Software Development Agreement Lawyers Adelaide: Ownership, Acceptance and Delay
Software development agreements in South Australia
Most software projects that end in a dispute had a contract that did not say who owns the code, what counts as finished, or what happens when the project runs late. Talon Legal drafts and reviews development and integration agreements for Adelaide businesses and developers, and acts when a project fails. Book a same-day free 30-minute consultation or call (08) 7094 2021.
Software development agreement key facts
| Issue | Position in South Australia |
|---|---|
| Default owner of the code | The author (Copyright Act 1968 (Cth) section 35(2)). A computer program is a literary work (section 10(1)). |
| Code written by an employee | Owned by the employer where written under the terms of employment under a contract of service (section 35(6)). |
| Code written by a contractor | Owned by the contractor unless assigned. An assignment has no effect unless in writing signed by or on behalf of the assignor (section 196(3)). A signed agreement assigning future copyright vests it in the client as the code is created (section 197(1)). |
| AI-generated code | Copyright needs a human author. Works produced by a program with no person directing their material form were held not to be original (Telstra v Phone Directories at [118], [169]; Acohs v Ucorp at [57] to [58]). |
| Delay damages | A sum payable on default is unenforceable as a penalty only if out of all proportion to the interests the clause protects (Paciocco v ANZ, Kiefel J at [29]). |
| Guarantees for development services | For a consumer customer (price $100,000 or less, or services ordinarily acquired for personal use): due care and skill (Australian Consumer Law section 60) and fitness for a purpose made known (section 61). |
| Contracting out | Void for the guarantees (section 64). For services not ordinarily acquired for personal use, liability can be limited to resupply or its cost unless that is not fair or reasonable (section 64A). |
| Promises about delivery | A representation about a future matter without reasonable grounds is taken to be misleading (section 4(1)); loss from misleading conduct is recoverable as damages (sections 18 and 236). |
| Exclusion and limitation clauses | Construed by their natural and ordinary meaning in light of the whole contract (Darlington Futures v Delco at [16]). |
| Time limits | Six years for contract claims (Limitation of Actions Act 1936 (SA) section 35) and ACL damages claims (section 236(2)). |
| Where claims are heard | The Magistrates Court hears money claims up to $100,000 (Magistrates Court Act 1991 (SA) section 8); larger claims go to the higher courts. |
| First step | Same-day free 30-minute consultation. Call (08) 7094 2021. |
Need a software development agreement lawyer in Adelaide?
Our software development agreement lawyers in Adelaide act for the businesses that commission software and for the developers who build it. The questions are the same on both sides: who owns what is built, how the work is accepted, what happens when it is late or does not work, and who pays when the project fails. The Copyright Act 1968 (Cth) decides ownership unless the contract deals with it in writing, and the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth) overrides some terms. This page states the law current to 24 October 2026.
This guide is part of our information technology law practice. Related guides cover software licences and SaaS agreements, IT services and support agreements, data protection and privacy and technology IP and IT disputes.
If the software is an app for the public, see our guide to app terms and conditions.
If AI tools write any of the code, see our guide to AI-generated content and copyright. For AI models and the data used to train them, see AI contracts and data licensing.
Free Consultation. Send us the proposal or the contract before the project starts. Book a same-day free 30-minute consultation or call (08) 7094 2021.
On this page
- Who owns code written for a business?
- Does AI-generated code have copyright?
- What should the agreement say about scope and acceptance?
- How should delay be dealt with?
- What warranties and guarantees apply?
- What about open source and third party code?
- What happens when a development project fails?
- How similar matters tend to play out
- How we act on software development agreements
- Case law
- Frequently asked questions
Who owns code written for a business?
The author, unless the Copyright Act or a written assignment says otherwise. A computer program is a literary work (section 10(1)), and the author of a literary work owns the copyright (section 35(2)).
Employment changes the answer. Where the code is written by an employee in pursuance of the terms of their employment under a contract of service, the employer owns it (section 35(6)). The test is the employment relationship, so code written by an employee outside the scope of their duties, or by a contractor, is not caught.
