Most often, IT teams neglect reading their tech contracts thoroughly until something goes wrong. Let's change that narrative today. Whether using enterprise software, hiring consultants, or building SaaS products, knowing the nitty-gritty of tech agreements is key to properly drafting agreements and identifying contractual vulnerabilities before it’s too late.

Let’s walk through different types of tech agreements and steps to create well-defined contracts for your upcoming project.

TL;DR

• Tech contracts define everything from project timelines, deliverables, and liability protections to intellectual property rights.
• There are various types of tech agreements, including EULAs, SLAs, MSAs, SOWs, NDAs, consulting agreements, escrow agreements, and SaaS agreements.
• Contract management using an automated CLM solution will reduce risks and ensure compliance for IT teams.

What are tech contracts?

Tech contracts help two or more parties define the development, sale, use, or licensing of technology-related products or services. The legally binding agreements allow the receiving party to use the intellectual property (IP) while protecting the owner’s IP rights. 

Types of tech contracts

Let’s understand each agreement and how it can help you identify potential issues and ensure appropriate protections are in place.

End-User license agreements (EULAs)

You must draft an EULA when a licensor grants the other party (licensee) the right to use technology or software. This contract defines how the end user will use a product, app, or online platform. Usually, this type of agreement is available in the clickwrap format, which a user must accept to comply with clauses like rights granted, usage restrictions, redistribution terms, duration, financial compensation, and the creation of derivative products. 

For example, you must accept the EULA before installing Adobe Photoshop. You'll get access to the digital product only after you click the “Agree” button.

Source: Syeda Salma Fathima via LinkedIn

Service level agreements (SLAs)

SLA is another common tech contract signed between the receiving parties and service providers. This agreement outlines the responsiveness, quality, and availability of services along with penalties for breaches. 

For example, a cybersecurity firm’s SLA could require patching vulnerabilities within 72 hours of discovery and providing quarterly audit reports to the client.

Thus, SLAs promote transparency and accountability during the collaboration.

Source: Sagar S Via LinkedIn

Master service agreement (MSA)

An MSA establishes the general terms and conditions for ongoing services between two parties. For instance, a software development firm signs an MSA with a client to build long-term relationships.

Generally, this contract covers service expectations, payment terms, warranties, and confidentiality obligations.

Statement of work (SOW)

SOW provides clarity on project-specific details to remove ambiguity. In this tech contract, you’ll define project deliverables, timelines, budgets, and responsibilities within the broader scope of an MSA or other agreements for collaborating parties. It also allows one party to cancel the contract if the other party doesn’t meet their obligations.

Source: Anshul Verma via LinkedIn

Non-disclosure agreements (NDAs)

NDAs help protect sensitive information during collaborations. If one party shares confidential data, draft unilateral NDAs are ideal, whereas mutual NDAs are ideal when both parties disclose valuable information. B2B tech startups often require NDAs before product demos, while employees sign them to protect trade secrets.

Key NDA clauses include the definition of confidential information, exclusions, duration, remedies for breaches, and post-termination terms. 

Also Read: How to Sign an NDA? (Best Practices + Tools)

Consulting agreements

These contracts define the scope of consulting services provided by experts in areas like IT strategy or cybersecurity. For example, you can use this type of agreement when hiring a cybersecurity expert for risk assessment.

The agreement contains terms for consultation deliverables, compensation, and confidentiality. 

Escrow Agreements

An escrow or source code agreement is a three-party contract between the depositor (a software developer), the neutral third party holding the source code (the escrow agent), and the beneficiary (the end-user). 

The lawfully valid contract secures access to the source code and critical materials for the end user. Thus, it reduces the risk for clients reliant on proprietary software as a third party holds the source code or deposit materials until predefined requirements are met.

SaaS agreements

This agreement comes into play for cloud-based software subscription services like CRM or project management tools. It grants users a non-exclusive license to use a platform while retaining the IP ownership. For instance, Zoom’s agreement allows you to host meetings but restricts reselling its services.

Unlike traditional software licenses, SaaS business agreements focus on uptime, data ownership, and termination.

