Who owns the code in a software development contract?

By default, the developer who writes the code owns the copyright — even if the client paid for it. Ownership transfers to the client only when explicitly stated in the contract. This template uses a dual strategy: a work-made-for-hire designation plus a present-tense assignment clause ('Developer hereby assigns' — not 'agrees to assign'). Both are necessary because software created by an independent contractor often does not qualify as 'work made for hire' under the nine enumerated categories of 17 U.S.C. §101, so the assignment clause serves as a backstop.

What is the difference between fixed-price and time-and-materials software contracts?

A fixed-price contract sets a total fee for a defined scope — best when requirements are well-defined and both parties accept the scope risk. A time-and-materials (T&M) contract bills by the hour — best for exploratory or evolving projects where the full scope is unknown. Fixed-price shifts scope risk to the developer; T&M shifts it to the client. Many projects use a hybrid: a fixed discovery phase followed by milestone-based or T&M development. This template supports both models with a payment type selector.

What is background IP in a software development contract?

Background IP refers to code, libraries, frameworks, and tools the developer created before or independently of your project — including reusable components deployed across multiple clients. The contract should state that the developer retains ownership of Background IP but grants the client a perpetual license to use it as embedded in the finished product. Without this clause, the client may inadvertently claim ownership of the developer's entire toolkit, which makes future client work impossible and makes the developer reluctant to sign.

Does a software development contract need to address open-source code?

Yes — especially for SaaS products. Code licensed under GPL or AGPL carries copyleft obligations: incorporating GPL or AGPL code into your software may require you to release your entire codebase under the same license. AGPL is particularly risky for SaaS because network access (not just binary distribution) triggers the disclosure obligation. This template requires the developer to disclose all open-source components in a Software Bill of Materials (SBOM) and warrant that no copyleft license forces disclosure of your proprietary code.

Is a software developer an independent contractor or employee?

It depends on the working relationship and state law. Under the DOL's February 2026 proposed rule (RIN 1235-AA46), the federal standard uses a five-factor economic realities test, with two core factors: degree of control over the work, and the worker's opportunity for profit or loss. States including California, Massachusetts, and New Jersey apply the stricter ABC test, which presumes employee status unless three specific conditions are met. This contract documents the independent contractor relationship, but the actual working arrangement must match the contract terms.

Who owns AI-generated code in a software development contract?

Purely AI-generated code with no human authorship cannot be copyrighted under current U.S. law. The U.S. Copyright Office confirmed this in its January 2025 Part 2 guidance, and the Supreme Court reinforced it by declining to hear Thaler v. Perlmutter in March 2026. Code where a developer exercised meaningful creative control — designing architecture, writing core functions, substantially editing AI output — can be copyrighted and assigned to the client. This template includes an AI tools clause requiring disclosure of tool usage and documenting human authorship sufficient for copyright protection.

Updated June 2026

Free Software Development
Contract Template

A complete software development agreement covering IP ownership (WFH + assignment), open-source disclosure, AI tools policy, and fixed-price or time-and-materials payment. Download and send in minutes.

↓ DOCX (Word) ↓ PDF

— or — ✏ Fill in & download ready-to-send version ↓

No signup required
Free forever
Reviewed June 2026
Covers all U.S. states

Edit & Download

Fill in your project and payment details — the preview updates live. Download a filled DOCX or PDF ready to send.

Branding (optional)

Developer / Studio Logo

1 — Developer

Contract Date

Developer Full Name

Business / Studio Name (optional)

Address (optional)

2 — Client

Client Full Name / Entity

Company Name (optional)

Client Address (optional)

3 — Project

Project Name

Brief Description

Start Date

Completion Date

4 — Payment

Payment Model

Currency

Total Fee (fixed) or Hourly Rate (T&M)

Deposit % due on signing

Late Interest Rate (%/month)

5 — Legal

AI Code Tools Policy

Confidentiality Duration

Governing State

PDF: choose "Save as PDF" in the dialog that opens.

Software Development Agreement

Date: enter date above

1. Parties

This Agreement is entered into as of enter date above between Developer name, trading as , ("Developer"), and Client name, , ("Client").

2. Scope of Work

Project: project name

Description: project description

Start date: start date | Completion: completion date

3. Payment Terms

Model: Fixed-price | Currency: USD ($)

Fee: USD ($) amount

Deposit: 25% due on signing. Balance due on final acceptance before deliverables are transferred.