A contractor keeps the copyright unless it is assigned. An assignment, total or partial, has no effect unless it is in writing signed by or on behalf of the assignor (section 196(3)). Paying for the work does not transfer the copyright. The cleaner course is an assignment of future copyright in the development agreement itself: where an agreement signed by the prospective owner purports to assign the future copyright, it vests in the client as the code comes into existence (section 197(1)).
Ownership is not always what the client needs. A developer that reuses its own libraries and tools across clients will not assign them, and should not have to. The usual structure assigns the bespoke code to the client and licenses the developer’s pre-existing material to it, broadly enough to use, modify and maintain the system without the developer. What matters is that the agreement says which is which.
Does AI-generated code have copyright?
Not necessarily, and the answer depends on how much a person directed what was produced. Australian copyright needs a human author.
In Telstra Corporation Ltd v Phone Directories Company Pty Ltd [2010] FCAFC 149, directories produced largely by an automated process were not original works. Perram J said the person in control of a program will ordinarily be the author of what it generates, so long as that person directs or fashions its material form. Where the operator does not control the form the program produces, there is not enough independent intellectual effort to make that person an author ([118]). Yates J said originality requires that the work originate from an author or authors, which a work dominated by a computer-generated process does not ([169]).
In Acohs Pty Ltd v Ucorp Pty Ltd [2012] FCAFC 16, source code generated by a software system from material users entered did not emanate from authors and was not an original work ([57] to [58]).
Neither case concerned AI coding tools. They state the test, and it is a question of fact and degree ([169]). Code that a developer writes with an assistant suggesting lines is in a different position from code generated end to end from a prompt. A development agreement should therefore require the developer to disclose its use of AI tools, warrant that the deliverables are original work or properly licensed, and deal with what happens to any part that turns out not to be protected.
What should the agreement say about scope and acceptance?
Scope and acceptance cause more development disputes than anything else. A specification that describes outcomes in general terms leaves both sides arguing about whether the system was finished.
The agreement should fix the specification, or a process for settling it, and an acceptance test that is objective: who tests, against what criteria, in what time, and what happens to defects found. It should say whether acceptance is deemed if the client does not respond, and whether going live counts as acceptance. Change requests need a written process that records the effect on price and timing, because most delay claims turn on which changes were agreed.
Representations made before signing count too. A statement about a future matter, such as a delivery date or a feature, is taken to be misleading if the person making it did not have reasonable grounds for it (ACL section 4(1)). Misleading conduct in trade or commerce is prohibited (section 18), and loss caused by it is recoverable as damages (section 236). Proposals and sales emails should be read with that in mind before they are sent.
How should delay be dealt with?
With a timetable that names the dates that matter, and a clear consequence when they are missed. Liquidated damages, a set amount per day or week of delay, are common in larger projects.
A liquidated damages clause is enforceable unless it is a penalty. In Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28, Kiefel J, with whom French CJ agreed, put the question as whether a provision for the payment of a sum on default is out of all proportion to the interests of the party which it is the purpose of the provision to protect, and said that interest may be of a business or financial nature ([29]). A sum that reflects the client’s real exposure to delay is unlikely to be out of all proportion. A sum chosen to frighten the developer may be.
The agreement should also say what delay the developer is not responsible for, such as delay caused by the client’s late instructions or data, and whether liquidated damages are the client’s only remedy for delay. If they are, a cap that is too low leaves the client without a real remedy.
What warranties and guarantees apply?
The contract’s warranties, plus the consumer guarantees where the client is a consumer. For services supplied to a consumer, the guarantees are that the services will be rendered with due care and skill (ACL section 60) and will be reasonably fit for any purpose the consumer makes known (section 61). Where the result is software supplied as goods, the guarantee of acceptable quality can apply as well (sections 2 and 54).
Many development projects are outside those guarantees. A client is a consumer only if the price was $100,000 or less, or the services are of a kind ordinarily acquired for personal, domestic or household use (section 3 and regulation 77A of the Competition and Consumer Regulations 2010). A larger project depends on the contract’s own warranties: that the software will conform to the specification for a defined period, and that defects reported in that period will be fixed.
Where the guarantees do apply, they cannot be excluded (section 64). For services not of a kind ordinarily acquired for personal use, the developer can limit its liability to supplying the services again or the cost of doing so, unless the client shows that relying on the limit is not fair or reasonable (section 64A(2) and (3)).
What about open source and third party code?
