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Rajah Lehal

Software Development Master Services Agreements Part IX: Acceptance of the Delivered Work in an MSA

February 06, 2017

Links from this article:Small Business Law Library

ACCEPTANCE OF THE DELIVERED WORK

For the vendor in a Master Services Agreement (MSA), acceptance of their delivered work is usually a required customer step before payment. With specific types of contracts where they have frequent or periodic milestones, acceptance is a normal part of the work delivery, approval and payment process. These steps protect the customer from having a defective product at the end of the agreement. The more milestones, the more the customer gets to see the product before it is finished. It is helpful to design formal testing criteria for both the vendor and customer during negotiations of the MSA. This allows the vendor to know what to test for before sending it in for acceptance. This also saves time on behalf of the customer.

In particular, software development agreements have frequent checkpoints based on design or functionality specifications. The requirement for acceptance is an important “gatekeeper” to make sure that the product matches specifications and is bug-free. To put it simply, customers do not want to be billed unless the developed software is working properly.

Clausehound’s Small Business Law Library has a number of different Software Development Agreement templates, suitable for a variety of situations.

https://clausehound.com/legal-contract/15835/#!/document=

DRAFTING AN ACCEPTANCE PROVISION

For the vendor – a loose acceptance provision, where the customer can continue to demand further development, could result in a tiresome loop of testing and retesting.

Vendors can try to impose a “drop-dead date” or date of “deemed” acceptance where, after a certain number of days or a specific deadline, it will be considered accepted for that milestone. This is to ensure that periods of silence from a busy customer will not threaten the work delivery and payment period. For the customer – they will try and keep the deemed acceptance period as long as possible and may also require that the vendor properly delivery notice for when testing has commenced. Adequate notice may be a broadly worded provision within the agreement or may be as specific as requiring that a specific person or persons are contacted and/or are available i.e. not on vacation or out of office during the acceptance period.

Stay tuned for more blogs on this topic!

Commercial Activities
Master Services Agreement
Software Development

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.