Key contract considerations for app development

1 August, 2018
by: Cripps Pemberton Greenish

Quick service restaurants and food-to-go businesses require, by their nature, easy accessibility and fast service to ensure they stand out in a crowded market. Harry Partridge of law firm Cripps takes you through the key contract points when looking to develop an app for your food business.

Apps (mobile software applications) are versatile tools that can help with customer accessibility (ie to your menus or ordering), build brand loyalty, increase spend, and make better use of customer data. They are becoming increasing popular with even smaller independent businesses but when starting costs for even a basic app can be between £5,000 and £15,000, with higher-end functionality potentially exceeding £50,000, its important you get what you need.

IP ownership and protection

The main IP (intellectual property) in the app will be copyright in the source code. As the app developer will likely use source code it has already used – or might use for other clients (commonly called “background IP”) – you will need your contract to contain a licence to permit you to use this. However, for the bespoke elements being developed just for you, it is more likely (although not strictly necessary if the licence terms are appropriate) that the developer will agree to transfer (assign) ownership of this IP (the “foreground IP”) to you.

The app development agreement should also contain warranty and indemnity protection for you against any third party claiming that the app infringes its IP (ie that it already owns the IP and you don’t have the right to use it in your app).

Acceptance

As with food contracts, careful drafting is needed to make it very clear at which point the app will be “accepted” (when the client confirms to the developer it considers the app complete and ready to go-live). Acceptance is commonly a trigger for payment of the last (and often largest) proportion of the developer’s fee and after acceptance you may lose a right to reject the app and/or claim compensation for any problems.

Continuing Services

Consider whether you will need ongoing maintenance and other services, for instance search engine optimisation, branding and advice on advertising and usability, or how to add elements such as ingredients or recipes.

Security standards, functionality and compliance

Ensure your contract sets out detailed requirements for your app in relation to security (data protection), functionality (for example will you want to allow user-generated content) and compliance with the terms of your chosen “app store”. This last point is crucial as a non-compliant app may be removed from an app store. Consider also if you will want to be able to tie in to social media sites.

Often overlooked and buried in the “legals”, most commercial contracts contain an “entire agreement clause”, which operates to exclude any pre-contractual promises and statements made in tenders, presentations and marketing materials etc unless they are expressly repeated in the contract. Ensure your key requirements are listed as warranties in your agreement, or you risk being unable to rely on them.

Do your research: get the choice of developer right and follow that with a tight contract. While it is not possible to predict every potential legal issue that may arise with an app development project, the most common pitfalls can easily be avoided.

For more information contact Cripps associate Harry Partridge on 01732 224092 or email harry.partridge@cripps.co.uk.

This article first appeared in Out of Home in August 2018.