Almost every modern system includes code the developer did not write. Each component comes with its own licence, and using it outside the licence infringes the copyright in it (Copyright Act section 36(1)). Some open source licences impose conditions that matter commercially, such as obligations to publish source code when software is distributed.
The agreement should require the developer to list the third party components, confirm their licences permit the intended use, and keep the client informed of changes. The client then knows what it owns, what it licenses from others, and what it would have to replace.
What happens when a development project fails?
The contract decides the first steps. Many development agreements require a dispute notice, escalation between senior people, or mediation before court. Following the clause matters. In AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd [2022] FCA 696, a customer that withheld disputed payments without activating the contract’s dispute process remained liable to pay, and the supplier was entitled to suspend services ([137] to [140]).
Liability caps and exclusions are read for what they say. A clause is construed by its natural and ordinary meaning, read in light of the contract as a whole, and against the party relying on it where appropriate in case of ambiguity (Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82 at [16]). A clearly worded cap will often decide how much a failed project is worth.
Time limits are six years from when the cause of action accrued, for contract claims (Limitation of Actions Act 1936 (SA) section 35) and for ACL damages claims (section 236(2)). The Magistrates Court hears money claims up to $100,000 (Magistrates Court Act 1991 (SA) section 8). Our technology IP and IT disputes guide covers the claims in more detail.
How similar matters tend to play out
Three illustrations of how the law on this page combines on ordinary facts. They are not predictions. Outcome depends on the contract, the evidence and the court.
Lower range. A start-up engages a freelance developer under an email exchange and a quote. The app is built and paid for. When an investor asks for evidence of IP ownership, there is none, because an assignment needs writing signed by the assignor (section 196(3)). A short deed of assignment, signed before the developer moves on, fixes it.
Middle range. A business commissions a system for $90,000 with a vague specification. It goes live late and does not do several things the business expected. At that price the business is a consumer (section 3), so the services must be fit for any purpose it made known (section 61). The outcome turns on what purposes were made known, which change requests were agreed, and what the acceptance clause says.
Upper range. An integration project worth several hundred thousand dollars fails. The client claims the developer promised a delivery date it had no reasonable grounds to give (section 4(1)). The developer relies on a cap of 12 months’ fees and the client’s late delivery of data. The cap is read for what it says (Darlington at [16]), and the client’s damages claim for misleading conduct under section 236 has to be assessed alongside it.
How we act on software development agreements
We act for clients and for developers. For a client, the aim is ownership of what it pays for, an acceptance process that protects it, and a remedy for delay. For a developer, it is a scope it can deliver, protection for its pre-existing tools, and a cap on liability that matches the fee.
| Stage | What happens | What we do |
|---|---|---|
| Proposal | The developer's proposal or the client's brief is settled. | Check that scope, price and timing are capable of being turned into contract terms. |
| Drafting | The development agreement is prepared. | Draft the ownership, licence, specification, acceptance, change control, delay, warranty and liability clauses. |
| Delivery | The project runs, with change requests and milestones. | Advise on variations, extensions of time and acceptance notices as they arise. |
| Acceptance | Testing, defects and sign-off. | Advise on whether the acceptance criteria are met and on the defects process. |
| Dispute | The project is late, fails or is terminated. | Follow the dispute clause, assess the claims and the cap, and protect the limitation period. |
We cannot promise an outcome, and no lawyer can. We can make sure the agreement answers the questions that cause disputes before the project starts.
Every hour matters. Book a same-day free 30-minute consultation, or call (08) 7094 2021 now.
Software development case law
None of the decisions below concerned an AI coding tool, and only AIBI concerned an IT services contract. The others deal with the ownership, penalty and limitation questions that every development agreement has to deal with.
| Case | Court | Principle | Pinpoint |
|---|---|---|---|
| Telstra Corporation Ltd v Phone Directories Company Pty Ltd [2010] FCAFC 149 | Full Federal Court | Computer-generated works need a human author | [118], [169] |
| Acohs Pty Ltd v Ucorp Pty Ltd [2012] FCAFC 16 | Full Federal Court | Program-generated source code not an original work | [57], [58] |
| Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 | High Court | When a sum payable on default is a penalty | [29], [68], [69] |
| Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82 | High Court | Construction of exclusion and limitation clauses | [16], [19] |
| AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd [2022] FCA 696 | Federal Court | Disputed payments, dispute clauses and suspension | [137] to [140] |
Case notes
Telstra Corporation Ltd v Phone Directories Company Pty Ltd [2010] FCAFC 149
Copyright did not subsist in directories produced largely by automated processes, and the appeal was dismissed. Perram J said an operator who does not control the material form a program produces is not its author ([118]). Yates J said the computer-generated process was of such overwhelming significance that the works did not originate from authors ([169]).
