Software Licence Agreements: What Is Included And Why (2026 Updated)

If your business develops software (or relies on it to deliver services), a software licence agreement is one of those legal documents you really want sorted early.

It’s easy to think “we’ll just send the customer an invoice and give them access”, but that’s where problems start. Without a clear licence, you can end up arguing about who owns what, what the customer is allowed to do with the software, and what happens when something goes wrong.

This guide is updated for current expectations in the market (including how SaaS and cloud products are typically delivered today), so you can set up your legal foundations properly and protect your business from day one.

What Is A Software Licence Agreement (And When Do You Need One)?

A software licence agreement is a contract that sets the rules for how someone can use software.

In plain terms, it answers:

• What the user is getting (access, a download, an installation, an account, API access, etc.)
• What they’re allowed to do with it (and what they’re not allowed to do)
• What you’re promising (for example, support, uptime targets, or warranty statements)
• What happens if there’s a dispute (including liability limits and termination rights)

Importantly, a licence agreement is usually about permission to use, not a sale of the underlying IP. Unless you clearly assign ownership, you generally want to make sure you’re licensing the software (keeping ownership) rather than accidentally “selling” it.

Common Situations Where You’ll Need One

You’ll usually need a software licence agreement if you’re:

• Selling software as a product (downloadable, installed, or on-prem)
• Offering a SaaS platform (subscription access via browser or app)
• Licensing a plugin, template, or integration to customers
• Letting customers use software you’ve developed internally (including white-label use)
• Providing access to APIs or developer tools

Depending on how you deliver the software, a licence may be packaged as an SaaS Terms document, an end-user licence agreement, or a larger services contract with a licensing schedule built in.

If your software is offered via a website or platform, you may also need Terms of Use to cover broader platform rules (like acceptable behaviour, account registration rules, and misuse).

What Is Typically Included In A Software Licence Agreement?

A good software licence agreement isn’t just “legal fine print”. It’s a practical playbook for your relationship with the customer.

While the right clauses depend on your product, pricing model, and risk profile, these are the provisions we commonly see included (and why they matter).

1) Licence Grant (What Rights You’re Giving)

This clause sets out the licence itself. Key questions it should answer include:

• Is the licence exclusive or non-exclusive? (Most are non-exclusive.)
• Is it transferable or non-transferable?
• Is it sub-licensable (can the customer let others use it)?
• Where can it be used (territory), and for how long (term)?

Without this, you can end up in a messy “we assumed…” situation. And assumptions are expensive once a customer has already rolled your software out across their business.

2) Scope Of Use (Users, Seats, Devices, Sites, Purpose)

This is where you define the practical boundaries. For example:

• How many authorised users can access the software
• Whether use is limited to a particular entity (e.g. one company in a group)
• Whether use is restricted by devices, locations, or sites
• Whether the customer can use it for their internal business only, or also provide it to clients

If your revenue model depends on seats, usage limits, or tiers, this clause is essential. Otherwise, it’s hard to enforce pricing boundaries in a way that feels fair or commercially realistic.

3) Fees, Payment Terms, Renewals, And Late Payment

Software pricing isn’t just “how much”. Your agreement usually needs to cover:

• Subscription fees (monthly/annual), or one-off licence fees
• When payment is due and acceptable payment methods
• Renewal rules (auto-renewal vs manual renewal)
• Suspension rights if invoices aren’t paid

This is also the place to ensure your contract aligns with how you actually operate (for example, what happens if a customer upgrades mid-cycle).

4) Intellectual Property Ownership (Who Owns What)

This is one of the biggest reasons to have a proper software licence agreement.

Usually, you want to make it clear that:

• You (or your licensor) own the software and all IP rights in it
• The customer is receiving a licence to use, not ownership
• Any feedback, suggestions, or feature requests may be used by you (often without compensation)

It’s also common to deal with:

• Customer data and who owns it (usually the customer)
• Customer content uploaded into the platform
• Custom developments (if you’re building bespoke features)

If you are doing custom dev work alongside licensing, you may also need a separate Software Development Agreement so there’s no confusion about deliverables, milestones, acceptance testing, and who owns custom code.

