EULA

What it means

An EULA, an end-user licence agreement, sets out how the user may use software, on how many devices, whether it may be modified and who is liable for bugs. It is often accepted with a click during installation or registration, but it is a binding contract.

The user does not buy the software but obtains a licence, a right to use it. The software remains protected by copyright, and the EULA defines the scope of that right, for example banning reverse engineering, copying or renting to others.

Similar terms apply to SaaS services, where they are called terms of use, and to open source licences, which by contrast allow the code to be freely used and modified on stated conditions. The type of licence strongly affects what a company may do with the software.

How it works in practice

Companies should keep a licence register: what software they use, how many licences they hold and to whom or which devices they are assigned. Software vendors carry out licence audits and can demand payment for unlicensed use, usually above the normal price.

The EULA determines whether a licence is for home or commercial use. Using a home edition in business is a common breach that audits uncover. When buying, also check whether the licence permits remote work or use on several devices.

In the accounts, a purchased licence costing above the threshold and used for more than a year is recognised as a long-term intangible asset and amortised, while cheaper licences and subscriptions are expensed directly. For licences from foreign suppliers, remember reverse-charge VAT.

What to watch out for

Limitations of the vendor's liability in an EULA may not be valid against consumers. When selling digital content to consumers, the trader has statutory duties that cannot be excluded by contract, whereas between businesses there is more freedom of contract.

An EULA may include terms on data collection, automatic updates or the vendor's rights to user data. For business software that processes personal data, the data processing agreement and the data storage location also need checking.