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This article is not a legal text. It is written for project managers, product owners, technical leads, and software teams involved in software development projects.
Its purpose is not to explain the technicalities of contract law, but rather to make visible why issues frequently encountered in day-to-day software projects so often result in "legal" consequences. This is because many technical and managerial decisions taken during a project are directly linked—often without being noticed—to how the contract is drafted.
The headings below aim to show non-legal teams how to look at contracts in a way that helps protect the project.
Software projects are rarely challenged by purely technical problems; they are more often strained by misaligned expectations.
Phrases such as "That's not how we understood it," "This was already within scope," or "We didn't expect this at this stage" usually arise not from the code itself, but from gaps left in the contract.
A well-drafted software development agreement works quietly in
the background.
No issues arise. No disputes emerge. Because everyone reads the
same text and understands the same thing.
Based on our experience to date, we therefore attempt below to address the most common issues encountered in software projects where the scope is defined at the outset and the project is managed using the classic Waterfall approach.
1. The Definitions Section Must Actually Be Read
In many contracts, the definitions section is seen as technical and tedious. As a result, it is often skimmed or copied from a previous agreement. In reality, this section is one of the fundamental building blocks that determines how the rest of the contract will be interpreted.
When drafting definitions, the following perspective should be kept in mind:"If the people who prepared this contract are not present, can a third party reading the text understand what is meant?"
Because when a dispute arises, it is not the parties who will interpret the contract, but most often a judge or an expert. Definitions must enable these third parties to correctly understand the project and what the parties intended.
Concepts such as "software," "deliverable," "acceptance," and "specification" may seem clear in everyday usage, but they should not be left to intuition in legal texts. For this reason, the definitions section should be treated not merely as explanatory, but as a framework that shapes the entire contract.
2. Clarity Is Critical in Projects with a Predefined Scope
In projects managed under the Waterfall approach, the scope of work, timeline, and deliverables are defined at the outset. This approach provides predictability; however, that advantage can quickly turn into a disadvantage if the contract is not drafted with sufficient clarity.
If the Statement of Work (SOW) does not clearly set out the technical and functional requirements, disputes over what is "missing" versus what is "out of scope" become inevitable as the project progresses. Since scope is considered fixed in Waterfall projects, ambiguity does not create flexibility—it creates direct risk.
Accordingly, the clearer the contractual language, the smoother the project execution.
3. If Requirements Are Not S.M.A.R.T., Disputes Are Inevitable
One of the most problematic areas in software contracts is how requirements are expressed. In many agreements, requirements are phrased in well-intentioned but highly subjective terms such as "user-friendly," "high performance," or "compliant with industry standards."
At this point, the SMART methodology offers not only a project
management tool but also a practical framework for legal clarity. A
requirement that is
Specific, Measurable, Achievable, Relevant, and Time-bound
aligns the parties on what is considered "delivered" and
what will be deemed "missing."
Non-SMART requirements typically cause issues at the acceptance stage. From the developer's perspective, the work may appear complete, while the customer may believe expectations have not been met. This situation usually arises not from bad faith, but from vague definitions.
4. Scope Creep Usually Results from Incomplete Definition, Not Bad Faith
Scope creep is often associated with bad-faith demands. In practice, however, it is usually the natural outcome of requirements that were not clearly defined at the outset.
Statements such as "This was already within scope" or "We had counted this separately" are often the product of incomplete definitions. Because changes are more costly in Waterfall projects, such ambiguities tend to surface earlier and more forcefully.
For this reason, the handling of change requests must be tied to a written process in the contract. Requiring new requests to be submitted in writing, assessing their impact on time, cost, and scope, and implementing them only after both parties approve that impact protects both the project and the relationship between the parties.
5. It Is Not Enough for the Software to Work—Legal Ownership Must Be Clear
At the end of a project, it is important that the software
works.
In the long term, however, the truly critical issue is who owns
the intellectual property rights to that software.
As is well known, terms such as "license sale" or "license rental" are frequently used in the software sector in our jurisdiction. From a copyright law perspective, however, these terms are technically inaccurate.
In practice:
- What is referred to as a "license sale" usually means a transfer of economic rights;
- What is referred to as "license rental" generally means granting a right of use (a licence) over those rights.
If this distinction is not correctly reflected in the contract, the parties' rights become unclear.
Another important point should be noted: software development agreements are, as a rule, classified as contracts for work under the law of obligations. This classification has direct consequences for issues such as delivery, acceptance, defects, and liability. If the contract is drafted without taking this reality into account, expectations and legal outcomes will diverge.
6. Use of Open-Source Code Requires Transparency
Open-source components are widely used in software development. However, not all open-source licences provide the same freedoms, and some may impose unexpected obligations.
Especially in projects with a predefined scope, it is critical to understand the licensing implications of third-party components in advance. Otherwise, restrictions on the commercial use of the delivered software may emerge.
For this reason, the open-source components used and their respective licence types should be clearly specified in the contract.
7. If the Acceptance Process Is Undefined, the Concept of "Completion" Becomes Unclear
Although phases are clearly defined in Waterfall projects, the project may never effectively end if the acceptance process is not sufficiently defined. If the criteria for acceptance of the delivered software are unclear, the parties may reach the same point at different times.
When test periods, defect classifications, and the final acceptance mechanism are set out in writing from the outset, the acceptance process becomes both shorter and more objective. This clarity is also critical for the financial and legal closure of the project.
8. Liability and Indemnity Clauses Are a Matter of Balance
In projects where scope and price are fixed at the outset, balancing risks through contractual provisions is essential. If liability limits are unclear, a minor error may lead to disproportionate consequences.
Capping liability at a reasonable level protects the developer, while clearly defined exceptions safeguard the customer's core interests. The objective is not to advantage one party, but to make the relationship predictable and sustainable.
9. Termination Clauses Are Safeguards for Worst-Case Scenarios
Not every project proceeds as planned. Therefore, in the event of termination, it should be clearly stated what will be delivered, which obligations will survive, and how fees will be calculated (pro rata, etc.).
Ambiguous termination provisions are often more damaging than the underlying problem itself. Well-drafted termination clauses make a difficult process more manageable.
10. "Standard" Clauses Are Not Standard at All
Finally, there are the so-called "standard" clauses, i.e. boilerplate. Provisions labelled as "General" or "Miscellaneous"—such as governing law, jurisdiction, and notice procedures—are often left to the end or passed over quickly.
In reality, these are often the most decisive clauses when a dispute arises or when a force majeure event occurs.
These provisions are not truly standard; they must be considered separately for each project and set of parties.
11. Overall Assessment
Software development agreements are often viewed merely as documents that need to be "signed." Once the project begins, the PDF copy of the contract is saved to the project folder and sent to accounting. In practice, however, the answers to many project-related problems are already contained in the contract. In other words, the contract is a reference point for project management.
Contracts therefore manage not only legal risks, but also operational uncertainties. Clearly drafted definitions, measurable requirements, written change request procedures, and predefined acceptance criteria are all directly related to project management.
Especially in projects managed under the Waterfall approach, the clearer the contract, the fewer surprises arise during execution. As ambiguity increases, technical issues quickly turn into contractual disputes.
For this reason, early engagement between project managers, software teams, and the legal department during the drafting or revision of the contract is advisable to ensure that technical expectations are accurately reflected in legal language.
This collaboration is not a step that slows the project down; it is a protective measure that helps prevent future disputes and unnecessary friction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
