Open Source

Contract Type:
Generic Contract

The Licensor warrants that the Software does not contain any third party open source software. In the event that the Licensor becomes aware that the Software does contain any third party open source software, the Licensor shall promptly notify the Licensee in writing providing details of the relevant open source software, including the applicable open source licence terms. The Licensee may at its sole option: (a) accept the open source software and associated open source licence terms, in which case those licence terms shall apply to the use of that open source software in place of the terms of this Agreement (but shall not affect the terms of this Agreement in relation to the remainder of the Software); or (b) require the Licensor at the Licensor's own expense to replace the relevant open source software with software of equivalent functionality that is not subject to open source licence terms. If the Licensee accepts any open source software under option (a), the Licensor shall indemnify the Licensee against any losses, damages and expenses incurred by the Licensee arising from or in connection with any failure by the Licensor to comply with the applicable open source licence terms in respect of the use of that open source software.


Here is a plain English explanation of the Open Source clause:

- The Licensor promises the software does not contain third party open source code.

- If the Licensor finds there is open source code, they must promptly notify the Licensee in writing with details.

- The Licensee can then choose to:

(a) Accept the open source software and its license terms. These terms would apply instead of the contract terms for that open source portion, but the rest of the contract remains the same.


(b) Require the Licensor to replace the open source part with equivalent software not under an open source license, at the Licensor's expense.

- If the Licensee accepts option (a), the Licensor must indemnify the Licensee against any losses from the Licensor failing to meet the open source license obligations.

- The purpose is to give the Licensee control over any open source software use and ensure the Licensor complies with open source licensing.

History of the clause (for the geeks)

Open source licensing gained prominence in the 1980s with the rise of free software movements.

This allowed source code to be shared and modified openly, contrasting to proprietary models. Companies utilizing open source in products had to adhere to associated distribution terms.

But the use of open source code was not always transparent. Some firms failed to comply with licensing requirements. Others unwittingly included open source without realizing license obligations. This created legal exposures for licensees of the software.

To protect against risks from unvetted open source usage, licensees increasingly sought contractual protections. Open source clauses obliged disclosure by licensors if code carried licensing requirements. This ensured licensees could evaluate potential constraints or liabilities.

If open source usage was revealed, licensees could decide whether to accept it or require replacement by equivalent proprietary code. Indemnities covered any license breaches by licensors. Such clauses shifted the diligence burden for vetting open source usage.

As open source licensing has proliferated across industries, these contract provisions have become critical.

They uphold license compliance in commercial software. And they safeguard licensees from inheriting unknown licensing burdens through opaque supply chains.