4. IP Ownership

All Work Product created for this project is assigned to Client upon receipt of final payment (WFH + present-tense assignment — dual strategy). Developer retains Background IP (pre-existing code libraries) and grants Client a perpetual license to use them as embedded in the Work Product.

AI tools: Permitted with disclosure. Developer warrants human authorship sufficient for copyright per USCO Jan 2025 + Thaler SCOTUS Mar 2026.

5–9. Standard Clauses

Open-source disclosure (GPL/AGPL + SBOM) · Confidentiality (3 years) · Warranties (90-day) · Liability cap (3-mo fees) · Change orders & termination

10. Governing Law

Governed by the laws of governing state. Developer is an independent contractor (DOL 2026 proposed 5-factor economic realities test; ABC test applies in CA/MA/NJ).

Developer

Signature

Print name: _______________

Date: _________________

Client

Signature

Print name: _______________

Date: _________________

Template preview

Software Development Agreement Free to download

Parties

1. Parties

This Software Development Agreement ("Agreement") is entered into as of [Date] between [Developer Full Name], trading as [Business / Studio Name], [Address] ("Developer"), and [Client Full Name / Entity], [Company Name] ("Client"). Both parties agree to the terms of this Agreement and the Scope of Work attached hereto.

Scope

2. Services & Scope of Work

Developer agrees to provide software development services as described in the attached Scope of Work ("SOW"), incorporated by reference. Any services not described in the SOW require a written Change Order executed by both parties before work begins.

Project: [Project Name]
Description: [e.g. Full-stack web application with React frontend, Node.js backend, PostgreSQL database, user authentication, admin dashboard and REST API. Includes deployment to AWS production environment.]

In scope: [e.g. Feature development per SOW, code review, unit testing, deployment scripts]
Not included: [e.g. Ongoing maintenance, third-party API subscription fees, server hosting costs, content creation — unless separately agreed in writing.]

Start date: [Date] | Completion: [Date, subject to timely receipt of requirements and client approvals]

Payment

3. Payment Terms

Fixed-price: Total fee [Currency + Amount]. Deposit [e.g. 25%] due on signing; [e.g. 50%] due on Milestone 1 acceptance; balance due on final acceptance. Invoices unpaid after 15 days accrue interest at [e.g. 1.5%]/month.

Time & Materials: [Currency + Rate]/hour. Invoiced monthly with itemized hour log. Due within 15 days of invoice date. Unpaid amounts accrue interest at [e.g. 1.5%]/month.

Expenses (pre-approved third-party tools, hosting, travel) reimbursed at cost with receipts.

IP Ownership

4. Intellectual Property Ownership

Work Product: Client shall own all right, title, and interest in all work product created specifically for this project ("Work Product"), including source code, object code, documentation, and deliverables, upon receipt of final payment in full.

Dual assignment strategy: To the extent any Work Product qualifies as a "work made for hire" under 17 U.S.C. §101, it is deemed a work made for hire. To the extent it does not qualify (note: software by an independent contractor often falls outside the nine enumerated 17 U.S.C. §101 categories), Developer hereby irrevocably assigns all rights to Client — this is a present-tense grant; no further instrument is required.

Background IP: Developer retains ownership of pre-existing code libraries, frameworks, and tools ("Background IP"). Developer grants Client a perpetual, non-exclusive, royalty-free license to use Background IP solely as embedded in the Work Product.

Download the full template — includes open-source & SBOM clause, AI tools policy, confidentiality, warranties, liability cap, change orders and termination.

Download the full template — free

Fill in your details above and download a ready-to-send contract.

Word / DOCX Editable Document Fill in your details above and download a ready-to-send DOCX ↑ Fill & Download PDF Print-Ready Fill in your details above and save as PDF ↑ Fill & Save PDF

What's included in this template

Parties — developer and client identification with addresses

Services & scope — deliverables, explicit out-of-scope exclusions

Milestones and acceptance criteria (silence = acceptance, §69)

Payment — fixed-price or T&M, deposit, late interest rate

IP ownership — WFH + present-tense assignment (dual strategy)

Background IP — dev retains, client gets perpetual license

Open-source disclosure — GPL/AGPL contamination + SBOM

AI tools policy — USCO Jan 2025 + Thaler SCOTUS Mar 2026

Warranties (90-day) + limitation of liability (3-month fee cap)

Change orders, termination (cause / convenience) + governing law

How to use this template

Choose your payment model before filling in anything else

Fixed-price works when requirements are fully defined — both parties know the full scope and accept the risk boundary. Time & Materials works when the scope is exploratory or likely to evolve. Many projects start with a fixed discovery phase, then switch to T&M. Whichever you choose, document it clearly — payment disputes almost always originate from a mismatch between what each party expected the model to cover.

