System development agreements govern a wide range of projects from the straightforward to the large, complex and costly. The objective is usually simple: to create an IT system meeting the customer’s needs in a trouble-free way, by an agreed time and for an agreed price. However, this simple ambition often masks a mass of complexity reflecting the underlying complexity of IT systems themselves. Practical matters, including the methodology for the project, the components of the system and how the system should work in real-life conditions, fundamentally affect the issues that a development agreement must address. Without a clear working knowledge of the commercial and technical issues, there is a good chance that lawyers will produce contracts which are divorced from reality and inadequately address the risks. In addition, development contracts contain a mixture of contract, intellectual property and commercial issues which can look standard to the uninitiated but in fact vary widely in order to accommodate specific project requirements. This Practice Note covers the following key issues: • Development methodology • Incorporating other software • Hardware