Why Do Most Software Purchases Come With A EULA?

By Drew Stevens - January 15, 2023 - Technology & IP

Why Do Most Software Purchases Come With A EULA?

When a person downloads software or a mobile application, they typically have to agree to an end-user license agreement (EULA) in order to use the software or app. Why is it common practice to include a EULA in a software purchase? The agreement grants the consumer an end user license to use the software, explains how customers may use the technology, and helps protect the company from legal liability in issues related to the use of the product. Here’s a closer look at why most software purchases come with an end user license agreement and why your company should consider having one, too.

What Is an End User License Agreement?

An end user license agreement is a legal agreement between a company that has created or is providing software or an app and the person who will be using the software or app (the end user). The EULA gives a person a license to use the software once they have agreed to specific terms and conditions, which state how the user can and cannot use the technology. The EULA gives people the right to use the software according to the terms in the agreement, but does not give them ownership over it.

User agreements also give the company the right to penalize a user who breaks contract and even terminate their ability to use the software. A EULA protects the rights of the technology’s creator/provider, making it an important part of your product.

Why Do Most Software Purchases Come with A EULA?

If your company has created or is providing software, it’s in your best interests to create an end-user license agreement because it offers you control and protection. You control what terms are part of the agreement and how the user can and cannot use your computer program or mobile app. You can also limit what you are legally liable for in the event your technology doesn’t perform as well as expected or damages occur while the user is using your software.

Most purchased programs come with a EULA because the agreement clearly states what people can and cannot do, requires users to agree to specific terms before being allowed to use the software, allows the company to take legal action if the user breaks the terms of the agreement, and protects the company that created the program from legal liability.


Who Benefits from the Agreement?

EULAs are designed to protect the company that owns the software rather than the user of the software. If a user breaks the terms in your EULA, you can revoke their access to the software as well as have legal action taken against them. User licenses are important for any business that offers computer software or mobile apps.

There are many circumstances in which a EULA is beneficial. For example, a EULA protects the company that owns the software in the event that a user uses the product to perform illegal activities or in other unfavorable ways. It also gives you the ability to remove users who don’t properly use the software according to the policy, such as if they infringe on the copyright or otherwise break the conditions in the agreement.

Well-tailored EULAs also limit your liability if damages occur when the user uses your technology. For example, if someone downloads your software and their device crashes as a result, with a good EULA, that person may not be able to sue you, even if your software did in fact cause the crash. Additionally, EULAs help ensure users may not be able to hold you responsible in the event you don’t 100% meet their expectations, such as if the software stops working properly for a period of time or if an app is down.

It is your responsibility to provide the end user license agreement, and it is the user’s responsibility to read and agree to the contract. Even if the user does not read the contract, once they agree to it, they are required to follow the terms of use. They will not be able to use “I didn’t read it” as an excuse for breaking the contract. If the user breaks the end-user license agreement, you are able to hold them accountable for their actions, regardless of whether or not they actually read the entire agreement.

What Is Included?

A EULA states specific ways people can and cannot use the software or app. These are listed in clauses that cover topics like liability, copyright, warranties, software updates, and more. You can also determine whether the product can be used for personal or commercial use, where the program will or won’t work, and provide other detailed information about the use of your software. Additionally, you can include contact information for your customer service department, so people know how to reach out to you if they have questions about the end-user license agreement. The EULA should also state to the user that by accepting the policy, they agree to abide by its terms.

The specific details in the clauses are different for each company, as each company has its own opinions on how their technology should be used. Additionally, each company’s technology will serve different purposes, have different features, or be built with different goals in mind. The rules in your EULA should be customized to your company’s goals and the specific features and purposes of your technology.

Important Clauses

There are several types of clauses that are commonly included in user agreements. A lawyer can help you decide which clauses should be part of your agreement. These sections of user agreements clearly explain what is and is not allowed when using the product and give your company the ability to take action against people who break the agreement.

Restrictions on use: This clause states the ways people are not permitted to use your software. For example, they cannot use the software for illegal purposes, reverse engineer the software, sell the software to other people or companies, or reproduce it.

Limitation of liability: This limits the liability of the software company and other involved parties from damages that result from the user using the software. This may include limiting liability for personal injury, property damages, software malfunctioning, and more.

