An End-user License Agreement (EULA) is a contract between a software developer and a user who wants to purchase and use that software.
The software developer is known as the “vendor”, and the buyer of the software is known as the “licensee” because the EULA gives them a license to use the software.
1. What is an End User License Agreement?
An End User License Agreement is a contract between two parties — the licensor and the licensee — for the right to use proprietary software. The licensor or vendor is often an individual or software company who created the software. The licensee is the user who pays a fee to use, download, or install a copy of the software.
An End User License Agreement is often known by its abbreviated form EULA. If you’ve ever downloaded an app on your phone, you’re likely familiar with those four little letters.
An EULA protects the licensor or copyright owner of the software by prohibiting the licensee from re-selling the software for their own personal gains at your expense. A license essentially gives the user “permission” or a limited right to use the software.
A simple End User License Agreement will identify the following basic elements:
- Disclaimer of Warranties: the software is often provided “as is” and the licensor is not responsible for any problems that may arise from using the software
- Governing Law: which state’s laws will apply if there is a dispute or problem
- Infringement Acknowledgement: the user is responsible for any legal issues related to copyright infringement
- Licensor: name and address of the individual or company who created the software
- Licensee: name and address of the user who wants to install or download the software
- License Granting: limitations on how the software can be used by the licensee
- Limitations of Liability: whether the licensor will be responsible for any damages or problems that arise from using the software
- Maintenance and Support: whether the user will be provided support on site or by phone, either 24 hours 7 days per week, quarterly, or annually
- Software: name or title of the computer software program created and now licensed
- Termination: whether the software developer has the right to end the license if the user violates the agreement or other issues arise
- Use Restrictions: the licensee is limited in how they can legally or illegally use the software
In contrast to an EULA, a Terms and Conditions agreement is broader and covers more issues than merely the licensing of the software.
As a reference, an End User License Agreement is known by other names:
- Browse Wrap Agreement
- Click-Wrap License
- End-Use License Agreement
- License Agreement
- Licensed Application End-User Agreement
- Shrink-Wrap License
- Software License Agreement
The courts are mixed about whether “browsewrap” agreements are legally enforceable since some provisions have been declared unconscionable or unacceptable. Knowing the difference between browsewrap and clickwrap agreements can help you better understand which fits the needs of your own business.
Every EULA should clearly state that a revocable, non-exclusive, non-transferable, limited license is being granted to the user. In other words, the software can be used but not re-sold.
2. When an End User License Agreement is Needed
An End User License Agreement is commonly used when an individual or company creates proprietary software and would like to make money by allowing others to use the program in limited ways. If the licensor is worried about their copyright, a EULA prevents others from copying the source code, selling the software as their own, or transferring the software to a non-paying user.
3. Consequences of Not Using an End User License Agreement
Without an End User License Agreement, a software publisher is in many ways agreeing to a free and open-source software license. In these copyleft situations, all future versions of the software must continue to be distributed for free.
Instead, if the individual or company who created the software wants to earn money, a EULA protects their source code and specially written program, mobile app, or website from being copied or used without permission. An NDA can act as another layer of protection.
An EULA allows the vendor to restrict the user from modifying, adapting, improving, enhancing, translating, or making derivative works from the original software being licensed.
4. Common Uses of an End User License Agreement
If you have created one of the following, you may benefit from creating a license agreement for your users to agree to before using your software:
- mobile apps
- software applications
- computer programs
5. What to Include in an End User License Agreement
A simple End User License Agreement should generally have at least the following:
- Who created the software program (i.e. licensor) and who wants to use it (i.e. licensee)
- What software program is being licensed and subject to the EULA
- Where disputes will be resolved if there is a problem with the software or agreement
- When the user becomes bound to the terms of the license, either upon opening the package seal, registration, installation, or acceptance of the EULA
- How the software can be used and any rights the user has to the software application
- Whether the licensee can install the software on more than one computer (i.e. site license)
Read about some considerations you should make to ensure your EULA is fair to users.