You may be surprised to know that many companies in the US and UK do not put together a water tight contract when dealing with an overseas software services provider. Most of the agreements are done via email with little or no regard to important aspects such as dispute resolution, intellectual property rights, confidentiality issues and employee infringement. If you plan to use an offshore provider soon, here are some basic tips on how to draw up a workable contract which safeguards the interests of both parties:

Define deliverables: Since software development is mostly intellectual work and has many grey areas in its definition, it is advisable to define deliverables in a detailed fashion. This helps in making sure that the understanding of the work is clear on both sides and there is no miscommunication of any kind with the supplier. You can also choose to define the change management process and the number of revisions allowed as it makes the deliverables more structured.

Mention the acceptance clause: What is good for the goose may not be good for the gander. Though an old saying, there is a huge amount of truth in it. Sometimes the software services provider may consider the work completed whereas you might not accept it. Thus the goal or the premises on which the work will be accepted should be clearly mentioned to both parties concerned.

Confidentiality rights on both sides: Sometimes companies get an NDA signed with the service provider and expect it to hold true even when working on the project for a long time. This method is not advisable. A suitable contract must be drawn up in the case of ongoing work so that issues such as confidentiality of information are maintained by the service provider. Though some customers feel that their projects do not warrant such a clause, the information exchanged may even be about the company, business or related information which has been given out unknowingly.

Employee Infringement: Approaching a service provider's employee directly is one of the cardinal sins which can be committed by a client. Thus as a service provider, it is necessary that this clause is mentioned in a contract. The opposite can also happen where the service provider may approach the client's personnel for indirect or direct gain. An employee infringement clause keeps a check on such practices and provides a legal route if there is substantial evidence of the infringement.

Force Majeure: The relatively recent natural calamities of the Tsunami and Hurricane Katrina have made it necessary for many large companies to seriously consider the Force Majeure clause. This is necessary to protect the interests of both parties.

Last but not least, pricing: This is probably the most common reason for arguments between a supplier and vendor and is applicable in all industries throughout the world. A clear mention of the total project pricing and milestones at which the charges will be paid should be included as an important schedule within the contract.

There might be other specific terms and conditions which may have been agreed by you and the supplier. These should all be mentioned in the contract not only for the sake of posterity but also for ensuring continuity of work in case of personnel change in the supplier's company.

About the Author

Rod Morris is the founder of CodeLance - http://www.codelance.com - a leading outsourcing website for a wide range of computer services.