This article has been written by Aditya Rastogi pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.
If I were to ask you to help me in drafting an agreement between a website developing company and me so that they can help me in building a website for my business, what would be your first thought? If I were to guess, it would be about consulting an advocate assuming that it would be a complex task.. What if I told you that, even without having any expertise in website designing, development and maintenance domain or the law domain, you can draft an agreement on your own or at least can become capable of negotiating with website developers for it, without appearing ignorant so that they don’t charge you a hefty amount for it!
This article aims to make you understand what is website development and maintenance agreement, why it is so important in the current scenario and what this agreement consists of, so that you can start drafting one yourself for your website.
What is a website development and maintenance agreement?
A Website Development and Maintenance Agreement is a contract between an individual/company/business (in short “Client”) and the website development and maintenance developer company (in short “Developer”). The contract lists the scope of work to be done by the developer for the client, roles and responsibilities of both the parties, terms and conditions to be followed by both the parties while performing their duties under the contract, warranties and representations, assignment of duties, etc.
There are generally two parties in this contract; namely the “Client” and the “Developer”.
Importance of website development and maintenance agreement
When a client takes the services of a developer for building a website, he approaches them in one of the given ways: (a) “Build a website for me, I have no domain knowledge”; (b) “Build a website for me with particular specifications as quoted.”
If the client has no domain knowledge, then the Developer usually provides a questionnaire to the client to understand his demand, i.e., what kind of website he demands and what all he requires in his website. In case the client already has the knowledge of the domain, he can provide the developer with a Request for Proposal (RFP) form, quoting his specifications. After going through the Request For Proposal (RFP), the developer can understand the client’s needs and can also further negotiate for building the website.
In both the cases, either the questionnaire or the RFP, form the part of the contract, so that the Developer becomes bound by the requirements of the Client.
The Agreement helps in:
A. allocating the roles and responsibilities of the parties and legally binding them to fulfill their obligations under the contract (for the Developer it is – building the website and for the Client it is – payment to the Developer for building the website)
B. preventing either party from disclosing confidential information of each other as well as the information generated during the website development
C. removing the possibilities of misunderstandings and confusion between the parties and also prevents of disputes from taking place
D. protecting any kind of IP (intellectual property) generated during the website development
Scope of work
(i) In website development
It is important for the developer to understand the needs of the client. There are a number of websites on the internet, it is for the client to tell what kind of website he likes. Also, the developer can suggest the type after understanding the purpose. After the type is decided, the parties need to decide on what all shall be included in the website, how interactive it has to be made, stages of completing the task (the timeline) and the budget. The scope also includes purchasing IP Addresses (Domain name registration) and servers on which it shall be hosted, and also providing training to the client for the use of the website.
It is of utmost importance for the client to get the domain name registered in his own name. Domain names are usually bought for long durations.
(ii) In maintenance service
Maintenance is all about keeping the website smoothly running and updated. It also involves storing the website information that it generates on a daily basis. It has to be decided that once the website is up and running, at what periods will the developer be required to change various pictures, banners and videos. Since the developer is not always available at the client’s disposal, it is necessary to decide how frequently the developer will be called in action. Also, the developer will be required from time to time to update the various licenses required for running the website.
Intellectual property rights
Intellectual Property Rights is one of the dominant clauses and reasons as to why parties enter into this agreement. Developing a website can lead to infringing of IPs of parties unknown to the agreement, leading to disputes with them, paying hefty penalties and ultimately shutting off the website.
Developing a website means using and creating several IPs such as copyright, design, trademark and at times, patent. This leads to a very important question as to who owns what IPs. Thus, it is important to decide prior to executing the agreement as to who shall be owning what IPs.
Ownership of IP under this agreement are divided into 3 parts:
(i) IP of the Client – All the inputs/IPs that the client provides for customization purposes, remain the property of the client. Once the website is developed, all the IPs generated, of which neither the developer nor the third party are the owner, becomes the property of the Client.
(ii) IP of the Developer – There are certain inputs/IPs that the developer creates on its own and are unique to him. Such inputs/IPs if used in the website of the client, the owner of such inputs/IPs remains with the developer.