Acohs Pty Ltd v Ucorp Pty Ltd [2012] FCAFC 16
The claimed works were the source code of documents generated by a software system ([50]). The Full Court agreed with the primary judge that the source code was created by the operation of the program, did not emanate from authors and was not an original work ([57] to [58]).
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28
Kiefel J, with French CJ agreeing, asked whether a sum payable on default is out of all proportion to the interests of the party the provision protects, which may be business or financial interests ([29]). The bank’s late payment fees were not shown to be penalties, and the appeal was dismissed with costs ([68] to [69]).
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82
An appeal from South Australia. Exclusion and limitation clauses are construed by their natural and ordinary meaning in light of the whole contract, and against the party relying on them where appropriate in case of ambiguity ([16]). A $100 limit applied to each of the client’s unauthorised contracts ([19]).
AIBI Holdings Pty Ltd v Virtual Technology Services Pty Ltd [2022] FCA 696
A customer withheld payment of disputed charges without activating the dispute resolution mechanism, so the invoices remained payable ([137] to [139]). The supplier did not breach the contract by suspending its helpdesk services ([140]).
Frequently asked questions
Who owns the code if I pay a developer to write it?
The developer, unless copyright is assigned in writing signed by or on behalf of the developer (Copyright Act sections 35(2) and 196(3)). An agreement signed before the work starts can assign the future copyright so it vests in the client as the code is created (section 197(1)).
Does an employer own code written by its employees?
Yes, where the code is written in pursuance of the terms of employment under a contract of service (section 35(6)). Code written by a contractor, or by an employee outside the scope of the employment, is not caught.
Is code written with AI tools protected by copyright?
It depends on human involvement. Australian copyright needs a human author, and works produced by a program with no person directing their material form have been held not to be original (Telstra v Phone Directories at [118]; Acohs v Ucorp at [57]). Neither case concerned AI tools.
Should a development agreement mention AI coding tools?
Yes. It should require the developer to disclose their use, warrant that the deliverables are original work or properly licensed, and deal with any part that is not protected by copyright.
Can a developer keep its own tools and libraries?
Yes, if the agreement says so. The usual structure assigns the bespoke code to the client and licenses the developer’s pre-existing material, broadly enough for the client to use, modify and maintain the system.
Are liquidated damages for delay enforceable?
Usually, if the amount is not out of all proportion to the interests the clause protects (Paciocco v ANZ, Kiefel J at [29]). A sum that reflects the client’s real exposure to delay will generally survive.
Do the consumer guarantees apply to software development?
Only if the client is a consumer: a price of $100,000 or less, or services of a kind ordinarily acquired for personal use (ACL section 3 and regulation 77A). The services must then be rendered with due care and skill and be fit for any purpose made known (sections 60 and 61).
Can a developer exclude all liability?
Not for the consumer guarantees where they apply (section 64). For other liability, a clearly worded exclusion or cap is construed by its natural and ordinary meaning (Darlington at [16]), and for business-type services liability can be limited to resupply or its cost (section 64A).
What if the developer promised a delivery date it could not meet?
A representation about a future matter made without reasonable grounds is taken to be misleading (ACL section 4(1)). Loss caused by misleading conduct can be recovered as damages within six years (sections 18, 236(1) and 236(2)).
How long do I have to sue over a failed project?
Generally six years from when the cause of action accrued, for contract claims (Limitation of Actions Act 1936 (SA) section 35) and ACL damages claims (section 236(2)). The contract may require dispute steps first.
Do I need a software development agreement lawyer?
For a project the business depends on, yes. A software development agreement lawyer can settle ownership, acceptance and delay before work starts, which is far cheaper than arguing about them after it fails. A free 30-minute consultation will tell you where you stand.
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