Payment for Licences -
Software Licence Agreements and Software Development Contracts - Part 4

Payment for Licences

Owing to the nature of the rights of the licensor in granting software licenses, the licensor is able to structure the payment for licences to build in flexibility to payment structures.

Restrictions may also be placed on the use of software over a network, per machine, single use, on specified equipment, per user, per site, worldwide, by territory or any combination of these.

The most basic form of licence seems to be a fixed sum for an organisation. Extensions of this form of licence may be for a set number of users with additional licences incurring an additional fee for a fixed period. For multifaceted software, different fees may be applied for different the types of licences required. For instance, an organisation may require additional administration licences or data processing licences each of which would attract a different price point.

Where licences granted are not intended to be perpetual, the timing of renewal payments should be set out and the method of calculation of the sum falling due. Properly drafted contracts should allow for price rises over the course of the licensing period together with price rises in materials and human resources. Also, the parties should consider whether they want the licence to renew automatically, or to automatically lapse.

It is worthwhile providing for interest rates where payments are late, but failing that the Late Payments of Commercial Debts (Interest) Act 1998 will apply for those late payments.

Other Payments

Where software has been commissioned, there may well be hardware requirements to host the software or other expenses such as staff costs, other materials and travel expenses that should be dealt with in the agreement. For clarity, whether the prices are inclusive or exclusive of VAT it should be made clear to avoid doubt as to who will be liable for the tax in the event it becomes payable in unexpected circumstances.