Reviewing a software licence from a vendor

A software licence gives the business the right to use the vendor's program on the vendor's terms: a defined number of users, devices or sites, for a purpose, for a period, with maintenance and support bought alongside. The vendor's agreement defines the scope narrowly, reserves an audit right, and sets the price of exceeding the licence. I review the licence from the licensee's side and return it marked up with a written explanation of the changes and which ones a vendor will accept, for a fixed fee of £495 in three working days.

Who this is for

Businesses in England and Wales buying or renewing an on-premise or hosted software licence from a vendor, whether an enterprise system, a specialist application, a database or an embedded component, and want to know what they may do with the software, what the vendor may charge them later, and how they get out. Both parties are businesses.

What to look for in a software licence

Scope: users, metrics, affiliates and purpose

Software is protected as a literary work under section 3 of the Copyright, Designs and Patents Act 1988, so any use outside the licence is infringement as well as breach of contract. The review checks the licence metric (named users, concurrent users, cores, sites, revenue), whether affiliates, contractors and outsourcers may use the software on the licensee's behalf, whether use for the licensee's own customers is permitted, and what 'indirect use' means where other systems access the software's data, because vendors use that phrase to charge for users who never log in.

The rights the licence cannot take away

Whatever the licence says, a lawful user may make a back-up copy where necessary under section 50A of the Copyright, Designs and Patents Act 1988, may decompile the program to obtain the information needed to make an independent program interoperate with it under section 50B, and may copy or adapt the program where necessary for its lawful use, including to correct errors, unless the licence prohibits it, under section 50C. The review checks for terms that purport to exclude the back-up and decompilation rights, which are void to that extent, and for a prohibition on error correction that would leave the licensee dependent on the vendor's support.

Audit rights and true-up

Vendors reserve the right to audit the licensee's use and to charge list price plus back maintenance for any shortfall. The review asks for audits on reasonable notice, no more than once a year, during working hours, by an independent auditor bound by confidentiality, limited to the licensed software, with the licensee allowed to remediate a shortfall at the contract price rather than list price and without back-dated support fees. It also checks that the licence does not require the licensee to install the vendor's monitoring tools or to give the vendor remote access.

Maintenance, support, upgrades and price rises

Support terms decide whether the software keeps working: response and resolution times by severity, the versions the vendor will support and for how long, whether upgrades are included, and the annual increase in the maintenance fee. The review asks for a cap on maintenance increases, a right to drop maintenance without losing the licence, continued support for the version the licensee runs for a stated period after a new release, and clarity on whether hosting is included. The Late Payment of Commercial Debts (Interest) Act 1998 applies to the fees.

Warranties, liability and open source

The vendor's warranty will be that the software performs substantially in accordance with the documentation for a period, with re-performance as the sole remedy, and the liability clause will exclude everything else. Against a business licensee those terms are subject to the reasonableness test in section 3 of the Unfair Contract Terms Act 1977 where the licence is the vendor's standard form. The review asks for a warranty that the software does not infringe third-party rights, backed by an indemnity, that it contains no malicious code, and that open source components are disclosed with their licences, since a copyleft licence in the vendor's code can affect how the licensee's own systems may be distributed.

Termination, escrow and the vendor's insolvency

A perpetual licence should survive the end of maintenance and the vendor's own termination rights should be limited to material unremedied breach. Where the software is critical, the review asks for source code escrow with release on the vendor's insolvency or withdrawal of support. Under section 233B of the Insolvency Act 1986 a supplier cannot terminate a contract for the supply of goods or services only because the customer has entered an insolvency procedure, which protects the licensee's own downstream contracts but does not oblige the vendor's administrator to keep supporting the software, so escrow remains the practical protection.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Complex review, £895. Heavily negotiated or unusually complex documents. Five working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The vendor says we owe licence fees for people who use reports from the system but never log in. Is that right?

It depends on how the licence defines use, and vendors define it to include indirect access through other systems. The review checks the definition and asks for it to be limited to people who log in or to a stated number of integrated systems, so that a downstream user of data is not a licensed user.

Can the vendor stop us fixing bugs ourselves?

It can prohibit error correction in the licence, and if it does you depend on its support. If the licence is silent, section 50C of the Copyright, Designs and Patents Act 1988 lets a lawful user correct errors. The review checks which position the licence takes and asks for the right to correct errors where the vendor does not.

What happens to our licence if the vendor is bought or goes under?

A perpetual licence continues, and the acquirer takes it over; a term licence continues to its end. Support is the risk, so the review asks for source code escrow with release on insolvency or withdrawal of support, and for the vendor to notify a change of control so you can plan.

Related guidance and services

• Contract review, £495, the service this page describes
• SaaS and technology contracts, £995
• Reviewing a SaaS vendor's terms before your business signs up
• Reviewing a reseller agreement from a US software vendor

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.