A Website Development Agreement is an agreement between a company desiring to have a website developed or modified (the “client”) and a person or company that will be handling the development (the “Developer”).
The website development agreement contains important terms and conditions relating to the scope of the project, payment terms, and overall responsibilities of the Developer and the client. Although each development agreement will vary depending on a variety of criteria, here are some key terms that will need to be addressed:
Website Development Agreement Benchmarks
One of the most important elements of a website development agreement is the “statement of work” (or “SOW”) which details important deliverables, deadlines, partial payments, and performance requirements to measure progress throughout the development process. SOW’s are sometimes woven into the development agreements, themselves, but are typically attached as schedules or exhibits to the development agreement, which are incorporated into the agreement by reference. Changes to the SOW may result in changes to the payment owed to the Developer.
A significant amount of conflicts that arise between developers and clients relate to an unclear understanding of the deliverables, ownership of intellectual property, benchmarks and timings, performance requirements, and other specific elements of the project.
Ownership and Copyrights
Another critical aspect of a website development agreement is ownership of intellectual property. In many cases the Developer will use third party website elements, or elements of its own previously-developed website, as part of the new website being developed for the client. The development agreement must determine the ownership of each element of the website and must clarify each party’s rights with regard to all of these various elements.
Moreover, the development agreement should provide for the transfer of copyrights and other intellectual property related to website from the Developer to the client (unless the parties prefer that the Developer retain these rights).
Employee vs. Contractor
Many companies incorrectly assume that, because they are paying for website development, they automatically own the website that is created. This is not true, unless the Developer is an employee of the client and development is part of their employment. This is covered in the US “work for Hire” statute. For all other developments, such as where the Developer is a freelancer or third-party company, the Developer will be the owner of all website created for the project. Thus, it is important that the development agreement provide for the automatic transfer to the client of all copyrights and related intellectual property rights in the website.
Confidentiality and Control of Information
In many instances, the Developer will need access to a client’s confidential information and trade secrets in order to create the website. The website development agreement must require the Developer to keep such information confidential and must provide guidelines for the use of this information by the Developer.
In addition, where the Developer uses employees or contractors on the project, the agreement must require notice if any data or work will be moved outside the United States and must ensure that the Developer’s employees and contractors are also subject to confidentiality requirements.
Compensation to the Developer is typically paid in multiple phases, such as when important benchmarks in the project are achieved. This enhances the importance of the SOW being clear and detailed, so that each party knows when a progress payment is due. The final payment should not be required until all work on the project is complete and the website is performing according as required by the SOW.
After final delivery, any ongoing training or maintenance obligations of the Developer can be addressed in the SOW, the development agreement, or via a subsequent agreement between the parties.
Term and Termination
While the “term” of the development agreements is typically the amount of time required to complete the project, the parties should address in the agreement what happens in the event either party wants to terminate the contract prior to completion. They should address issues such as: who owns what IP, what payment will be owed to the Developer, and the return of all client confidential data and other proprietary materials.
Sometimes, the Developer will host the website once development is complete. Although the hosting may be related to the development project, hosting services will require additional agreements and understandings between the Developer and client. These are best addressed in a separate “Web Hosting Agreement.”