Please note the Law may have changed since the publication of article.
Simon Halberstam looks at some of the most important contractual issues relating to Website agreements and focuses specifically on the Website Specification Agreement. The article is based on the template Website agreements prepared by the author.
Making the Terms Effective It is most important that the Client is given the opportunity to consider the terms of an agreement and signs that agreement before the Designer carries out any work. Designers should adopt a standard procedure whereby any enquiry from a prospective Client is responded to by despatch of a copy of the relevant agreement, possibly incorporated into the Designer’s order form.
Limitation of Liability
No limitation/exclusion of liability clause is bound to be upheld by a court. It is always a question of reasonableness in the eyes of the court. The court will look at many factors in determining reasonableness.
It is thought best not to merge the provisions together into a single sub-clause but to leave them as separate sub-clauses. The rationale for this is that a court may hold certain elements of a limitation of liability clause to be unreasonable and, if so, it may delete them. If all the provisions are merged into a single clause and the court objects to one element of that clause, the whole clause may become ineffective.
As regards setting a contractual cap on its liability, the Designer must give very careful consideration to the figure chosen. If the figure set has an obvious rationale, such as being tied into the Designer’s level of insurance cover this is also likely to be taken into account.
Another issue to consider is whether instead of arbitration, the agreement should provide for alternative dispute resolution. This is said by its supporters to be more time and cost effective than arbitration or litigation. Furthermore, because of its less confrontational approach, it is likely to enable a more amicable outcome, providing for an ongoing business relationship.
Intellectual Property Rights (“IPR”)
In most projects, the Client will provide material to the Designer to enable the Designer to create the specification. The material may comprise literary, photographic, video and other kinds of material. It is very important that the Designer obtains a warranty and, ideally, an indemnity from the Client to the effect that the Client owns or is otherwise entitled to provide the source material to the Designer.
This gives the Designer some protection in the event that it unwittingly infringes third party IPR in such material. It is quite possible that despite appearances, and maybe reassurances to the contrary, the rights may be owned by a different company in the same group as the Client or by an entity completely unrelated to the Client.
This would cover, for example, the situation where the Client gives the Designer a copy of its publicity brochure which includes a photograph which the Designer proceeds to incorporate in the specification. It then transpires that copyright for electronic transmission of the photograph over WWW has been retained by the photographer. The photographer sues the Designer for breach of his copyright.
The law provides that copyright and other IPR in a work belong to the author of that work. The two exceptions are where the author is an employee of another entity in which case the employer will own the IPR and where a document signed by the author transfers the IPR to another entity.
Thus, in principle, the Designer should end up owning the IPR in the specification and the Client cannot legally take away the specification for use by another Website designer. However, it is often wise for this to be spelled out contractually to avoid any implication to the contrary.
If the Client does want to have the specification implemented by another designer, then the original Designer would be at liberty to charge a supplemental fee for assignment of the IPR. Such a clause is particularly useful if the Designer has made little or no profit from creation of the specification.
If the Client balks at this clause and wishes it removed or altered, the Designer may ask itself why as it may well indicate an intention not to enter into a Website Design Agreement with the Designer and the Designer should in such circumstances price the specification work accordingly.
The Designer should issue the invoice for the Fees at the same time as it provides the specification to the Client. The contract should provide that the Designer is entitled to payment for provision of the specification to the Client, not that payment is conditional on the Designer delivering a document which meets with the Client’s absolute approval.
© This article is copyright Simon Halberstam 2008 and should not be construed as legal advice or opinion in any specific facts or circumstances. the contents are intended for generic information purposes only. You are urged to contact a suitably qualified lawyer for specific advice.