Attach a detailed Scope of Work before signing

The contract references an attached SOW. The SOW is where you list every feature, tech stack choice, integration, and acceptance criterion. The more specific the SOW, the less room there is for scope creep. List what is explicitly NOT included just as clearly as what is. Change orders — any work outside the SOW — must be in writing and signed before any out-of-scope work begins.

Address IP and open-source disclosure before a line of code is written

Clarify Background IP (what the developer brings to the project) upfront — not after delivery. If the developer plans to use any GPL or AGPL libraries, this needs written client approval before the code is written, not after. A single undisclosed AGPL dependency in a SaaS product can obligate the client to release their entire proprietary codebase. The SBOM clause requires the developer to document every open-source component at final delivery.

Both parties sign — and the client sends the deposit — before a single line of code is written

The deposit converts a verbal agreement into a binding contract and compensates the developer for turning away other work. Do not begin development until both the signed agreement and the deposit are received. Use Bonsai to collect signature and deposit payment in a single workflow.

Frequently asked questions

: By default, the developer who writes the code owns the copyright — even if the client paid for it. Ownership transfers only when explicitly stated in the contract. This template uses a dual strategy: a work-made-for-hire designation plus a present-tense assignment clause ("Developer hereby assigns" — not "agrees to assign"). Both are necessary because software created by an independent contractor often does not qualify as "work made for hire" under the nine enumerated categories of 17 U.S.C. §101. The assignment clause serves as a backstop that guarantees transfer regardless of WFH eligibility.
: A fixed-price contract sets a total fee for a defined scope — best when requirements are fully known and both parties accept the scope risk. A time-and-materials (T&M) contract bills by the hour with monthly invoicing — best for exploratory or evolving projects where the full scope is unknown at signing. Fixed-price shifts scope risk to the developer; T&M shifts it to the client. Many engagements use a hybrid: a fixed discovery or design phase, followed by milestone-based or T&M development. This template supports both models via the payment type selector in the form above.
: Background IP is code, libraries, frameworks, APIs, and tools the developer created before or independently of your project — including reusable components deployed across multiple clients. The contract must state that the developer retains ownership of Background IP, while the client receives a perpetual license to use it as embedded in the finished product. Without this clause, the client may inadvertently claim ownership of the developer's entire toolkit, which makes future client work legally impossible and makes developers unwilling to sign.
: Yes — especially for any product delivered as a service. Code licensed under GPL or AGPL carries copyleft obligations: incorporating GPL or AGPL code may require the entire product to be released under the same license. AGPL is particularly risky because network access (not just binary distribution) triggers the source-disclosure obligation — meaning a SaaS product using undisclosed AGPL code may be required to make its entire codebase public. This template requires the developer to list all open-source components in a Software Bill of Materials (SBOM) and warrant that no copyleft license forces client disclosure of proprietary code.
: It depends on the working relationship and applicable state law. Under the DOL's February 26, 2026 proposed rule (RIN 1235-AA46), the federal standard uses a five-factor economic realities test. The two core factors are: (1) the degree of control the hiring party has over the work, and (2) the worker's opportunity for profit or loss based on initiative or investment. States including California, Massachusetts, and New Jersey apply the stricter ABC test, which presumes employee status unless three specific conditions are met. A well-drafted contract documents the IC relationship — project-based scope, developer-controlled hours, multiple clients — but the actual working relationship must match the written terms.
: Purely AI-generated code with no human authorship cannot be copyrighted under U.S. law. The U.S. Copyright Office confirmed this in its January 2025 Part 2 guidance, and the Supreme Court reinforced it when it declined to hear Thaler v. Perlmutter in March 2026 — upholding lower court rulings that AI-generated works without human authorship are not copyrightable. Code where a developer exercised meaningful creative control — designing architecture, writing core functions, substantially editing AI suggestions — can be copyrighted and then assigned to the client. This template's AI tools clause requires disclosure of tool usage and warrants that deliverables reflect sufficient human authorship for copyright protection.