5) Restrictions (What The User Must Not Do)

Software is easy to copy, modify, and share. Your agreement should clearly state restrictions, such as prohibitions on:

• Reverse engineering or decompiling the software
• Removing copyright notices or branding
• Sharing logins or exceeding seat limits
• Using the software to develop a competing product
• Security testing or penetration testing without permission

This matters because if you ever need to enforce the agreement, you want your “no” to be written down clearly and reasonably, rather than implied.

6) Support, Updates, Maintenance, And Service Levels

Customers often assume software comes with ongoing support and updates. Your agreement should spell out what’s actually included, for example:

• Support channels (email, chat), support hours, and response times
• Whether updates are included in the price
• Whether you can push updates automatically (important for SaaS)
• Scheduled maintenance windows and downtime notices

If you provide uptime commitments or detailed performance metrics, it can make sense to attach a service level agreement.

7) Privacy, Data Use, And Security Obligations

If your software collects, stores, or processes personal information, your contract needs to align with your privacy compliance.

In New Zealand, the Privacy Act 2020 matters here. You generally want to be clear about:

• What personal information is collected and why
• How it’s stored and protected (in general terms)
• Whether information is stored offshore or accessed by offshore providers
• What happens if there’s a data breach (including notification steps)

Many online products also need a Privacy Policy that matches how the product works in practice (not just what a generic template says).

And if you’re dealing with enterprise customers, you may be asked to sign a data processing style agreement or add-on, especially if you’re processing personal information on their behalf.

8) Warranties, Disclaimers, And Consumer Law Considerations

This is where you set expectations about performance and legal risk.

Common approaches include:

• Limited warranties (for example, the software will “substantially perform” as described)
• Exclusions for issues outside your control (like third-party outages)
• Disclaimers about suitability for a particular purpose

In New Zealand, you’ll also want to think about the Consumer Guarantees Act 1993 and Fair Trading Act 1986:

• If you’re selling to consumers, consumer guarantees may apply and you can’t contract out of them in the usual way.
• Even for B2B, you need to be careful about marketing claims and representations (for example, what you say your software “will” do).

This is a good example of why a tailored agreement matters. The “right” disclaimers depend on your customer base, how you sell, and what your product actually does.

9) Limitation Of Liability (Managing Your Worst-Case Scenario)

This is the clause that often decides whether a dispute is survivable for your business.

A limitation of liability clause might cover:

• Caps on liability (for example, capped to fees paid in a period)
• Exclusion of indirect or consequential loss (like lost profits)
• Carve-outs (for example, for fraud, intentional misconduct, or IP infringement)

Getting the balance right is important. Too harsh, and customers may refuse to sign. Too weak, and a single claim could put your business under serious pressure.

10) Term, Termination, And What Happens Next

Your agreement should set out:

• How long the licence lasts (fixed term vs ongoing)
• How either party can terminate (for convenience vs for breach)
• Suspension rights (for example, for non-payment or security risks)
• What happens on termination (access removed, data exported, accounts closed)

For SaaS, it’s also common to deal with how long data remains available after termination, whether you provide assistance with transition, and whether any fees are refundable.

Why Software Licence Agreements Matter (Even If You’re A Small Business)

It’s tempting to think formal licence terms are only for big software companies.

In reality, smaller businesses often have more to lose if something goes wrong, because you typically don’t have the same cash reserves or internal legal team to manage disputes.

They Protect Your IP (And Your Competitive Advantage)

Your software is often one of your most valuable business assets.

Without clear ownership and restrictions, it can become much harder to stop a customer (or former customer) from:

• Sharing the software more widely than you intended
• Repurposing parts of it in a way that competes with you
• Arguing they “paid for it” so they own it

Even if you’d ultimately win a dispute, unclear contracts can lead to long, distracting arguments that slow down your business growth.

They Set Expectations And Reduce Support Disputes

A lot of software disputes aren’t really about “breach of contract” in the dramatic sense. They’re about mismatched expectations.

For example:

• The customer expects 24/7 support, but you only offer business-hours support
• The customer thinks updates are included, but you treat them as paid add-ons
• The customer assumes they can add unlimited users, but your pricing is per seat

If it’s written clearly up front, you’ll save time, money, and relationship strain later.

