Drafting a pilot agreement proof of concept: what belongs in it

Drafting a proof-of-concept or pilot agreement involves clearly defining the test phase: scope, duration, costs, intellectual property rights regarding the results, confidentiality, measurable success criteria, and, most importantly, whether or not a follow-up obligation arises after the pilot. Because a pilot takes place in the pre-contractual phase, it is precisely this non-binding nature that you must explicitly regulate. Below is a list of the components that should be included and what to look out for.

The short answer

1. Scope and duration: what is being tested, where, for how long, and with what effort.
2. Costs: who pays what during the pilot and how settlement is handled.
3. Intellectual property: who owns the results and may the client use them.
4. Confidentiality: protection of shared data and knowledge.
5. Success criteria: when is the pilot successful and who assesses that.
6. Continuation: no-obligation, option or purchase obligation upon success.

First determine the nature of the phase

A pilot usually falls within the pre-contractual phase, which is governed by reasonableness and fairness (Art. 6:2 BW). In principle, parties may break off negotiations, but according to settled case law, this may be unacceptable if the other party was justifiably entitled to rely on an agreement. To avoid this uncertainty, explicitly stipulate that the pilot is non-binding and does not automatically lead to a continuation. This way, you determine the rules of the game yourself instead of leaving them to the judge.

So choose wisely: is this a no-obligation exploration, or are you already building towards a deal? That starting point determines how you structure the rest of the contract, from the costs to the success criteria.

Drafting a proof of concept agreement or pilot agreement: the standard components

• Scope: which functionality or solution is being tested and what falls outside of it.
• Duration and phasing: start and end dates and any interim milestones.
• Commitment and responsibilities: who provides which people, data, and resources.
• Costs: fixed fee, cost sharing or free of charge, and payment term.
• Intellectual property: rights to the results and right of use after the pilot.
• Confidentiality: what information is confidential and for how long.
• Success criteria: measurable goals and the assessment method.
• Continuation: no obligation, option under fixed conditions, or purchase obligation.
• Liability: limited risk allocation, appropriate for a test phase.

Keep the document concise. A pilot is intended for rapid learning, so an overly burdensome contract does not fit the objective. Get the core right and leave the rest out.

The two parts that go wrong most often

The first stumbling block is intellectual property. If a supplier builds custom work or if valuable insights or configurations emerge during the pilot, the copyright remains with the creator unless otherwise agreed. Therefore, a customer who pays for a proof of concept does not automatically become the owner. Specify who holds the rights, whether the customer may use the result after the pilot, and whether the acquired knowledge is exclusive.

The second stumbling block is the follow-up question. Without clear success criteria, a pilot often ends in a discussion about whether it was successful. Make the criteria measurable, determine who assesses them, and link a clear consequence to them. If you opt for an option or a purchase obligation, immediately establish the rates and conditions for that follow-up so that you do not have to renegotiate them later.

Confidentiality and liability rules

During a pilot, parties often share sensitive information: business data, customer data, or technical knowledge. A confidentiality clause, possibly including a reasonable penalty clause, protects that information even if the pilot does not lead to a follow-up. Regarding personal data, also consider a data processing agreement if the supplier processes your customers' data.

Regarding liability, a pilot calls for a limited arrangement: it is a test, not a production environment on which you rely fully. Limit liability to what is reasonable, but bear in mind that an overly broad exclusion may be unreasonably burdensome and set aside.

Practical example

An SME webshop has a marketing agency test a new advertising strategy for two months. The pilot agreement stipulates a fixed fee, the agency retains ownership of its methodology while the webshop retains the campaign data, confidentiality regarding revenue figures applies, and it has been agreed as a success criterion that the cost per sale decreases by at least twenty percent. If this is achieved, the webshop can continue at a fixed monthly rate; if it is not achieved, the collaboration ends without obligation.

Honest recommendation

You do not always need a lawyer. For a short, cost-free test without sensitive data and without in-house development, a written confirmation of the scope and duration is often sufficient. Have a pilot agreement drawn up as soon as money, sensitive data, or customization is involved, or when a party makes a substantial investment. In that case, be sure to properly arrange three things: the intellectual property of the results, confidentiality, and whether or not a follow-up obligation arises. Furthermore, keep the document concise, because a pilot is about learning quickly. The biggest pitfall is not the text, but the ambiguity regarding what happens after the pilot; you eliminate this with clear success criteria.

Read more or get started immediately? View the pilot agreement proof of concept, first read what a pilot agreement proof of concept is , and see what you can expect if you are considering having a pilot agreement proof of concept drafted .

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