Websites are the “shop windows” in the e-commerce marketplace, which involves the selling of goods, services and information online to a global market.
A website may merely be used to display, describe or list goods and services, which may be purchased for physical delivery to a specified address (e.g. ordering a book or new computer) which also usually provides for electronic payment and in some cases, for electronic delivery (e.g. downloading software, music, videos) or it may be the online provision of a service (e.g. an advice line, an after-sales support/“help” line or online dispute resolution service). Whichever type of website is required, its creation and development will involve contracting the services of a website developer, unless of course, the company, firm or individual uses a specialist website creation software tool (if they want to do it themselves).
Website development is similar to the development of software, it is very specialised and needs skill, judgment and experience to develop a suitable website to meet as far as possible the client’s requirements. Whilst the Explanatory Note to Contract 63 describes the client’s website expectations, this contract is drafted for the benefit of the developer and thus ensures that the developer is not undertaking or guaranteeing anything over which it has no control and furthermore is not giving warranties for any performance or results nor guarantee that the website will attract any specific number of potential purchasers or generate any revenue target expected by the client.
This contract also protects the intellectual property rights of the developer in the creation of the website and in any new processes or inventions which arise during development. This is particularly important in such a fast moving and continuously evolving field of activity where every new website may involve a new way of doing something (e.g. podcasting, webcasting) or of linking to new facilities or services (e.g. linking to a secure payment provider, to a translation service, to a trust or accreditation mark/code of conduct, to an online dispute resolution service or to some other new facility or service which are continually evolving on the internet).
The developer should receive regular payments (e.g. monthly) throughout the development to ensure that the developer is not exposed to any client “sign-off”/approved milestone or deliverable that may be indeterminate in time or dependent on the client. Once the website development is complete, full payment of the balance should be made (with no retention) before the website is then transferred to the website hosting company or the client. Any support or enhancement thereafter is at an extra charge.
Specific points to consider:
Specification (Clause 4)
To minimise the developer’s potential liability, it should collaborate with the client in preparing a specification which the client must approve thereby attaching a degree of responsibility to the client since the highest proportion of disputes and actions between a client and a developer arise from a deficiency, failure or misunderstanding based on the specification.
Acceptance Testing (Clause 5)
For the developer, it is vital that “clearly-ascertainable” acceptance tests are devised which will result in a “Yes/No” type result, since final payment will usually be linked to “Acceptance”. The client on the other hand, would prefer that it only “accepts” the website when it “satisfies” the client’s requirements or “performs satisfactorily for the purposes of the client’s requirements”. If the developer commits to a timetable, it will not want to agree to penalty charges (liquidated damages) whereas the client will want such penalty provisions.
Price (Clause 6)
In agreeing a price for the development work, it is more beneficial for the developer to charge on a “time and materials” basis rather than agree to a fixed price, since website development, especially if new software is also required, is notorious for taking longer and often involves more work than either party anticipates, especially if the client wants to add new features or other changes part way through the development.
Payment (Clause 7)
Payment terms for the developer’s benefit should optimally be W% upon signing the agreement, X% “up-front” on commencement to start the development work, Y% or preferably monthly payments for the development staff time actually worked during that month and Z% (which should preferably, from the developer’s point of view, be less than 5% of the total price) upon passing of the acceptance tests.
Liability (Clause 9)
If there can be said to be any “generally acceptable limit of liability”, then the value of the contract price appears to be the most “acceptable limit”. However, every contract is negotiable on this point.
Copyright (Clause 10)
It is of paramount importance that the ownership of the copyright in the website and any specifically developed software is established. For websites, the client will usually own the content, its corporate trade marks, trade names, logos, etc. If the developer has to develop bespoke software then the developer will wish to retain copyright in any such work.
Non-solicitation (Clause 14)
A non-solicitation clause may be necessary since the developer’s staff usually need to work closely with the client and the client may be tempted to poach the developer’s staff especially if the client wants to support and update the website in-house after acceptance.