The legal guide to setting up a website

Most new or existing businesses rapidly realise the benefits of setting up a website, whether it’s used to promote and drive online sales transactions or will serve as a marketing tool to showplace your expertise and encourage users to sign up to your services. In this article our commercial contract solicitors and technology lawyers look at the business to business contractual and legal considerations when setting up a website.

Setting up a website

Whether you are a new entrepreneur or an established business owner looking to completely refresh your existing website there are legal and contractual considerations when setting up a website that can be broken down into:

• The business aspects of the website - Your contracts withwebsite designers and licence and software providers as well as those businesses providing you with maintenance and hosting services.
• The consumer aspects of the website - If you are going to use your website to conduct online sales this is classed as distance selling. You will need to comply with the Consumer Contract Regulations, the Electronic Commerce Regulations, and other consumer protection legislation relevant to the goods or services you are selling or the jurisdiction you are selling them in.

Whether you plan to use your business website for online sales or simply as a means of promoting your business it pays to take time to consider what you want out of your website and assess the legal and contractual issues involved in setting up or changing your website. Time spent in preparation will usually pay for itself through ensuring that:

• You know what you want your website to achieve - That’s important as if your primary focus is on online sales you may want to invest more in functionality and speed.
• You know what it is possible to achieve with your website - There is nothing more frustrating than setting up a website only to find that it doesn’t have maximum functionality or that it could have been set up with enhanced client or consumer interaction, for example, client sharing of documents.
• You know what resources and budget you require - It is rare for a business to have all the in-house resources it needs to set up a website that’s to the professional standard the business deserves, so it is important to understand what specialists you will need to set up your website and the costs involved.
• You budget for the ongoing website costs - The costs of a website don’t end when it is finally launched. That’s why it is vital that your business has an appreciation of any ongoing costs, such as licence fees or the refreshment of digital content through internal or freelance copywriting.
• You have an awareness of what can go wrong with a website - Whether it’s copyright or data protection and breach issues, your business needs to have an understanding of the potential legal issues that come with setting up a website as well as the ongoing maintenance issues.
• You don’t look at your website in isolation to other sales or marketing activities - When a website is set up it is easy to focus on the look and functionality of the website without looking at the wider picture. For example, your standard terms and conditions of business may need to be adapted by your commercial solicitor if you are planning on conducting online sales. That’s because the terms will need to be compliant with the regulations on distance and online selling. Alternatively, if you are going to start taking online payments, your sales or accounting staff may need additional training or supervision to ensure they comply with your financial policies or data protection issues.

Contractual considerations when setting up a website: An overview

There are a number of contractual matters when setting up a website, such as:

• Website design and development contracts
• Website maintenance contracts
• Website content licences
• Website hosting agreements
• Website copywriting agreements

The above list may appear to be a lot of legal paperwork for one website but the implications for not getting the right contracts and documents in place can be both costly and long lasting because you won't want to end up in commercial contract disputes with third party website providers or contractors. You also probably won't have the budget or inclination to have a second attempt at setting up a website that meets all of your business objectives.   

Domain name ownership: Knowing where you stand

One of the most frequent reasons for website misunderstandings and disputes over the setting up of a business website is the domain name of the website and who owns it.

For the non-technical, getting ownership of the domain name wrong can be a very expensive mistake to make. The domain name is the electronic address for the website and is rented from a registrar for a specified period with the business entering into a services agreement with the registrar. The services agreement secures the right to use the domain name for an agreed number of years. At the end of the agreement the business can apply to renew the services agreement to continue use of the domain name.

Given the importance of the domain name for your business it’s important that the domain name is registered in the name of the business rather than in the name of your web designer. If it isn’t and there is a disagreement with the website designer, then your business won't own its own website domain name or be able to control it. Even if the contract between your business and the web designer states that the designer holds ownership of the domain name for the business it means your business can't exercise direct control in communications with the registrar, such as the domain renewal and dispute resolution process.

