Licence (in the context of contracts)

A unilateral permission given to a party or parties to use someone else’s property or product, usually subject to a set period of time and other conditions. In a contract, a licence is generally offered by the licensor to the licensee in exchange for consideration. Licences are becoming increasingly common in the digital age, and are generally governed by intellectual property law as well as contract law.

A typical licence agreement will most likely include provisions outlining the scope, training and support, and fees.

For example, a licence to use software may include the following information:

Scope

• What products is the licensee entitled to use of?
  e.g. Software program/s.
• What are the limits on the licensee’s use of these products?
  e.g. Private personal use on up to five devices.
• What is the start and end date of the term of use?
  e.g. 01/01/2019 – 01/01/2020.

Training & support

• Is there an obligation on the licensor to provide training and/or support in the licensee’s use of the product?
  e.g. A ‘help’ button can be found within the applications that provides a training function and a mechanism to chat with a support agent.

Fees

• What is the cost of the licence?
  e.g. $100
• How will the licensor be paid?
  e.g. Upfront fee

In a business context, a commonly used licence is a franchise agreement, where a large corporation or chain issues a licence to a franchisee to open and operate a business with the corporation’s name and branding.