Source code Buyout clause in contract


I have a small contract that I have to makeup, but the biggest importance is to make sure the the source code buyout doesn't have a set price. What would be the best way of wording this? Ideally, we'd like for the source code to be valued by a third party (bank or such).

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asked Nov 28 '12 at 14:18
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2 Answers


Ick. Don't do that.

Here's the problem: trying to put a dollar value on source code is more of an art than a science. There are people out there who do independent valuations, but you can hire two of those people and they will likely come up with wildly different valuations. Besides, their valuations are going to be based on the value of the code in the free market, and the free market value is likely to be a lot less than the value of the code to the company you're contracting with.

If you really want to do it, you can put in something like "at a price to be determined by a mutually-agreeable valuation expert with expertise in the field of [Blank.]" Alternatively, you could do baseball arbitration: you come up with a valuation, the buyer comes up with a valuation and some mutually-agreeable third party picks between the two. [Note, though, that a typical commercial bank will not have the skills needed to do this. Some investment banks have that skill, or you can just hire an independent valuation expert.]

If it were me, I'd try to find someway to determine a price without a third-party valuation. Either do it based on a set price today with an annual increase, or a multiple of revenue generated by the code or whatever.

answered Nov 29 '12 at 02:01
Chris Fulmer
2,849 points


What is the contract for? It isn't really clear what you're trying to achieve from what you've said.

If you are licensing something that is very different to buying it outright, so the contract needs to reflect that.

answered Nov 28 '12 at 19:21
Steve Jones
3,239 points

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