The legal nature of software development agreements
Custom software development in Georgia is not regulated by a special statute — it is governed by the norms of the Civil Code on the contract for work and labour. Under the concept of Article 629, under a contract for work the contractor undertakes to perform the work provided for by the contract, while the customer is obliged to pay the contractor the agreed remuneration. In the software context this means: the developer produces a result, and the client provides compensation.
The question of ownership is also important. Where the work involves the making of an article and the contractor makes it from materials acquired by himself, he transfers to the customer ownership of the article made. Where a generic thing has been made, the rules of sale are applied. In other words, a software product created by a developer with his own resources passes into the customer's ownership in the manner established by law.
The same article resolves the question of cost estimates: the drawing up of a cost estimate connected with the work is not reimbursed unless otherwise provided by agreement. This means that a model based on counting time and materials is available only by contract — the law establishes a presumption of result-oriented payment.
Payment of remuneration and acceptance of the work
Under Article 648, the customer is obliged to pay the contractor the remuneration after the performance of the work, unless the contract provides for payment in instalments. The payment schedule is a matter for the parties: the law's presumption is payment after delivery of the result, and advance or staged payments must be written directly into the contract.
Article 649 regulates the acceptance procedure: where under the contract or the nature of the work performed its transfer is necessary, the customer is obliged to accept the work performed. Upon acceptance the customer must pay the remuneration. The work is deemed accepted if the customer does not accept the work performed within the period set by the contractor. This last rule is practically significant: refusing acceptance through inaction does not reproduce the result — after the expiry of the period the work is deemed accepted.
Limitation periods
Article 655 sets the time boundaries of disputes: a claim due to a defect in performance may be submitted by the customer within one year, and a claim concerning a building within five years from the day of acceptance of the work performed. For claims about software defects it is precisely the one-year period that applies, unless the matter concerns work connected with a building.
The period is counted from the day of acceptance — which is why the correct execution of the acceptance act is critical for both parties. For the developer it is the moment from which the limitation clock starts; for the client, the final record of quality.
Termination of the contract
Article 636 gives the customer an important right: the customer may renounce the contract at any time before the completion of the work, but must compensate the contractor for the work performed and the damage caused by the termination of the contract. This means that stopping a project at any stage is possible, but not free of charge: the completed part and the damage of termination require compensation.
In project-management practice this norm distributes the risk to both parties: the client is free to change direction, and the developer is protected by the fact that remuneration for the work performed is still owed. This is why documenting stages and fixing the completed part is the indispensable infrastructure of the contract.
What to consider when concluding the agreement
Relying on the contract-for-work norms, the agreement should state directly: a description of the result and acceptance criteria; the remuneration and payment schedule — if staged payment is desired, it must be established by contract, since the law's presumption is payment after performance; the procedure for transferring ownership; the acceptance period and the consequence of its expiry; and the period for claims of defects — within one year of acceptance.
In each of these points documentation is decisive: the technical specification, stage acts, notifications and the register of changes. The Legal.ge team will help you draft software development agreements and resolve disputes — relying on the precise application of the contract-for-work norms, so that the result, the remuneration and the deadlines are known to both parties at every stage.
Frequently Asked Questions
These questions arise most frequently on software development agreements.
When is the remuneration paid?
After the completion of the work, unless the contract provides for payment in parts; where delivery is required, the customer must pay upon acceptance.
When is the work deemed accepted?
If the customer does not take over the completed work within the period set by the contractor, the work is deemed accepted.
Who owns the thing made?
Where the contract of work contemplates the making of an article and the contractor makes it from materials acquired by himself, ownership of the article passes to the customer.
Within what term may defects be claimed?
A claim for defects of performance may be brought within one year of acceptance of the work, and where the claim concerns a structure — within five years.
How We Help on Legal.ge
Disputes over development agreements turn mostly on the documentary trail of acceptance, remuneration and defects. The lawyers of Legal.ge will review the contract, assess the prospects of the dispute and prepare the demand or the response. Submit a request on the site.