Payment to software developers is one of the issues attracting significant attention in the business market. The below article provides the legal regulations governing payments to software developers and addresses several related questions, thereby helping individuals and organizations better understand their rights and obligations.
Payment to software developers is one of the issues attracting significant attention in the business market. The below article provides the legal regulations governing payments to software developers and addresses several related questions, thereby helping individuals and organizations better understand their rights and obligations.
I. Current situation regarding payment to software developers
Payment to software developers is an obligation of software users. Such payment may be made in various forms, including project-based payment, milestone-based payment, or payment in accordance with the agreement set out in the software use contract. In practice, in many cases, payment is interrupted or delayed due to faults on the part of the software developer, particularly where the developer fails to complete the work in accordance with the agreed schedule.
II. Understanding of payment to software developers
1. What is payment to software developers?
Software developers are professionals who use programming languages to design, code, test, and maintain applications and computer systems, thereby creating digital products that serve various purposes.
Software is a collection of programs, instructions, and data written in programming languages that enable computers to perform specific tasks.
Payment to software developers means customers or enterprises pay fees to developers for building software in accordance with specific requirements.
2. What costs are included in payment to software developers?
Depending on the software and the developer, the costs may vary. In general, enterprises are required to pay the following costs:
- Copyright/registration costs: Initial software fees or developer account registration fees.
- Implementation costs: Costs for consultation, bid, and initial establishment; costs for installing software into the customer’s system; and costs for training employees to use the software.
- Maintenance and support costs: Periodic maintenance fees, bug fixing, and application updates to ensure stable operation and improve user experience; account management fees or monthly/annual operation fees charged by the provider.
- Other costs: Project management costs, marketing expenses to promote the product in the market, costs related to servers and databases, and fees for special features such as push notifications and online payment functions.
III. Legal regulations relating to payment to software developers
Understanding legal regulations relating to payment to software developers is a concern and need of many entities. However, in the context of frequent changes in Vietnamese laws, correct understanding and application of these regulations are not straightforward.
Recognizing such matters, NPLaw sets out the latest legal provisions governing payment to software developers.
1. What are the conditions for payment to software developers?
Pursuant to Article 3 of Decree No. 71/2007/ND-CP, software products are software and accompanying documents that are produced and expressed or stored in any material form, which may be traded or transferred to other entities for exploitation and use. Software users typically enter into contracts for the purchase or use of software services with software developers. The conditions for payment to software developers are as follows:
Pursuant to Article 519 of the Civil Code 2015:
- The service user shall pay service fees as agreed.
- At the time of contract formation, if there is no agreement on service price or method of price determination and no other indication regarding service price, the service price shall be determined based on the market price of similar services at the time and place of contract formation.
- The service user shall pay service fee at the place where the work is performed upon completion of the service, unless otherwise agreed.
- In cases where the service provided fails to meet the agreed terms or the work is not completed on time, the service user has the right to reduce the service fee and request compensation for damages.
At the same time, the obligations of software developers in providing services are prescribed in Article 517 of the Civil Code 2015 as follows:
- Performing the work in accordance with the agreed quality, quantity, time, place, and other terms.
- Not assigning the work to another party without the consent of the service user.
- Preserving and returning documents and means provided by the service user upon completion of the work.
- Promptly notifying the service user if the information or documents provided are incomplete or if the means are inadequate to complete the work.
- Maintaining confidentiality of information obtained during the performance of the work, where agreed or where required by law.
- Compensating the service user for damages if documents or means are lost or damaged, or if confidential information is disclosed.
Accordingly, in general, software developers must fully satisfy the requirements of software users with respect to the software products provided in accordance with the contractual agreement or the above regulations in order for the software user to be obliged to make payment.
2. What forms of payment are commonly used for software developers?
Pursuant to Article 433 of the Civil Code 2015, regarding price and payment methods:
- The price and payment method shall be agreed upon by the parties or determined by a third party at the request of the parties. In cases, the law requires the price or payment method to comply with regulations of a competent State authority, the parties’ agreement must conform to such regulations.