They Make It Easier To Scale

When you’re growing, you want your contracts to work as a repeatable system.

A solid licence agreement helps you onboard customers consistently, enforce payment terms, and control product usage, without renegotiating everything from scratch every time.

And if you ever sell your business or raise capital, well-documented IP and contracting processes usually make due diligence smoother.

How Do SaaS Terms, EULAs, And Software Licence Agreements Fit Together?

These terms are often used interchangeably, but they can mean different things depending on your business model.

SaaS Terms (Cloud Subscription Access)

If customers access your software through an online platform, your legal document is often structured as SaaS terms. These usually cover:

• Subscription fees and billing cycles
• Access rules, accounts, and acceptable use
• Support and uptime (if offered)
• Data handling and privacy
• Termination and data export

If you’re providing the software plus broader services (like onboarding, training, or integrations), it may also overlap with a services contract.

EULA (End-User Licence Agreement)

An EULA is commonly used when software is installed on a device (or downloaded). It tends to focus heavily on:

• Restrictions on copying or modification
• IP ownership
• Warranty disclaimers and liability limitations

Some businesses use a click-wrap EULA that users must accept during installation or on first use. If you’re distributing software to end users via app stores or downloads, an EULA can be a key part of staying protected.

Software Licence Agreement (Broader Commercial Licence)

A software licence agreement often sits in the B2B space, where a business is licensing software for its team or operations. It may include negotiated terms, implementation rules, and sometimes a statement of work.

If the licence is part of a bigger commercial relationship (for example, you’re also providing professional services), it might be packaged into a master agreement with schedules.

Common Mistakes We See With Software Licensing (And How To Avoid Them)

Most software businesses don’t make licensing mistakes because they’re careless. They make them because they’re moving fast, selling the product, and trying to keep things simple.

The good news is that a few smart decisions early can prevent a lot of stress later.

Using A Generic Template That Doesn’t Match Your Product

Not all software is the same. A template might not address:

• Your actual pricing model (usage-based vs subscription)
• Whether you’re dealing with consumers, businesses, or both
• Your data flow (especially if you integrate with third-party services)
• Your approach to support and uptime

This is where businesses get caught: the contract says one thing, but the product and sales process do another.

Not Clearly Dealing With Customisations And Integrations

If a customer pays you to build a custom feature, you need to be clear about:

• Whether it becomes part of the core product
• Whether the customer gets any special ownership rights
• Who maintains it, and what happens if they stop paying

Similarly, if your software integrates with third-party platforms, you’ll want to avoid accidentally warranting the performance of services you don’t control.

Forgetting About Privacy And Security Expectations

Even small SaaS products can end up handling personal information (names, emails, IP addresses, payment details, employee records).

If you haven’t aligned your licensing terms with your privacy practices, you risk:

• breaching privacy obligations,
• losing customer trust, and
• being forced into a last-minute contract rewrite when a larger client does due diligence.

Not Planning For Exit: Termination, Data Export, And Transition

Customers will leave sometimes. That’s normal.

The question is whether your agreement makes that process clean and predictable. If it doesn’t, you may get stuck in disputes about:

• refunds,
• access cut-off dates,
• data return/export, or
• assistance fees for transition.

Clear termination and post-termination clauses help you end relationships professionally (without it becoming a drama).

Key Takeaways

• A software licence agreement sets the rules for how your customer can use your software, what they’re paying for, and what happens if something goes wrong.
• Most agreements should clearly cover the licence grant, scope of use, fees, IP ownership, restrictions, support and updates, privacy and data handling, warranties/disclaimers, limitation of liability, and termination.
• If you offer an online platform, SaaS-style terms and platform rules are often just as important as the licensing language itself.
• New Zealand laws like the Privacy Act 2020, Fair Trading Act 1986, and Consumer Guarantees Act 1993 can affect how you draft and enforce your software terms.
• Generic templates can create mismatches between your product and your contract, so it’s worth getting your software licence agreement tailored to your actual business model.
• Strong licensing documents don’t just reduce legal risk - they help you scale, onboard customers consistently, and protect your IP long-term.

If you’d like help drafting or reviewing a software licence agreement (including SaaS terms or an EULA), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.