EXPLANATORY NOTES FOR THE SOFTWARE SOURCE CODE ESCROW AGREEMENT

A licensee of software may require that the software source code be placed in escrow by the licensor. This is to protect the licensee in instances where inter alia the licensor may exit from the software development business, or the licensor goes insolvent, or is placed under business rescue, or fails to maintain the software as promised in a software maintenance agreement.

Note that this agreement can only be used where the receiver of services does not constitute a “consumer” in terms of the Consumer Protection Act. i.e the receiver MUST BE a juristic entity with a turnover or asset value equal to, or more than R2m at the time of the transaction.

Note: we will shortly make available agreements that regulate transactions that fall under the Consumer Protection Act. This agreement is for transactions that DO NOT fall under the Consumer Protection Act. Always make certain that the receiver of services under this agreement is neither a juristic person with assets or a turnover UNDER R2m, nor a natural person.

A licensee of software may require that the software source code be placed in escrow by the licensor. This is to protect the licensee in instances where inter alia the licensor may exit from the software development business, or the licensor goes insolvent, or is placed under business rescue, or fails to maintain the software as promised in a software maintenance agreement.

An escrow agreement is an arrangement whereby one party holds the software source code in favour of the licensor and releases such to the licensee should the above events happen. It is preferable that the licensor chooses the escrow agent. This is because the licensor may have several licensees and it is administratively easier having to deal with one escrow agent.

This is a robust agreement that caters for the protection of all parties concerned, but is slanted in favour of the licensor.

This SOURCE CODE ESCROW agreement:

  • is legally substantive (8 pages in total); please feel free to look at the explanatory notes below and compare the substance of this agreement to others for sale elsewhere;
  • is bordered;
  • has pages numbered;
  • is fully justified;
  • is typed up using Tahoma font, size 10;
  • has been meticulously spell-checked;
  • is extremely professional in its appearance;
  • has several drafting notes therein to guide a legal practitioner;
  • may be printed onto 8 A4 pages. (In the interests of the environment, it is suggested that the agreement rather be printed back to back on 4 pages.).

This SOURCE CODE ESCROW agreement contains the following clauses:

  1. PARTIES
  2. DEFINITIONS AND INTERPRETATION
  3. RECORDAL
  4. APPOINTMENT OF THE ESCROW AGENT
  5. TERM
  6. INTELLECTUAL PROPERTY
  7. CONFIDENTIALITY
  8. DEPOSIT OF ESCROW
  9. RELEASE, DELIVERY AND OBJECTION TO RELEASE OF THE SOURCE CODE
  10. WARRANTY
  11. CESSION AND ASSIGNMENT
  12. FEES
  13. GOVERNING LAW AND JURISDICTION
  14. RIGHTS AND OBLIGATIONS OF THE ESCROW AGENT
  15. DOMICILIUM AND NOTICES
  16. ARBITRATION
  17. GENERAL

APPENDIX 1: SCHEDULE OF SERVICES, FEES, SLAS AND PENALTIES

Please read carefully through the agreement and fill in all missing details; in preparing a signature document, please have regard to all the notes we have placed hereon to assist you with the conclusion of a professional, legally binding agreement.

We appreciate any constructive feedback concerning this agreement; such can be emailed to info@sitllegal.co.za.