In a contract dispute the web designer may be reluctant to transfer registration of the domain name to the business. Once the business has an established internet presence, the loss of a domain name could be financially damaging and have a reputational impact on the business.

Ideally a business should always own the domain name but, if it doesn’t, there needs to be a very clear contract between business and website service provider setting out the management of the domain name and detailing how and when the domain name should be transferred should the contractual relationship between business and service provider be terminated. The latter isn’t the best solution because of the dangers of the service provider breaching the contract or ceasing trading and the importance of the domain name to the business.

Getting your website design and development contract right

As your business may not have the specialist in-house skills to set up the website, or the time to do so, you may want to instruct a web designer to construct your website for you. The extent of the design task will depend on the strengths and capacity of your marketing team and whether you need more than programming and technical skills and advice.

The purpose of a website development contract is to ensure that your business and the chosen website designer understand what is being commissioned, the cost and timescale. Spending time on tendering for the right website designer for your business can be pointless if care and attention isn’t then spent on the website development contract. This will ensure that the designer understands your website specifications and minimise the risk of a contractual dispute over the extent of the work, costings, or timescale. For information and advice on contract dispute resolution take a look at our webinar on the topic.

A website development contract should include:

• The website function and performance specification - The business needs to carefully set out its website requirements by providing a function and performance specification. This should include details of the content (if any) that the designer will produce and any legal requirements that need to be met (for example ’pay now’ or delivery information and costs information under the Electronic Commerce Regulations) or any specific governing body regulations (such as the Financial Services Authority) or data protection or cyber security legislation. To avoid disappointment and delay the contract should be accompanied by a detailed website specification so the website designer understands your businesses target market and existing branding as well as the functionality needs of the site (such as use of videos or requirement for online payment facility). If the specification is sufficiently detailed the website designer should be able to accurately cost the work.
• Timescale for completion of the website - The business should ensure that the developer is contractually bound to meet deadlines. For example, reviews of progress dates and the launch date for the website. Penalties should be considered for breach of contract to help ensure the web designer meets the agreed timetable.
• Testing the website - Prior to final payment your business will want to test the website to ensure that it is fit for purpose and meets the design specification and other agreed criteria such as ease of access or data protection issues. Most businesses will want to include provision for testing the website before the website is signed off to avoid glitches.
• Website ownership - A business may assume that it owns its website but the contract needs to ensure that the business owns thedesign of the web pages as well as any relevant software or other intellectual property and IP rights. If the business doesn’t own the website then it won't be able to make changes to it or transfer management responsibility for the website to a new website developer. If the website developer owns any IP rights, then the contract should provide for the transfer of the IP rights to your business on termination of the contract. It is equally important to consider copyright and software issues. If necessary, the contract should include a licence for the business to use the designer’s software to operate the website. Likewise, the contract needs to restrict the website designer from producing a similar website for a third-party competitor as otherwise the money invested by your business in the new website may be worthless.
• Termination of the contract - In any contract it is important to cover the circumstances in which the contract can be terminated to limit the risk of commercial contract disputes. With a website contract, thought needs to be given to how any existing website is transferred smoothly to a new website designer to ensure there is a smooth transfer of the management of the website.
• Costs and payment - How the website work is to be costed needs to be included in the contract. The contract needs to detail if payment is on a time spent basis with an agreed hourly rate or on a fixed fee and whether there will be staged payments. From a budgeting perspective, a fixed fee is normally preferable for a business but be aware of add on costs for extras and changes to the original specification. If the contract includes any ongoing website maintenance work then this needs to be specified and costed.

The website hosting agreement

If you plan to use a website designer to host the website and manage it (for example, monitoring and posting reviews from purchasers or uploading new content) then your business should enter into a website hosting agreement with the web designer. This should ideally be a separate contract to the website design contract so that the business can use an alternative website designer should it choose to do so. Alternatively if the website design contract includes provision for hosting the website there should be appropriate break or termination clauses in the contract.