Disclaimer of warranties: This section states that the user accepts the software on an “as is” and “as available” basis, so the end user can’t hold you responsible when your software fails to meet the user’s expectations. Such instances may include an app being down, having bugs, or not performing as expected 100% of the time.

Termination: This clause allows you to terminate or suspend the user’s license. For example, if the user uses the software illegally or otherwise breaks the terms in the agreement, you can terminate their license to the software.

Copyright infringement: This section says that because you own the software, you also own the copyright and rights to intellectual property. It also states what happens to a user if that person infringes on the ownership rights and violates copyright law.

Governing law: This section states where your company and the user will resolve legal disputes should any arise. Care should be taken in choosing the governing law and venue, whether state law and federal law or arbitration.

Software updates: If you plan to have the software update automatically, you can mention this in the EULA so the user is aware of why product updates will occur (for example, to fix bugs or add new features), and what happens when those updates are made.

Related agreements: This states that by accepting the EULA, the consumer also agrees to other agreements from your company, such as the privacy policy. In the EULA, you can include links to any related agreements so the user can easily view them.

Is It Legally Required?

EULAs are not required by law, but it’s considered best practice to have one to protect your business from potential future legal issues. These licenses are legal contracts between a company and end users and are legally enforceable. When you have the user consent to the EULA, you can take legal action if they break the conditions in the agreement. If you don’t have the user agree to a EULA, you lose control over how that person uses your software and can’t do much, if anything, if they’re using the software in a way you don’t like.

Where to Display the Agreement

You need to make consumers agree to the EULA before allowing them to use the software. If the user must purchase software, consider requiring the user to agree to the policy before they pay. If the software is free, have the user agree to the EULA either before they download or install the product or right afterwards so they can accept the terms before using. The EULA should not be optional for the user, so make sure that in order to use the software, they must accept the policy. You can also display the EULA somewhere on your website so the consumer can reference it in the future if they want to be reminded of the rules they agreed to follow.

How to Create A EULA

You have several options when it comes to creating a EULA. Common ones include using a EULA generator or a template to create an agreement on your own, or having a knowledgeable lawyer help you draft the agreement.

A EULA generator asks you for basic information about your software as well as the terms you’d like to have included, then generates a EULA for you to use that includes the information you provided. Similarly, a template allows you to fill in the blanks with the information and rules you want included in the EULA. You can also write your own EULA from scratch. However, if you’ve never done this before, it can be easy to accidentally leave out important information. Further, most generators tend to take a one-size-fits all approach, which may not take into account the particular nuances of your software, from multiple perspectives, including overall functionality, the user interface, and legal concerns specific to your sector.

Working with a lawyer is the best way to ensure you create a EULA that includes all of the important details and is legally enforceable. A lawyer that’s knowledgeable in software agreements for use on a computer or mobile device can suggest specific clauses to include to best protect your company and will work with you to create a contract that meets your goals. Even if you choose to use a generator or template to build a contract, it’s a good idea to have a lawyer review the EULA to make sure it makes sense and isn’t missing anything.

Benefits of Working with a Lawyer

Working with a lawyer to create your EULA is a great way to ensure you include all the necessary clauses and aren’t missing anything important in your agreement. A lawyer can also make sure your agreement is phrased correctly so that it can be properly enforced. Working with a lawyer also makes it faster and easier to create a EULA since you have help from someone who is experienced in drafting, reviewing, and revising legal agreements. Additionally, a lawyer can provide legal guidance and recommendations as well as answer your questions and address any concerns you might have. If you decide to write up your own EULA, a lawyer can still review it to make sure there are no holes and that it includes everything that needs to be included to protect your business.

About Stevens Law

The legal team at Stevens Law has years of experience helping companies of all sizes in important technology and business law matters. If you’re in need of a EULA, our lawyers can draft or edit license agreements and provide legal guidance throughout the process. Our areas of expertise include matters in technology transactions law, SaaS and software development law, products liability law, and other practice areas focused on helping businesses, including mergers and acquisitions, intellectual property, and more. You can trust our team to help you protect your business and intellectual property. Contact us at (614) 826-3100 to learn more about our services and book a free consultation.

latest thinking at stevens law firm

See All News >>