Also Read: SaaS Contract Management 101: Essential Strategies and Tips

Your tech contracts handbook - The best tips to draft agreements properly

• Start with a Clear Scope: Ambiguity breeds disputes. Your tech contract must properly define deliverables, timelines, milestones, and acceptance criteria. Instead of using vague language, use measurable terms in the agreement to remove misunderstandings like “reduce page load time by 30%.”
• Specify IP Ownership: Clearly state who owns the intellectual property created during the project. Include clauses for pre-existing IP to avoid disputes over third-party tools or proprietary code used in the project.
• Governing Law and Jurisdiction: Specify which state or country’s laws govern the contract to ensure all parties understand their rights under a specific legal framework.

Source: Hitanshi Khandelwal via LinkedIn

• Data Privacy Obligations: To avoid legal penalties, outline what constitutes a data breach and resolution methods to ensure compliance with information privacy regulations like CCPA or GDPR. Further, add a confidentiality clause to keep shared sensitive data safe during and after collaboration.

“The thing about privacy is identifying what data is involved, how we are sharing it, and how we are going to be compliant in that sharing.”

~ Ken Priore, ex-Director of Privacy, Atlassian
Mastering the Intersection of Law, Technology, and Privacy

• Dispute Resolution: Outline the dispute resolution methods for any disagreements during the partnership, such as provisions for arbitration, mediation, and negotiation.
• Liability and Warranties: Limit your liability for indirect damages and exclude liability for issues caused by client misuse or third-party integrations. Specify warranties, like guaranteeing software functionality for six months post-delivery and remedies for defects (e.g., fixes or refunds).
• Force Majeure: Unforeseen circumstances are beyond the control of either party. Since it can impact contractual obligations, you must add a force majure clause specifying how such situations will be handled.

“The most important clause is likely the Force Majeure provision which excuses the performance of one or both parties under the right circumstances. This can either be bad or good for you – or a combination of both.  You’ll need to analyze whether the pandemic triggers the clause and, if it does, what does it mean?  Is payment excused? Can either party terminate? Will supplies be disrupted?”

~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things: Dealing with a Pandemic (Yes, I am Talking About the Coronavirus)

• Termination Terms: Define circumstances under which either party can terminate the contract, such as missed deadlines, non-payment, or breach of terms. Plus, specify notice periods and what happens post-termination, like returning materials or transferring project ownership.
• Stay Flexible: Technology evolves constantly, so define how changes to scope, timelines, or extra costs will be managed to ensure both parties agree to modifications formally. Besides, schedule regular contract reviews to adjust for evolving requirements, market changes, or new regulations.

Managing tech contracts with SpotDraft’s CLM

From creation, execution, and analysis to renewal, Contract Lifecycle Management (CLM) software will handle everything. Firstly, all tech contracts will be stored in a secure, searchable single repository. So legal tech teams will be free from the chaos of finding relevant agreements from the heaps of shared drives. 

Further, CLM’s automated workflow speeds up the approvals process by sending reminders for contract deadlines, expiry, or renewals. So you never miss a critical date. The AI-powered legal tech tool also helps analyze contract performance, flags non-compliant clauses, and suggests necessary amendments.

Besides, you can quickly draft common tech agreements like NDAs and software licenses using customizable templates. Or quickly find relevant tech-related clauses from SpotDraft’s dedicated legal hub. 

Thus, automating routine contract management tasks not only reduces human error but also ensures compliance throughout the partnership.

Also Read: What IT Teams Should Know About CLMs

Future-proof your IT initiatives with technology contracts

Your technology stack is only as strong as the contracts supporting it. Each tech contract type serves a specific purpose in protecting your organization's interests. With the right approach and tools like CLM software, you can ensure your tech agreements work for you, not against you. 

Want to control your technology contracts smoothly? Book a SpotDraft CLM demo now and make your life easier. 

FAQs

1. What are the three main types of software contracts?

Software licensing agreements, software maintenance and support contracts, and software development agreements are the three primary contract types.

2. What is a technical agreement?

A technical agreement is used when one party offers specific technical services, such as consulting, engineering, or technical support. This contract ensures clarity in service delivery by defining the scope of work, terms, conditions, roles, and responsibilities of all parties involved.