(iii) IP of Third Party – All the IPs that belong to the third party and the developer uses it for building the website with/without permission, the third shall remain the owner of it. If used without permission/license it will lead to infringement. If used with permission/license then license fee is to be paid by the client.
Confidentiality is an important clause that restricts either party from disclosing any information under the agreement to a third party. Confidentiality runs during the term of the agreement but it should be drafted such that it remains active even after the contract comes to an end. The certain time period should be decided for which either parties cannot disclose any information even after the termination of the agreement. It should be recorded as to what all constitutes confidential information and under what circumstances such information can be disclosed, such as; it can be disclosed to the employees of the developer, it can be disclosed to law enforcement authorities on demand, etc.
Money is the primary consideration that the developer receives for the development of the website. There are two ways the client can make payment, depending on how well he negotiates with the developer:
(i) Monthly payment (good option for the Developer)
In this case, once the term for the development of the website has been decided, the total compensation shall be divided by the term.
Example: A (Client) and B (Developer) enter into a contract and the term for the development of the website they decide is 4 months. The total compensation decided is $4000. So A shall pay $1000 to B every month.
(ii) Milestone based payment (good option for the Client)
In this case, the client shall divide the complete work into certain milestones, and on completing each milestone the developer will receive a certain amount.
Example: A (Client) and B (Developer) enter into a contract and the terms of payment they decide is milestone payment. The total compensation decided is $4000. The work is divided into 5 parts (a) Upfront – $1000 (b) Designing of the website completed – $500 (c) Development of the website is completed – $1000 (d) Testing of the website is completed and is approved by the Client – $500 (e) The website goes live – $1000.
If the term for the agreement is decided then the agreement automatically terminates at the end of the term. But in case there is no term decided or either party no longer wants to continue with the agreement, the termination clause becomes vital for the parties to decide its end.
Termination can be at convenience i.e., either party voluntarily terminating the agreement by giving a written notice and on the occurrence of material breach i.e., the grounds of which should simultaneously be recorded in the contract. It is important to note all possible grounds, under which either party becomes entitled to terminate the agreement.
Some of the grounds can be:
(i) If the developer fails to comply with the timeline decided even after providing additional time.
(ii) If the client does not make payment as per the schedule in the agreement.
(iii) If either party is declared bankrupt.
Consequences of termination – If the agreement terminates what consequence it will have should be recorded in the agreement. Consequences can be; both parties shall return the confidential information/proprietary information/IPs that they had taken under the agreement, what rights shall be reserved with the client and the developer after the termination, penalty to be paid for the termination (where it is material breach).
Dispute resolution, governing law and jurisdiction
A contract is considered good when it contains a dispute resolution clause which states that in case of a dispute, it shall be resolved through Arbitration. The dispute should be governed by Arbitration and Conciliation Act, 1996.
In India, such agreements come under the purview of Indian Laws in general and in specific; Indian Contract Act, 1872, Intellectual Property Laws (Copyright Act 1957, Trademark Act, 1999, DesignAct, 2000 and Patent Act, 1970), and Information Technology Act, 2000.
The jurisdiction can be decided mutually by the Parties. Practically, jurisdiction depends upon the negotiation power of the parties. It can be at the place of business of the developer or at the place of residence/business of the client.
Website Development and Maintenance Agreement plays an important role in our life. Due to Covid a lot of the work has gone virtual, people are moving their business online, to stay competitive and match up to their competition. Websites play an important role in keeping the business alive. It also acts as an advertisement for the business.
Today, every business demands a website of its own. And if the website is one of a kind, then the business will skyrocket. If the owner of the business knows how to develop a website or has a team for it then it’s just great. But if the owner does not understand all the technical know-how required, then the only option he has is to approach a developer.
This is where the Website Development and Maintenance Agreement comes into play, through it the client can clearly mention all the rights and liabilities of the parties, the scope of work, payment, deadlines, etc., beforehand so that in future not only the client does not have to go through litigation but also his website runs smoothly thanks to the developer.
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