Website Development Agreement Checklist – An Introduction
A website development agreement checklist can help simplify the process of preparing a website development agreement. Drafting such an agreement involves planning for and addressing a wide range of technical, economic and legal issues. Questions or comments?
No website development project or website development agreement is the same, nor should they be. Website development projects are as diverse as their resulting websites.
With ever-changing technology platforms, development tools and methodologies, and the “Web” itself constantly evolving, a website development agreement checklist can be a useful tool for both the developer and customer alike. While no checklist can be an exhaustive list of the issues that a website development agreement will need to address, it can serve as a starting point for high-level planning by the parties and their counsel and for website contract review.
What is the “Website” That is Being Developed?
- The term “website” can mean many different things. Consider developing a detailed specification and requirements document in advance.
- Often one or both of the parties do not want to go through this process prior to starting the project. In this event, a website development agreement might provide for an initial blueprinting phase to guide further development activities.
- In other cases, the provider and customer have a general idea of what they each envision, and decide to use an Agile development methodology for the website development project.
- Consider defining in scope and out of scope items at the outset. In addition, the parties should agree on any specific assumptions and conditions for the website development project.
Is the Website Developer Providing Other Services?
- Some website development projects are limited to design and development. The customer takes the deliverables and deploys them to their own hosting environment. Some customers prefer this approach to maintain control over the website. Customers with internal IT departments often require that the website developer use a development environment on the customer’s systems throughout the development process.
- Developers often provide hosting services through reseller arrangements with third-party hosting providers. In these cases, and others where the developer uses or passes along third-party services, the developer should make sure its third-party agreements are consistent with its obligations to the customer. Where this is not possible, the parties may provide that the customer will establish its own account or contract with a hosting company or third-party provider. A review of SaaS contracts may be helpful.
- Some website development agreements cover additional services, such as training, ongoing maintenance and support, and future development activities. In these cases, using a master services agreement (MSA) with individual statements of work (SOWs) often makes sense. The core terms and conditions are included in the MSA, with the technical detail and economic terms left to the specific SOWs. This can streamline future work, as the parties can develop a new SOW that is subject to the MSA without having to develop and negotiate separate agreements.
Cost and Payment Terms
- Fixed cost or time and materials approaches are often utilized. Alternatively, the parties can provide for good faith estimates for different phases of the website development project.
- Fixed cost projects are often tied to development milestones. Time and materials projects may provide for payment every two weeks or monthly.
- A developer often requires a deposit or initial payment at the time of execution of the website development agreement.
- Consider whether taxes are payable.
Who Owns the Website?
- Customers want to own their websites and often contribute to the website development project. Developers want to own the tools they use to develop websites. Websites often include third-party materials, many of which are subject to third-party licenses.
- A website development agreement should have ownership and licensing provisions that make clear what the customer owns. Developer tools are often defined and licensed to the customer in perpetuity for use solely in connection with the website. A review of a software license agreement checklist may be useful.
- If there are any third-party materials, the website development agreement should reference them and any associated terms and conditions. A customer should review these terms and conditions to determine whether they provide sufficient rights and protections. Third party materials are often treated differently in other areas of the website development agreement.
Warranties from the Developer and Customer in Website Development Deals
- Customers typically seek performance and conformance warranties from the developer. Developers often tie these to specific limitations and remedies to reduce their risk exposure. In some website development projects, the developer does not provide performance or conformance warranties but agrees to separate maintenance and support obligations. In other projects, both are provided, but maintenance and support obligations activate only after the warranty period expires.
- In projects using Agile, lean or rapid development methodologies, performance or conformance warranties may not be given at all. Instead, errors and non-conformities are addressed through the methodology and fixed in the next iteration of the project deliverables.
- Customers often seek other warranties from a developer. These can include warranties relating to viruses and disabling features and non-infringement of third-party intellectual property rights. With respect to infringement issues, some developers will not provide a warranty but will agree to indemnify a customer for certain third-party infringement claims. Developers typically seek broad disclaimers as to all warranties other than those set forth in the website development agreement.
- Developers may seek warranties from the customer for materials, software and systems that the customer provides, or grants the developer access to, in connection with the development project.
Website Acceptance and Acceptance Testing
In some website development agreements, customers will request detailed acceptance testing provisions with specified remedies if a website does not perform or conform to specifications designated in the website development agreement.
These provisions may not be appropriate if Agile or other rapid development methodologies are being used. Where acceptance testing is used, it is usually broken down into stages from initial designs representing general “look and feel” elements (with a customer often being able to select from multiple options or mix and match elements from all options presented), through development phases of specific parts or functional modules of the website, to a final stage where the website is ready for final testing before launch.
Indemnities from the Developer and Customer; Insurance Requirements
- Customers often seek broad-form indemnities from developers. Developers usually resist broad-form indemnities in favor of targeted indemnities covering specific issues.
