EULA vs software licence agreement: What are the differences?

When it comes to software agreements, finding the right template to suit your business model and audience can be daunting. Two commonly encountered contracts in the software world are end-user licence agreements (EULAs) and software licence agreements (SLAs). But what exactly are these agreements, and how do they differ? In this guide, we’ll provide a high-level overview of the differences between these software contracts to understand their nuances and the various scenarios in which they are used.

To understand their differences, first let’s delve into each of these software agreements individually:

What is a EULA?

An end-user licence agreement (EULA for short) is a contract between a software vendor and an end-user that grants the right to use an app or software.

Real-life example: Imagine purchasing a brand new game from an online market place. After eagerly installing the game, a pop-up banner appears on the screen asking you to read and accept the terms of the EULA. This document outlines the conditions for playing the game, restrictions, intellectual property protection and user responsibilities. The EULA forms a legally binding contract between the software vendor and the individual using the software.

What is a software licence agreement?

A software licence agreement is a contract between a software vendor and a business customer that grants a licence to the customer to use the software. These agreements extend beyond individual use and delve into the intricacies of software deployment, ownership of the software and intellectual property rights, etc.

Real-life example: A financial software company (the vendor) agrees to license its accounting software to a marketing agency (the customer). As the software will be downloaded and hosted on the customer’s server, the vendor will use a software licence agreement. This document specifies the terms for installation, usage, ownership, data security, fees and limitations of the vendor’s liability.

From software licence agreements to SaaS agreements

With the rise of cloud computing and software-as-a-service, traditional software licence agreements have evolved. SaaS agreements, cater to businesses using cloud-based software. They outline the terms for cloud-based access to software hosted remotely, often including similar provisions that have evolved from those found in traditional software licence agreements.

Please note that if the software is hosted on the software vendor's servers and the software is cloud-based (i.e. software as a service), then typically a SaaS agreement will be used instead.

For a deeper dive into the key differences between SaaS and traditional software licences, check out this blog.

Key differences between EULAs and software licence agreements:

While both agreements contain software licences, they have very distinct disparities. Here are some of the main differences between them:

1. Audience

EULA: Designed for individual users (but can be used in both B2B and B2C contexts).

SLA: Designed for businesses.

2. Purpose

EULA: Establishes guidelines for how an individual interacts with and uses the software. It sets out end-user responsibilities, restrictions and disclaimers.

SLA: Covers a broader range of terms within a business context, including software usage but also deployment, maintenance, technical support, payment terms and potentially customisation (if applicable). It also addresses intellectual property rights and limitations of liability in more depth.

3. Protection

EULA: Contains terms that predominantly protect the software vendor.

SLA: Usually covers a wider range of terms that provide legal protection for the software vendor and also the customer (depending on the circumstances and parties' bargaining power).

3. Ownership

EULA: Software vendors usually retain ownership and control over the software. This means that while users are granted permission to use the software under specific terms and conditions outlined in the EULA, the user does not acquire ownership rights in the software.

SLA: Software vendors will also retain ownership and control. However, customers purchasing the software might gain more control if custom software is created by the vendor for the customer. In these circumstances, there may be more room for negotiation with a software licence agreement. For example, the SLA may state that the vendor will transfer ownership of a bespoke add-on or custom feature created specifically for the customer. Whereas a EULA is less likely to have scope for customisation and transfers of ownership.

4. Acceptance formalities

SLA: Finalising these agreements may entail negotiations before they are signed by both parties. The parties’ acceptance is usually confirmed by way of signature by authorised representatives of the businesses involved. Traditionally signatures were signed in wet-ink, but more often these days, signatures are collected via electronic signing or via a tick-box.

EULA: The terms of a EULA are often less negotiable and are presented as "take it or leave it" agreements due to their standardised nature. They are predominantly accepted with a simple click or ticked box to accept the terms. However, a vendor may prefer for individuals to e-sign to confirm their acceptance.

Can EULAs and software licence agreements work together?

Yes, there may be scenarios where a software vendor may require a customer to sign a software licence agreement and also require all users within the customer’s organisation to sign a EULA.

The software licence agreement will set out the broader terms relating to the access of the software, including any applicable fees, whilst the EULA will detail the specific responsibilities and guidelines for usage by individuals. This dual approach ensures a comprehensive understanding of both the companies' obligations and individual users' responsibilities when using the software.

Final thoughts

In the complex world of modern software agreements, finding the right legal templates that suit your business is vital. EULAs define individual software usage, while software licence agreements and SaaS agreements underpin more complex business software interactions. These agreements safeguard rights, responsibilities, and expectations, to create a comprehensive digital environment for individuals and businesses.

It's worth noting that each software agreement is distinct, and a 'one-size-fits-all' approach to these agreements will not always be suitable. Nevertheless, this guide has provided you with an overview of these contracts that facilitate the use of modern technology.

How can Docue help you create the right software agreement?

Docue offers a wide selection of software agreements that can be adapted to your specific requirements. Whether your software operates in the cloud or is downloaded onto your customers' servers, Docue has you covered:

• For cloud-based software, our SaaS agreement template can be used.

• If your software is intended for download and installation on your customers' servers and systems, then Docue's software licence agreement is better suited.

• If you’re looking for a contract that will be read and accepted by end users who will be using your software, then check out our EULA template. It can be used with business users and/or consumer users.

Beyond the suite of 100+ lawyer-drafted templates, Docue goes the extra mile by providing an efficient solution for collecting signatures electronically and storing documents securely. Our platform streamlines the contract process and saves you valuable time.