When setting up a new website, certain legal and commercial issues come into play. These issues can be divided into the following categories.
Establishing the site
The first issue that needs to be considered is how the site should be designed and who will do the work. Although some larger companies may have in-house expertise most companies will look to either outsource the work entirely to the developer or, if they have in-house design skills, bring in a programmer to work as a consultant on the project.
Websites can often be very expensive to develop and the project can be protracted and time consuming. Due to this, both the purchasing company and the web developer are advised to put in place a contract for the project so that the rights and obligations of each of them are clearly defined.
Broadly, the main issues under any website development agreement can be boiled down to specification, timetable, payment, acceptance, ownership and termination.
A detailed specification for the project is essential to avoid disputes over what is or is not within the scope of the project. Whilst the specification need not be purely technical (although as high a level of technical specification as possible is advisable) it should be clear to both parties what is expected of them.
The company should be clear on the branding to be used on the site, the image it is trying to project and its target audience and any regulatory requirements which it needs to comply with. The brief to the designer should also include a detail of any e-commerce element to the site and any contact functions such as regular email updates which will need to be integrated into the architecture of the site.
Content management should also be discussed as soon as possible. The client company should decide as early as possible how much of the site they want to be able to maintain themselves and should explain this clearly to the developer and have it detailed in the specification. This issue is particularly pressing as it will not only have a great impact on the cost but may also mean that the company requires some training on how to update the site and also needs to think about allocating that role to a particular individual in that organisation.
The specification will clearly need to be linked to a timetable. Once the project brief is decided upon, clear key milestones and final dates for acceptance and launch should be agreed and integrated into the contact. A well advised client company will insist on having some form of remedy (for example a deduction from the cost) available to it where key dates are missed by the developer and would want the right, in circumstances of extreme delay to terminate the project without further cost.
Speaking of cost, payment is an issue which will be at the forefront of both parties’ minds when drafting the agreement. Payment can either be made on a time and materials basis or on a fixed fee. Largely speaking, a client company will look to fix the fee whereas a developer will push for a time and materials basis knowing that there is then no danger of being “underpaid” if the project turns out to be more involved than first thought. One way or another, payment should be linked to key contractual stages with some payment being made up front to cover a developer’s cost and the rest being paid at the time of testing and launch.
Testing will be a key issue in the contract as it is important that the client is given the opportunity to make sure that the site works as they expect and to ensure that any problems are resolved by the developer before the final sign off of the project. The company should ensure that there are not too many stages to the testing process as this could lead the developer to reduce its own testing time and put the burden of testing onto the client. The client should be able to expect a well tested product before they have to use it at all.
Testing provisions should cover how the tests will be conducted, by whom, where and the consequences of any failures of the test. There should be some cut off point included so that if a certain number of tests are failed the client has the right to terminate the agreement.
The division of ownership of the content of the site is one which is often overlooked. Generally, copyright of work (such as the software and text of a website) lies with the author unless agreed otherwise. This means that the developer will generally be the first holder of copyright. Obviously the client company will want rights to anything specifically created for it and paid for by it and this should be specifically spelt out in the contract. The only element of the site which should not, eventually, belong to the client are third party images, logos or software. The client should ensure that any third party materials provided by the developer are properly licensed to it and this provision should be included in the contract.
In instances where bespoke software has been developed for the use of the site the client should ensure that a copy of the source code is held in escrow if it cannot be assigned to it. A developer will resist any attempt to assign copyright in any software which it seeks to use on other sites. In these instances escrow is essential so that the client can ensure that it can get its hands on this software if the developer becomes insolvent or otherwise ceases to trade.
The final major issue to be considered is termination. As we have already touched on, there are several instances where the company will look to withdraw from the agreement specifically where the site has not been delivered on time or where it has not passed acceptance tests. Both parties should also be able to terminate the agreement if the other becomes insolvent or ceases to trade and the consequences of termination should be clearly spelt out so that any ongoing rights to intellectual property and/or payment are detailed in the contract.
A properly detailed web development agreement will include issues other than those mentioned above but, invariably, these will be the main points to be covered. It will, no doubt, seem yet another unwelcome expense to the client to have a bespoke agreement drafted for the project. However, the consequences of having nothing in writing or relying on the developer’s standard terms of business (which will be drafted entirely in their favour) can often be worse as, if there is a dispute, not only will legal and other costs escalate but also a huge amount of time will be wasted arguing over terms and other issues which have not been properly recorded.
DDI – 0117 9453 042