- A developer will often indemnify a customer for third-party intellectual property infringement claims. This indemnity will often be subject to exclusions and limitations and provided as the customer’s sole and exclusive remedy for these issues. Developers may seek reciprocal indemnification on similar issues from the client.
- A personal injury and property damage indemnification is not unusual, especially where the developer’s team will perform services at customer locations.
- Customers often require developers to maintain insurance. A website developer should maintain insurance regardless of customer requirements. In some instances, certain insurance is mandated by applicable law. Insurance can serve as a funding source when claims arise, and both the developer and customer should work with their insurance advisors to procure and maintain appropriate coverages and limits. New features and add-ons to a website may increase exposure or introduce areas of risk not currently covered by a customer’s policies.
Limitations on Liability and Carve-Outs in Website Development Agreements
- The website development agreement typically provides for a limitation on the website developer’s liability. This limitation usually comes in multiple parts. One part limits the type of damages recoverable from the website developer, such as consequential, incidental, indirect or punitive damages. Another part will limit the website developer’s aggregate liability, often to a fixed dollar figure, the amount the developer has received from the customer in a certain period of time or another formula.
- A customer often requests that any dollar limitation be no less than the amounts paid or payable by the customer under the website development agreement. In some cases, customers seek greater amounts, often using the argument that the cost to obtain substitute services may be greater than what is provided for in the website development agreement. In addition, a customer often seeks to carve-out certain contractual obligations from the limitation provisions. These suggested carve-outs often include the developer’s indemnification and confidentiality obligations.
Confidentiality and Data Security; Compliance and Regulatory Obligations in the Website Development Context
- A website development agreement typically contains a mutual confidentiality provision and may have additional privacy and data security provisions depending on what information is being exchanged. Where confidential information or data will be shared with third parties (as is often the case when a developer uses subcontractors), the conditions for such sharing and disclosure should be set forth in the website development agreement. Where personally identifiable information or sensitive data is involved, a customer’s compliance team should advise as to any specific regulatory requirements which may vary by jurisdiction. In some cases, the website development project is designed so that no “live” data is used at any point until the customer accepts all deliverables and connects the website to its live systems.
- Each party’s responsibility for compliance or regulatory obligations should be set forth in the website development agreement. In addition, the obligations that arise from the website itself should also be allocated and set forth in the requirements and specifications. For example, the applicability of a particular regulatory framework such as the Children’s Online Privacy Protection Act (COPPA) may require that a website be built in a specific way or contain certain functionality. If a customer has specific regulatory requirements, it should be responsible for communicating these and signing off on them when the project deliverables are received. In addition, the parties should consider website accessibility issues so that they can be assessed early on in the development process.
Restrictive Covenants and Publicity Provisions
- A developer will often request provisions that restrict a customer from soliciting or hiring its personnel for a period of time after its services have been completed. These are common in many types of commercial agreements and are subject to local law issues.
- Developers will often request certain marketing and publicity cooperation from a customer with respect to the project. Sometimes this includes incorporating a link to the website developer’s website in the footer of the website for a period of time, and the customer granting the website developer the right to use screenshots or other facsimiles of the website on its website and in its marketing materials and communications.
- Where a customer agrees to marketing and publicity provisions, the customer typically requires certain prior approval or notice rights.
Third Parties and the Website Development Ecosystem
- Website developers range from small shops to large media houses. Regardless of size, many use ad hoc teams consisting of employees and independent contractors to handle a customer’s specific needs. The website development agreement should be aligned to enable the website development team to perform their services. Where a customer may want to prohibit subcontracting generally, one mechanism is to provide a carve-out to permit subcontracting to specific individuals identified in a SOW. Customers will often insist that the developer remains liable for any subcontractor obligations, but having a mechanism in place for anticipated subcontractors can avoid significant delays during the website development project.
- While in many ways website development has become more efficient and less technically cumbersome than its early days, customers should be aware of the large number of parties and technologies that can be involved in a website development project. It is not unusual for a website to utilize dozens of separate technologies that are not owned by either the customer or the developer. Many of these are open source materials subject to specific licenses, while others are tools, plug-ins, and third-party services that, together with the developer’s efforts, form a website that operates efficiently and according to the customer’s requirements. Customers and developers, however, must evaluate and consider the legal, technical and operational issues raised by these third parties and their materials and how they may impact the website, the customer’s rights and the website development agreement.
Comment on this Website Development Agreement Checklist
Do you have any comments on the information presented? Have you thought of other items that should be addressed in this website development agreement checklist? Let me know and I’d be happy to consider addressing your thoughts in an updated version. Also, if you are interested in this article you might also want to check out my Software License Agreements Checklist.
Copyright 2017 Geoffrey G. Gussis, Esq. All Rights Reserved. Learn more about me, the legal services I provide, and other articles I have written. Contact: firstname.lastname@example.org or (732) 898-0549. Licensed to practice in New Jersey and New York.