May 15, 2007

How to Write an End User License Agreement

Adriana Iordan writes "Whenever you install software on a computer, you will have to face the inevitable: agreeing to the EULA (End User License Agreement). But how many of us really go through all those paragraphs teaming with legalese?

The percentage of software users that actually read the terms of any license agreement is rather low, mainly because these agreements are too stuffy and, most of the times, almost incomprehensible for the average-educated software user.

Also, there's the common belief that all EULAs are practically the same, so users just skip reading them and go straight to ticking the "I Agree" checkbox and pressing the "Next" button. For that reason, many software users are confronted with usually unpleasant situations that could have been avoided, should they have read the EULA beforehand.

Such situations have generated huge waves of discussions on the topic of possible improvements that can be done in terms of software license agreements that can make them more appealing to end users and even put software companies in a better light.

What is the EULA?

The EULA (End User License Agreement) is, as its name shows it, a contract between the software developer and a potential user. By means of this contract it is established that the developer of the software is its de facto owner, and that a copy of the respective software bought from a vendor (or downloaded from the Internet) only licenses it to a user, and does not transmit any intellectual rights whatsoever on the software.

The end user is only allowed to use it as long as certain terms are respected, and is also prohibited from any alterations or uses of the software without the specific consent of its rightful owner, the software company/developer.

End User License Agreements can be presented in two forms. One is the so-called "shrink-wrap license". This type of license is usually met in the case of packaged products, when a label clearly states that tearing-open the package or breaking the seal automatically means that the buyer/user accepts the EULA found inside the package, even before reading it. The other type is the "click-wrap" / "click-through license", which is available to the user while installing the software. In order to continue the installation of the respective software, the user must check an "I Agree" box.


As mentioned before, most software license agreements are similar. They share similar terminology, as well as similar structures. Following are the most important four parts of a EULA:

  • Licensing
    In this section you will establish the rights that you wish to grant to the users over your product. It is of utmost importance to make it clear that the users do not have any intellectual rights over the software about to be installed / used, but that you are only licensing it for use according to your terms, to which the user may or may not agree, at their own discretion.
    You must also specify if any attempt to reverse-engineer, redistribute, copy, clone, modify or alter in any way the licensed software without your specific approval is strictly prohibited or permitted under certain, well-defined, conditions. It is also recommendable to make specifications as to how many terminals/computers can benefit from this license (one or more).
  • Warranties
    This section should contain a Disclaimer of Warranty, stating that even if the software is most likely to work on the user's machine, it may as well not, and it may not even be your fault. After all, should the product be exposed to, for example, atmospheric conditions that might alter the CD's / DVD's performances, you should not be held responsible for that.
  • Liability
    It is important to state the extent to which you can be held financially responsible for any mishaps that might incur as a result to the use of your software. Create a Limitation of Liability section, in which you will state clearly to what amount (if any) a user is entitled should your software damage the computer or cause legal problems by interfering with other third-party applications.
  • Laws
    Do not forget to mention specifically what laws control or apply to the license agreement that the user is supposed to agree to. A jurisdiction must be defined and any complaints or lawsuits can only be made or filed within the respective jurisdiction. If your software is supposed to have global distribution, make sure you find out which international laws apply to the EULA. Keep in mind though that, even if the EULA pattern is practically the same in most cases, yours should reflect your needs and your vision, your approach to the market and to the prospective users.

The importance of EULAs software

When it comes to software and your rights on a product in which you have invested time, financial resources and significant human effort, license agreements are not to be taken lightly. Be they in the form of shrink-wrap licenses or click-through licenses, their importance is unquestionable.

Here are some of the benefits of end user license agreements:

  • They clearly establish your property rights on the software
  • They protect your company's intellectual rights over the software
  • They protect you from lawsuits filed against you on the basis of terms that have not been read
  • They exempt you from any responsibility on malfunctioning software if your terms have not been respected

It Is Recommendable That You ...

  • Allow prospective users to see your EULA before purchasing your software. The best solution is an evaluation version of your product, free of charge, which will allow them to get an idea on what they would embark on when buying the full product.
  • Be specific on the limitations and restrictions that you impose on the use of your software. Don't be vague, as this can be held against you in court.
  • Let the users know what to expect if they use your software and do your best to meet their needs.
  • Avoid installing spyware on the user's computer along with the software, which might tamper with the system's performances. Whether you like it or not, in spite of your specifically mentioning in the EULA that anything related to the software's performance and influence on the user's system is strictly confidential, people will find out and the repercussions could be negative, most of the times in a financial way.
  • Make the important terms of your EULA as visible as possible. Anyway, be aware that free of charge tools have been created, which read, highlight and allow users to see the most important information in your software license agreement.
  • Avoid using a language that is much too difficult to understand by end users. Be transparent.
  • Include a refund policy in your user license agreement, stating in which cases a user could be entitled to a full or partial refund, and let users know that such a policy exists.
  • State specifically in what circumstances (if ever) a user can sell your software (the copy they have a license on), so as to avoid any hassle.
  • Find a way to notify the users about changes in your policy on the software, on the license agreements. Give them a chance to decide on their own if updates are good for them or if they still agree to your terms. Keep an open mind.


It is not absolutely necessary to write your user license agreements using terms of unfathomable complexity. Common language can be used to create these documents that will protect your work and investment. Nevertheless, have a specialist oversee the process of writing the EULA, namely a lawyer that is specialized in such matters.

Terms and conditions could be subject to interpretations, and it is only a trained person who can give you advice on how to properly write such a contract. Make sure you understand the laws under which the EULA is created so that you cover all the legal aspects pertaining to you and your intellectual property. And above all, respect your prospective customers, be they large corporations or just some minor domestic users."


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