What is an end-user license agreement (EULA)?

An end-user license agreement (EULA) is a contract between a software company and users of that company’s software. Also known as software license agreement, EULAs are essentially enterprise license agreements for end-users and software vendors instead of companies and software vendors. They’re usually given to users during the software set-up or installation stage and must be signed before completing installation.

Read on to learn how to write and manage EULAs. You’ll also learn how to use  contract management tools like Ironclad to draft and manage your company’s EULAs.

A EULA is a Terms and Conditions agreement granting end-users the right to use a software or application they bought from a vendor. A EULA establishes the following:

• How the user can use the software
• Restrictions on using the software (i.e., most EULAs prohibit users from distributing or sharing the software in any way that benefits themselves rather than the vendor)

Unlike most Terms and Conditions agreements, however, EULAs are much narrower in scope. They only cover issues related to the licensing of the software—including the right to use the software—while a Terms and Conditions agreement outlines a broad range of topics, including third-party service providers, use of the associated website, and fees and costs. A Terms and Conditions agreement for software licensing may also include a EULA.

You will encounter EULAs every time you make your software available for public use. This is because they exist to protect the rights of the business owner or licensor. They’re also critical for managing end-users’ expectations and establishing how they can or can’t use the software.

As such, every business that gives customers licenses to use software needs to have EULAs. This includes software, game, mobile app, and software as a service (SaaS) developers. 

You should also draft EULAs if your company:

• Provides a service or software that can cause potential harm if misused
• Is legally required to make disclosures about consumer rights, particularly cancellation and withdrawal rights
• Wants to have legally enforceable control over how your product may be used
• Offers a product that has different user levels (i.e., non-registered versus registered users)
• Allows users to trade or sell with other users (i.e., an eCommerce store)
• Participates in affiliate programs

Here’s what you need to include when creating a EULA:

Parties

Identify yourself and your business. Use the full legal names of your company so that end-users know exactly who they’re entering into a contract with. You also need to specify that this agreement is a EULA and that it’s between you and the end-user.

Grant of license

State that you are granting a license to the end-user to use the application. This is the most important part of a EULA, so be as clear as possible when writing this.

Limitations on use

The next step is to establish what end-users can and can’t do with your software.

Most EULAs only permit end-users to use the software for personal purposes. However, some EULAs—such as those for design and illustration software—permit end-users to use the application for commercial purposes.

Either way, most or all EULAs prohibit users from doing the following without your company’s prior written consent:

• Copying the software to develop, sell, manufacture, or design third-party devices or software
• Using the software to facilitate illegal activity, such as hacking
• Leasing the app to a third party
• Translating the app and rebranding the translated app as a new product
• Reverse engineering
• Decompiling a part or all of the software

Termination conditions

The end-user needs to know that you can terminate the agreement at any time if they breach the EULA. They also need to know that they can withdraw from the agreement at any time.

Warranties and disclaimers

Since you can’t promise that your application will always run smoothly, you need to cover your bases with warranties and disclaimers.

Essentially, this clause exists to remind end-users to take the product “as is” and control their expectations. Be firm about making no assertions or promises to the end-user about the application other than how it meets basic legal standards.

Limitation of liability

This clause will limit your liability if an end-user’s property or reputation gets damaged as a result of using your application.

You should state that you won’t be responsible for special, incidental, or consequential damages resulting from the malfunction, use, or possession of the application, including:

• Loss of business goodwill and reputation
• Personal injury (up to a certain extent)
• Hardware malfunction
• Property damage
• Punitive damages arising from any causes of action related to this EULA, whether from tort, strict liability, contract, or otherwise

Jurisdiction

State what country or state laws govern the EULA. Most businesses will choose the laws of the country or state where they have their main business, but sometimes, they may also include other jurisdictions.

For example, Rockstar Games’ EULA lists New York as their jurisdiction. However, end-users who are residents of a European Union member state can choose to raise proceedings in their home countries.

Contact information

Finally, you need to tell users how they can contact you if they have any questions or concerns about your EULA. You only need to include one contact method, such as an email or phone number, but you can include more as needed.

With so many clauses and details, EULAs can be a chore to draft and manage, particularly if you have more pressing contracts and projects to manage and execute. They’re particularly challenging to write and manage if you’re still storing contracts in physical cabinets, USBs, and hard drives.

That’s where enterprise-grade digital contract management tools like Ironclad come in. Powerful and sleek, Ironclad has everything you need to draft and approve EULAs within minutes.

For instance, our enables you to:

• Access EULAs and their contract metadata in seconds
• Bring in EULAs from all over your company
• Give team members access to as much or as little contract data as needed

These functionalities allow you to:

• Break down contract silos
• Bring teams together
• Find contracts and answers to questions in seconds.

Accelerate the negotiation and redlining process

Our Workflow Designer that lets you create and approve automated workflows for EULAs. A codeless and user-friendly tool that anyone can master in a few minutes, Workflow Designer empowers team members to create and deploy EULAs within minutes. All they have to do is upload a template, tag fields, and add signers and approvers.

An end-user license agreement or EULA is a contract that users must sign before they can finish installing software. Besides protecting software vendors’ and licensors’ rights, EULAs also manage end-users’ expectations and establish how they can or can’t use the software.

Lengthy and full of legalese, EULAs can be difficult to draft and manage, particularly if you’re new to this kind of agreement. That’s why you should consider getting Ironclad Editor. A premier digital contracting software, Ironclad will help you and your team draft, manage, and organize your EULAs.

With top-notch tools like our Data Repository and Workflow Designer, you’ll be able to break down contract silos, bring teams together, quickly find contracts and answers to questions, and accelerate the negotiation and redlining process.