Software Licence Agreement Checklist For NZ Startups

What should you actually put in your software licence agreement before you let customers use your product? The reassuring answer is that you don't need to write a 60-page contract to protect your business, but you do need the right clauses in the right places.

For New Zealand startups, a good software licence agreement does two practical jobs. It tells your customers exactly what they're allowed to do with your software, and it gives you a clear process if something goes wrong, such as non-payment, misuse of data, support issues or a customer trying to copy your product.

This doesn't have to be complicated. The key is to focus on the commercial terms founders negotiate most often: use rights, fees, support, IP, data, liability, audit rights and termination.

Do You Need A Software Licence Agreement In NZ?

Yes, if you're giving customers access to software you own or control, you should have a software licence agreement in place. Without one, you may struggle to control how customers use your product, limit your responsibility for issues, or stop customers from sharing, copying or reverse engineering your software, subject to limited exceptions under New Zealand law.

A software licence agreement can apply to different products, including:

• downloadable software installed on a customer's device
• cloud-based SaaS products accessed through a browser
• mobile apps and plugins
• APIs, integrations and developer tools covered by an API agreement
• white-labelled software used by another business under its own brand under a reseller arrangement

In New Zealand, your agreement also needs to sit alongside laws such as the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Privacy Act 2020. For example, you can't use your contract to mislead customers about what your product does. If you're dealing with consumers or small businesses, unfair contract term rules may also affect how far you can push one-sided terms.

If your customers are businesses, you can often take a more commercial approach. For example, you may be able to contract out of parts of the Consumer Guarantees Act for business-to-business supplies, but only if that's fair and reasonable and the wording is clear.

The agreement doesn't just protect you legally. It also helps sales conversations move faster because your customer can see what they're buying, what support they'll get and where the limits are.

What Should Go In Your Software Licence Agreement Checklist?

Your software licence agreement should cover the deal, the use rights, the support model, data handling, IP ownership, risk allocation and exit rights. If one of those areas is missing, you can end up arguing about assumptions rather than pointing to a clear clause.

A practical software contract checklist usually includes:

• Parties: the legal names and NZBNs, where available, of your business and the customer.
• Product description: what software, modules, features or plans the customer can access.
• Licence scope: who can use the software, for what purpose, in which territory and for how long.
• Fees and payment: subscription fees, setup fees, usage charges, GST, invoicing dates, failed payments and price changes.
• Permitted use and restrictions: what the customer can and can't do with the software.
• Support and service levels: response times, maintenance windows, exclusions and escalation process.
• IP ownership: who owns the software, customer content, feedback, customisations and improvements.
• Data and privacy: what personal information is collected, who controls it and what each party must do under the Privacy Act 2020.
• Security: access controls, user accounts, passwords, backups and incident notification.
• Liability: liability caps, exclusions and any carve-outs for serious breaches.
• Audit rights: when you can check licence compliance and how that process works.
• Termination: when either party can end the agreement and what happens after termination.

Try to match the checklist to how your product is actually sold. A one-seat subscription, a usage-based API licence and an enterprise implementation services project all need different drafting.

How Should You Define Permitted Use And Licence Restrictions?

You should define permitted use as specifically as you can, because this is the clause that tells your customer what they're paying for. A vague licence, such as "use the software for business purposes", often leaves too much room for disagreement.

Start with the basics:

• is the licence exclusive or non-exclusive?
• can the customer transfer or sublicence it?
• how many users, seats, devices or locations are included?
• is use limited to the customer's internal business operations?
• can related companies, contractors or clients access it?
• does the licence apply worldwide or only in New Zealand?

Then set out the restrictions. Most software licence agreements say the customer must not:

• copy, modify, adapt or create derivative works from the software
• reverse engineer, decompile or try to extract source code, except to the extent that New Zealand law prevents you from restricting that activity
• share login details or allow unauthorised users to access the product
• use the software to build a competing product
• use automated scraping, bots or excessive API calls outside agreed limits
• remove copyright notices, trade marks or ownership notices

That qualification matters because the Copyright Act 1994 gives lawful users of computer programs some limited rights, including rights to decompile in certain interoperability situations and to copy or adapt a program where necessary for lawful use if the statutory conditions are met. Some of those exceptions can't be contracted out of.

Worked Example: Seats, Usage And Overages

Say Maia runs a Wellington HR tech startup and sells a SaaS platform to a recruitment agency. The plan includes 20 named users and 10,000 candidate profile searches per month for $1,200 plus GST.

If the agreement only says the customer can "use the platform", the agency may assume all staff can log in and run unlimited searches. If the agreement says the licence is limited to 20 named users, 10,000 monthly searches and the customer's internal recruitment services, Maia can charge overage fees or require an upgraded plan if usage jumps to 35 users and 18,000 searches.

That level of detail isn't about being difficult. It's how you protect your pricing model.

Who Owns The IP, Data And Customer Content?

You should usually own your software and underlying intellectual property, while your customer owns the content and data they upload. The agreement should say this clearly, because IP and data issues can become messy once custom features, feedback and integrations are involved.

Your IP clause should cover:

• the software code, architecture, interface and documentation
• your business name, logos and trade marks, including any marks registered or applied for through IPONZ
• templates, reports, workflows, analytics and other product materials
• updates, patches, improvements and new features
• ideas, suggestions and feedback customers give you

If you create custom work for a customer, be especially careful. Are you giving them ownership of that custom code, or are you giving them a licence to use it? For most startups, giving away ownership of custom development can create problems later, especially if you want to reuse similar features for other customers.

