Traditional or Agile Contracting for Software Development: Decisions, Decisions

Introduction: Why Does The Contract Matter?

According to the Legal Executive Institute, United States (U. S.) companies spend approximately 40% of their revenues on legal services (2017). This is an astonishing number and considerably more than companies in other venues. Miller (2015) reports that CEOs and CFOs spend a great deal of their time on legal matters, from educating outside counsel about the business and the issues it confronts, to seeking to find information requested as a result of legal action, and to preparing for and complying with requests for discovery (depositions, interrogators and requests for documents). These managers must help prepare expert witnesses acting on behalf of the firm and attend hearings or go to trials. Litigation, then, is very expensive and time consuming. “Litigation …will reach deep into the business and the company needs to prepare for and accept that a number of different and valuable people will be taken away from big parts of their day jobs to assist with the (legal) effort (Miller, 2015).” One way to reduce the amount of time and energy wasted on legal disputes is to obviate their occurrence and one way to do this is to fashion carefully researched and crafted contracts. This is no less true for Agile contracting than it is for any other business contracting. While Agile contracting may involve a higher degree of collaboration than tradition contracts, the need for trust and the need for as much specificity as possible, even in light of the existence of known uncertainties, is critically important. Software developers and owners must accept that there will be disputes arising out of their contracts: the best way to reduce the negative effects of these disputes is to anticipate as much as possible of what might be points of contention.

There is not yet a great deal of litigation involving project management using the Agile approach, so the development of this material is based on general contract law, which we will see is based on legal principle that works for traditional or Agile contracting. However, in 2019, there was an instance of a dispute that resulted in a split decision by a Texas court (Raysman and Brown, 2019). In Polar Pro Filters Inc v. Frogslayer, LLC (2019), the dispute arose from a software development agreement that ran significantly over the original cost estimate and over the revised cost estimate. Further, fraud was claimed as a result of the non-delivery of the software in a viable form. The developer did not receive what he considered to be his full payment and the owner did not receive a viable product. The claims in the case were all based on traditional contract law even though the subject matter was a contract for software development wherein iterations were to be used. The point is that, although traditional contract and Agile contract may focus on, for example, different kinds of payment schedules or different visions of what should be delivered at what times, what installments or iterations are due/owing, the law used to generate a fair and equitable resolution to the dispute is well-established contract law. As Agile contracts become more frequently used and as more litigation develops, it is certainly possible that specific rules will be developed for Agile contract attributes that warrant different treatment. At this time, however, as evidenced by the Polar Pro case, traditional notions of contract essentials like fraud and breach of contract have served Agile contracting as well as traditional contracting.

In every successful business relationship, the parties must have agreed as to the purpose of the relationship. Each party must have a reasonably definite concept of what his obligations are under any contract he enters into: this is axiomatic in business and in business law. In traditional contracts, there is certainly enough litigation to make the retention of an attorney a good idea to give the parties a path to redress alleged transgressions, as well as to assure pro-active work to prevent any legal conflict via a well-written contract.