Agile IT Projects: How to Manage Legal Risks

Key Takeaway

While Agile methodologies offer a high degree of flexibility, they require a robust legal framework to mitigate the risk of disputes. Recent case law confirms that the success of an Agile project depends on a balanced commitment from both parties, a properly structured contract, and clear documentation of communications and decisions.


Agile methodologies have been widely used since the early 2000s in IT project management. They offer significant advantages, particularly in terms of flexibility and responsiveness to evolving client needs. However, if not implemented with sufficient rigor and structure, they can give rise to legal disputes. The growing adoption of Agile raises important legal challenges, especially concerning contract structuring and the allocation of responsibilities. While Agile is based on iterative processes, close collaboration, and continuous adaptation, these principles must be reconciled with legal requirements for clarity, coordination, and risk management. This article provides a legal analysis of this framework in light of recent case law, in order to clarify the respective obligations of service providers and clients.


1. A Brief Overview of Agile Methodologies

Agile methodologies emerged in the early 2000s as a response to traditional waterfall or V-model development approaches.

Designed to be more pragmatic than traditional development methods, Agile aims to better meet the client’s needs, recognizing that those needs may evolve and are not necessarily fixed from the outset of the project. Agile methodologies (such as Scrum, Extreme Programming, Lean Software Development, RAD, etc.) are based on principles of flexibility and adaptability throughout the execution of the project, close collaboration between stakeholders, including substantial involvement from the client throughout the process, and rapid delivery.

These IT project management practices were formalized in February 2001 with the publication of the Agile Manifesto. (1) The Agile approach is grounded in four core values:
    - prioritizing individuals and interactions over processes and tools,
    - delivering working software over producing exhaustive documentation,
    - fostering customer collaboration over contract negotiation, and
    - embracing change over strictly following a predefined plan.

Agile methodologies also incorporate key principles such as iterative development, continuous integration, and systematic testing and acceptance at the end of each iteration.

Even though the client’s requirements are not set in stone and an Agile project is fundamentally based on mutual trust between the parties, it is nonetheless essential to exercise vigilance in project management to avoid misunderstandings and scope creep. The contract remains a key instrument to formalize the principles of collaboration and adaptation to evolving client needs. It also serves as a working framework to prevent ambiguities regarding the processes that will be implemented. Since the project is not fixed from the outset, it may, in principle, be suspended at any time.

In addition, the financial terms of an Agile project must be transparent and agreed upon before services begin. Some projects may be structured entirely on a time-and-materials basis (billing according to time spent or number of days worked), while others may be carried out under a fixed-price model, for each iteration, for example. It is also possible to combine both approaches, with part of the project subject to a fixed price and another part managed on a time-and-materials basis.


2. The January 6, 2023 Ruling – A New Endorsement of the Agile Model

The French Courts have had the opportunity to rule on several cases involving IT projects carried out using Agile methodologies. One such decision, issued by the Paris Court of Appeal on January 6, 2023, affirmed the legal implications of a contract performed under an Agile framework. (2)

Oopet, a startup operating in the pet services sector, had commissioned Dual Media Communication, an IT service provider, to develop two mobile applications and a website.

The client later alleged that the provider had breached its duty to advise, particularly by failing to recommend to draft a detailed specifications document, and by delivering defective services.

However, the judges did not consider that the provider had failed in its duty to advise or to issue appropriate warnings. They noted that “numerous email exchanges show that the development of the mobile applications and the website was meant to follow Oopet’s precise requests, as expressed progressively based on the functional prototypes sent by Dual Media Communication. There were numerous letters and text messages (…)” Nonetheless, “despite a difficult communication process with the client and challenges in stabilizing its evolving demands, Dual Media demonstrated, through its many responses and reactivity, that it had fulfilled its duty to advise (…)”. The Court found no fault on the part of the provider and therefore upheld the original judgment dated October 7, 2020. (3)

Even in the absence of a comprehensive specifications document, the client must at least be able to define the purpose of the project and its expectations (such as formal requirements), so that the provider can understand its needs. The judges emphasized that while the provider’s duty to advise depends on the client’s needs and objectives, the client must express those needs clearly. A provider cannot fulfill this duty effectively if the client fails to provide the necessary information that would allow the provider to meet the client’s expectations as closely as possible.

It is worth recalling, logically, that this type of contract entails an obligation of means on the part of the provider. As such, it was the client’s responsibility to prove that the provider failed to meet its obligations, something Oopet was unable to do in this case. (4)

In conclusion, "Agility" is by no means synonymous with a total absence of formalism. On the contrary, the parties must remain deeply involved in the project, appoint individuals with decision-making authority, both on the provider’s and the client’s sides, and follow a rigorous methodology to ensure a satisfactory outcome for both: successful project completion for the client and validation of deliverables and payment of invoices for the provider.

(1) See https://agilemanifesto.org/ 

(2) CA Paris, Pôle 5, ch. 11, 6 janvier 2023, Oopet c/ Dual Media Communication

(3) T. com. Paris, 8é ch., jugement du 7 octobre 2020, Oopet c/ Dual Media Communication

(4) Sur l’obligation de moyens dans un contrat Agile, voir T. com. Nanterre, 4ème ch., jugement du 24 juin 2016, Macif c. IGA Assurances, et CA Pau 2e ch., 19 Novembre 2018, Axiome Solution c/ Hors Limites 64


Bénédicte DELEPORTE
Avocat

Deleporte Wentz Avocat
www.dwavocat.com

March 2023