For data, separate three concepts:

• Customer content: files, text, images, records or other information the customer uploads.
• Personal information: information about identifiable people, which is regulated by the Privacy Act 2020.
• Usage data: product analytics, logs and aggregated insights about how the software is used.

If you collect personal information, your terms and privacy documents should work together. Under the Privacy Act 2020, you need to be clear about why you collect personal information, how you use it, who you disclose it to and how people can access or correct it. If there's a privacy breach that has caused, or is likely to cause, serious harm, the Office of the Privacy Commissioner and affected individuals generally need to be notified as soon as practicable.

What Support, Liability, Audit And Termination Clauses Matter Most?

The most important clauses are the ones that set customer expectations before there's pressure in the relationship. Support, liability, audit rights and termination are often negotiated because they decide who carries the commercial risk.

Support And Uptime

Be precise about what support you offer. If you promise "24/7 support" but your team only responds during New Zealand business hours, customers may expect more than you can deliver.

Your support clause can cover:

• support channels, such as email, helpdesk or phone
• support hours and public holiday exclusions
• target response times for critical, high, medium and low issues
• planned maintenance windows
• what doesn't count as support, such as third-party systems or customer device issues

If you offer uptime commitments or ongoing support and maintenance, avoid promising perfection. Many SaaS providers use service targets with exclusions for planned maintenance, force majeure events, third-party outages and customer-side failures.

Liability And Warranties

Your liability clause should explain what you're responsible for and where your responsibility ends. Many software contracts cap liability at a set amount, such as the fees paid in the previous 12 months, but the right cap depends on your product, customer type and risk profile.

Think carefully about carve-outs. Customers may ask for uncapped liability for confidentiality breaches, privacy breaches, IP infringement or wilful misconduct. You don't always have to accept that, but you should treat it as a commercial negotiation, not just a legal clause.

The Fair Trading Act also matters here. Your sales material, demos and terms should line up with what your product can actually do. A strong limitation of liability clause won't fix misleading product claims.

Audit Rights And Termination

Audit rights let you check whether the customer is complying with the licence, especially where fees depend on users, devices, locations or transaction volumes. Keep audit clauses reasonable. For example, you might require reasonable notice, audits during business hours and confidentiality around the process.

Termination clauses should cover non-payment, serious breach, insolvency, extended outages and convenience termination if you offer it. You should also say what happens after termination, including:

• when access stops
• whether unpaid fees become immediately due
• how long the customer can export data
• whether you delete or return customer content
• which clauses survive, such as confidentiality, IP, payment and liability clauses

Without these details, a cancelled customer may still expect access, support or data storage months after the relationship has ended.

Can I Use A Licence Agreement Template?

Yes, you can use a licence agreement template as a starting point, but it should be tailored before you use it with customers. Templates often miss the commercial details that make your software business different, such as usage limits, integrations, data flows and support commitments.

If you're building your own first draft, this fill-in outline can help you organise the main clauses. It isn't a finished legal document, and a lawyer should tailor it before it's used.

1. Parties: write the legal names, trading names, NZBNs and contact details.
2. Background: briefly describe your software and the customer's reason for using it.
3. Licence Grant: state whether the licence is non-exclusive, non-transferable, limited by users, usage or term.
4. Permitted Use: describe exactly what the customer may do with the software.
5. Restrictions: list prohibited conduct such as copying, reverse engineering subject to New Zealand law, sharing access or competing use.
6. Fees: set out subscription fees, setup fees, usage charges, GST, invoicing and late payment consequences.
7. Support And Maintenance: state support hours, channels, response targets, updates and maintenance windows.
8. Customer Obligations: cover account security, authorised users, acceptable use and cooperation.
9. IP Ownership: confirm you keep ownership of the software and define rights in feedback, custom work and improvements.
10. Data And Privacy: explain customer content, personal information, security, breach notification and data export.
11. Confidentiality: protect product information, pricing, customer data and business information.
12. Warranties And Disclaimers: state what you promise and what you don't promise.
13. Liability: include caps, exclusions and any carve-outs that are appropriate for the deal.
14. Audit Rights: explain when and how you can check licence compliance.
15. Term And Termination: set out renewal, cancellation, breach process and post-termination steps.
16. General Terms: include assignment, notices, governing law, changes to terms and order of precedence.

Also think about how the agreement is accepted. For online SaaS licence terms or terms of use, you may use a click-to-accept process during sign-up. Keep a record of the version accepted, the date, the user's details and the customer account. That record can be very useful if a customer later says they never agreed to your terms.

Key Takeaways

• A software licence agreement helps you control how customers use your product and what happens if the relationship ends.
• Your permitted use clause should match your pricing model, including users, devices, usage limits, territory and purpose.
• Some Copyright Act 1994 exceptions for lawful users of computer programs can't be contracted out of, so restrictions on reverse engineering and decompiling need careful wording.
• IP clauses should protect your software, improvements and feedback while clearly dealing with customer content and data.
• Privacy terms need to reflect the Privacy Act 2020, especially if your product collects or processes personal information.
• Templates can help with structure, but your agreement should be tailored to your product, customers and risk profile.

If you'd like help with your software licence terms, SaaS customer contracts, privacy documents or IP ownership clauses, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.