- If there is no agreement or the agreement is unclear regarding the price or payment method, the price shall be determined based on the market price, and the payment method shall be determined in accordance with customary practice at the place and time of contract formation.
Accordingly, payment methods are typically agreed upon by the parties in the contract and may include bank transfer, direct payment upon delivery of the software, payment via online payment gateways, or electronic wallets.
IV. Questions regarding payment to software developers
1. If a software developer fails to complete the work on schedule, may an enterprise temporarily withhold payment?
Pursuant to Clause 1 Article 517 of the Civil Code 2015, the service provider is obliged to perform the work in accordance with the agreed quality, quantity, time, place, and other terms. In addition, Clauses 3 and 4 Article 519 of the Civil Code 2015 provide that:
- The service user shall pay service fee at the place where the work is performed upon completion of the service, unless otherwise agreed.
- If the service provided fails to meet the agreed terms or the work is not completed on time, the service user has the right to reduce the service fee and request compensation for damages.
Accordingly, whether an enterprise may temporarily withhold payment in the case of delayed performance by the software developer depends on the contractual agreement between the parties.
2. May project-based payment to software developers be divided into stages?
Pursuant to Article 433 of the Civil Code 2015 regarding payment methods:
- Payment methods shall be agreed upon by the parties or determined by a third party at the request of the parties. If the law requires payment methods to comply with rules of a competent State authority, the parties’ agreement must conform to such rules.
- In cases, there is no agreement or the agreement is unclear regarding payment methods, payment methods shall be determined in accordance with customary practice at the place and time of contract formation.
In addition, Clause 2 Article 50 of the Commercial Law 2005 provides that the buyer must comply with the agreed payment methods and perform payment in accordance with the agreed order and procedures and the provisions of law.
Accordingly, payment to software developers on a project may be divided into stages, subject to the agreement of the parties in the contract.
3. How should disputes over payment to software developers be resolved?
Where disputes arise regarding payment to software developers, the parties should resolve them as follows:
Pursuant to Article 317 of the Commercial Law 2005, dispute resolution methods include:
- Negotiation between the parties;
- Mediation conducted by an agency, organization, or individual agreed upon by the parties as a mediator;
- Resolution by Arbitration or the Court.
Procedures for resolving commercial disputes by Arbitration or the Court shall be conducted in accordance with the procedural rules prescribed by law.
Accordingly, in the case of disputes over payment to software developers, the parties should first seek resolution through negotiation and mediation, and only thereafter refer the matter to a competent authority such as Arbitration or the Court.
4. How is the payment deadline for software developers usually determined?
Pursuant to Article 55 of the Commercial Law 2005, unless otherwise agreed, payment deadlines are as follows:
- The buyer shall make payment to the seller at the time the seller delivers the goods or their related documents;
- The buyer is not obliged to make payment until having completed inspection of the goods, where there is an agreement on pre-inspection of goods in accordance with Article 44 of this Law.
Accordingly, payment deadlines for software developers are generally implemented in accordance with the parties’ agreement set out in the contract.
5. What should be noted when making payment to foreign software developers?
When making payment to foreign software developers, attention should be paid to international payment procedures, tax regulations, and clearly defined service contracts. Payments should be made through lawful means, and contracts should include provisions on intellectual property rights, data confidentiality, and compliance with Vietnamese and international law.
Main considerations include:
- Selecting an appropriate payment method: Common methods include international bank transfers, payments via online payment platforms, or other methods stipulated in the contract.
- Verifying reputation: Careful review in the developer’s background, completed projects, and prior customer feedback to ensure credibility and capability.
- Monitoring and updating compliance: Regular monitor and update of relevant regulations on international payments and taxation to ensure full and proper compliance.
V. Legal consulting services relating to payment to software developers
The above constitutes NPLaw’s responses to issues concerning payment to software developers. With a team of experienced lawyers and legal professionals, NPLaw provides reputable and professional legal services, ensuring optimal protection of clients’ lawful rights and interests. Should you require legal assistance, please contact NPLaw for consultation and support.
