Pitfalls of Website Design Contracts

So, you’re starting a business. You’ve formed your business entity and made sure you have your trademarks, patents, copyrights, and/or trade secrets in order, and now you need to get your company out in the public and start making some money. This means getting a domain and website.  Every single company needs a website these days, whether it is simply a landing page where your contact information is listed, an online marketplace, or a listing of all your services, there is no getting around having a website if you want to have a successful business. In order to have a successful website, website design contracts are key.

Many people opt to design their own website, using a service like Squarespace.  However, some people require a website designed by a website developer for one reason or the other.  In that case, you need to be very careful about your contract with the website developer.  Many issues arise that neither party is aware of.  Entering into a bad website design contract could crush your company before it even had a chance to succeed.

Here are the main items to look for when signing a website development agreement:

1. Who owns the website and the content?
2. What are the payment and deliverable schedules?
3. Where is the website designer getting photos or other content for use on the website?
4. What happens if there is a dispute during the term of the agreement and you just want access to your website?

Who owns the website and the content?

Ownership of a website is a tricky issue that many website developers themselves do not understand.  I’ve seen many website design contracts whereby both parties intended for all ownership of the rights to be that of the client, but really, the contract did not provide that.  Instead, the developer was the actual legal owner of the copyright to the website. 

Oftentimes, parties believe the website falls under a work for hire exception to copyrights.  Typically, a copyright is automatically bestowed upon the party who creates a work automatically upon completion.  For that copyright to be the property of someone else, a work for hire agreement must be in place.  But there are certain requirements that must be present in order for a work for hire agreement to be effective. 

If a work for hire agreement is not appropriate for one reason or the other, then be sure the appropriate assignment language is included in the contract whereby you, as the party who commissioned the website, has the exclusive and continuous right to continue using the website in perpetuity.  Many website design contracts fail to have any language relating to the actual ownership of the website.  It is usually the intent of the parties that the party who commissioned the website is the owner, and as such, it never becomes an issue for many.  However, whenever any conflicts arise between the parties, any shortcomings in the website design contract are often exploited.  I have seen too many people hire a website designer and everything is going along smoothly until there is a question over, for example, payment, and all of a sudden, the website designer is a legal expert and claims that they own everything on the website and refuses to give access to the commissioning party. 

What are the payment and deliverable schedules?

This is important for any contract relating to services, and it is often overlooked.  I have soon too many contracts that just has a price listed, with no details on schedule of deliverables, whether the price is inclusive of all work, whether there may be overages, when is payment due, etc.  A proper payment schedule needs to be in the contract that lays out when payments will be made, but also requires the website designer to stick to a schedule. 

The deliverables schedule should also list the specifics of the website that is going to be designed to hopefully avoid any issues or disagreements.  What happens if you agreed to an extensive website for a flat fee price that includes a client login and payment processing, for example, and the website designer, after exhausting the agreed-upon flat fee price, says that those items are too complex to be included under the agreed-upon terms?  Well, without a contract that details the deliverables, you could be out of luck and in for a fight.  If anything, it is going to cause a lot of back and forth with the website designer in trying to negotiate something new.  That is a situation that can be avoided.

Where is the website designer getting photos or other content for use on the website?

I have seen too many seemingly legitimate website designers simply grab photographs (or other content) from the internet and use them on their clients’ websites with no regard to ownership.  And unfortunately, that could create huge problems for the owner of the website, regardless of who obtained the photograph (or other content).

There are many online repositories where you can get public domain photographs to use on your website, or you could simply use photographs that you have taken or own the rights to (always the safest option).  If you leave it in the hands of your website designer to obtain photographs to put on your website, you need to confirm where all of those photographs came from. 

The worst case scenario is when the copyright holder of a photograph on your website comes after you for copyright infringement.  Sure, you can say that it was not your fault because you hired someone and they are the ones who put it on your website, but as far as the copyright holder is concerned, you are the one on the hook.  Copyright infringement is serious and there’s not much leeway when it comes to photographs that are simply placed on your website.  Typically, those scenarios end with the website owner paying something to the copyright holder in exchange for a full release.  It would be the website owner’s responsibility to get any compensation from the website designer, which can be difficult, if not impossible or practical. 

Good website design contracts will have certain indemnifications contained in it.  Ideally, the designer will indemnify and hold harmless the website owner for content, including photographs, that were obtained solely by the designer.  Inversely, the owner indemnifies the designer for anything that happens on the website out of the designer’s control.  This will help protect both parties.  It would not stop a third-party from suing a website owner for copyright infringement, but it would be likely that the website owner could bring the designer into the lawsuit in order to indemnify or at least off-set some of the liability of the website owner.

What happens if there is a dispute during the term of the agreement and you just want access to your website?

This is a huge one.  Website designers have a lot of leverage simply because they are in control of the website.  Thus, they can, oftentimes incorrectly, hold your content hostage.  That is not a situation you ever want to be in, and it can be impossible to completely avoid this situation as parties do go rogue.  Without a court order, it can be impossible to force a party to hand something over.  This is typically done with a temporary restraining order and subsequently preliminary injunction in order to get the website back in the hands of the owner.  That is expensive, and not where you want to be.  And it may not actually prevent the damage from occurring.

One way to get around this is to concurrently have access to all of the website files and be the administrator of all accounts.  This would prevent the website designer from locking you out of your website.

Conclusion

Failure to enter an appropriate contract for a website can result in numerous issues, thus putting your new company in the hole before it even had a chance to succeed.  Speaking to an attorney before entering into an agreement with a website designer is always recommended, and although it will cost money, it could save much more money in the long-run and prevent many headaches. The creation of website design contracts can ensure the success of your website.

Consult with Intellectual Property Attorney today to discuss all the issues when it comes to your business’s website.

Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.