The website content licence

Your business may require website content licences depending on the nature and content of your website. For example, if your business owns the website you may need a software licence so that you have the necessary permission to continue the use of the software. Failure to get the right website content licence may mean that your business breaches or infringes third party intellectual property rights.  

When your business is considering website content licences it needs both IT advice as well as specialist IT technology and commercial contract legal advice on what should be included in the website content licence to protect the interests of the business. The main issues that your business should consider including in the website content licence are:

• What website content needs to be the subject of a licence and the nature and length of the licence - The nature and scope of the content to be licenced should be carefully defined. In addition, there needs to be an agreement on liability for content.
• Where the content is to be placed - The business may be concerned about the placement of the content on the website and, if so, placement needs to be addressed in the contract.

The website hosting contract

Your business website will need to operate or be hosted on a server to publish the website on the internet and enable potential customers to browse the site. The server needed depends on the complexity and functionality of your website together with the number of anticipated users. Get the server wrong and your website could keep crashing resulting in your business losing trade. Without the right website hosting contract in place your business could be exposed if, for example, the website keeps freezing or the security isn’t sufficiently robust, so it’s hacked.

When negotiating a website hosting contract your solicitor should include terms to address:

• The services provided under the website hosting agreement and the server specification and agreed timescales - The scope of the services could include support to your IT staff, disaster recovery, site usage information and statistics or security and ongoing maintenance.
• Accessibility and availability of the server and response times - This is vital as if the server is slow or issues aren’t resolved quickly this could impact on online sales figures especially if the server is slow during your website’s peak usage times.
• The security of the server – It’s essential that the server is secure to ensure that there is minimal risk of data breaches, and dependant on the nature of your business, the website complies with any industry relevant regulations on data security.
• Liability for the content of the website - Another issue to resolve in the contract is who is liable for the website content. If the material is prepared by your business then it is normally the business’s liability and your business may need to provide an indemnity in case the website material infringes third party rights. However, liability clauses need to be carefully drafted, for example, the scenario of the hacking of website content because the host server doesn’t provide adequate cyber protection measures.
• Data collection from the website - The contract can include an obligation on the server provider to let your business have statistical reports on the website usage. This information can be essential for targeted marketing, but any contract needs to ensure the host server doesn’t use the statistical information in breach of any data protection regulations or laws.
• Contractual hosting fees - The cost of hosting fees needs to be clearly set out in the contract so there can be no confusion about the fees and what they are designed to cover and when they are payable. Often there is an upfront payment followed by payments during the life of the contract. If payments are performance related the contract needs to make this clear as well as the performance specification.
• Termination of a website hosting contract - It is important that any commercial contract contains clear termination provisions. But in the case of a website hosting contract, it is particularly important that the termination clauses set out clear provisions about what should happen if the contract is terminated by either party so the website can be transferred to a new host server with minimum disruption to your business and therefore reduced risk of an impact on online sales.

The need for website terms and conditions

In addition to having the right contractual paperwork in place to set up your website your business also needs to review its terms and conditions documentation and prepare internet specific website usage terms that are fit for purpose when it comes to third party or consumer usage of your website.

Without comprehensive and clearly located terms and conditions, that are tailored to your business, website users won't be bound by the terms. Ideally a website visitor should be asked to accept your business term or be told that they are deemed to have accepted them if they continue to access the website. The terms should specify what the user can do whilst on the website and should spell out the ownership of intellectual property rights and the penalties for breaching them.

Within the terms there should also be a disclaimer for the contents of the website so that the business has no liability if the website user relies on the contents through either assuming that the contents are factually correct or up to date.

The law on website contracts appears complex and confusing but with the right legal team on board with commercial contract, intellectual property and data protection and IT technology and commerce expertise all the necessary legal paperwork to protect your business and its website can be drawn up by one joined up team of specialist solicitors.