Web development deals (Hong Kong law)

This guide is based on Hong Kong law. It was last updated in May 2005. There is an equivalent UK guide.

Overview

Despite the highly publicised failure of some on-line businesses, there is still a very active market for providing web development services to businesses seeking to initiate or update their web presences.

There are pitfalls to the web development process however, and it would be an ill-advised developer who, having received the client's instructions, starts the development process without first considering (a) the legal aspects of his relationship with the client; and (b) the extent of any obligations he may have as a matter of law.

If a legal agreement is in place with the client before any work is started, both parties will have certainty in relation to the obligations of the other. More importantly from a business continuity perspective are the issues of payment for work and ownership of your intellectual property. This guide sets out in broad terms the areas which should be covered in your agreement with the client.

Identify the services

It is important to clearly identify the services to be provided to each client. This approach means that each client knows what services to expect and you will have certainty in relation to your entitlement to payment.

Where you have agreements with other parties (e.g. with a telecoms company), the terms of such agreements must be taken into account in any agreement with the client. If you rely on a third party for the performance of any of the services being provided to the client, you can only give warranties and undertakings to your client in relation to those services which are consistent with the warranties and undertakings which have been given by that third party to you.

Consultancy

You may be providing consultancy services to your clients before, during and after development of their website. Clients should be consulted so that a specification is produced for the desired performance of the website: this is critical if they are seeking your advice on how those requirements will be realised on the website and at what cost.

It is essential that you do not hold yourself out as an expert in the client's business. Take care with the "pitch" made to the client and the types of statements or representations made by you (or your staff) to prospective clients. From a liability perspective, it is vital not to make promises or statements to the client which are untrue or unfounded.

Hosting the website

You need to consider and set out clearly what you will do for the client. Issues to consider include:

1. What will happen if the website goes down?

• Can you make any contingency plans, for example, use a back-up server? The client may set limits in the agreement on the amount of "permitted" down time, and also the financial consequences for failing to meet those limits.

2. Responsibility for the server

• Will the website sit on your server or will this function be outsourced? You should also consider what practices to implement in relation to virus checking to ensure that viruses are not passed from the server to the client's website. As importantly, these practices will ensure that the client does not introduce viruses to the website or to the server (which may affect your own website and networked systems).

3. Adding content to the website

• There should be a procedure to set out how new content is added to the website in order to ensure that you are not liable for content posted to the website by the client, the client's employees or any of the website's users.
• For example, will new content be posted exclusively by you or will the client (or users of the website) be able to post material to the website? The agreement must set out the extent and scope of your functions in relation to new content and the respective liabilities of you and the client in relation to this issue.

4. Maintaining the website

If you are providing maintenance services of any kind, the agreement should also set out the extent of the maintenance services to be provided, for example:

• will support be by email/telephone/on-site?
• when will it be provided?
• by whom?
• what types of maintenance will be provided?
• will maintenance extend to hardware/equipment?
• will there be different response times depending upon what is being provided?
• what are the costs of such maintenance and how is payment to be made?

Development of the website: technical capability

Clients want websites which have some guaranteed functionality. The software and technology you use must be of a type which can support the client's chosen area of operation in a number of technical environments. It is therefore important to get as detailed a brief as possible in relation to the specification for the website which should include, for example, the client's instructions on functionality, accessibility, use (in particular use by the client of any information collected by them via the website, which may trigger obligations under the Personal Data (Privacy) Ordinance).

A detailed brief will also enable you to advise the client whether the specification it requests is feasible and/or appropriate, and to ensure that the client's expectations are managed (it will know what it can expect from the website in terms of technical capability).

Time scales

The client may have tight time scales in which it wants the website developed as it may have planned a formal launch, or the "go live" date may be published in advertisements. It is important that these timescales (including any interim timescales) are specified in the agreement. The extent to which any failure to meet these timescales is dealt with should also be specified (for example will any such failure allow the client to terminate its relationship with you or to withhold payment?)

If the client insists that time is of the essence it is important to ensure that the appropriate obligations are placed on the client in terms of the timing and the format in which the content should be provided.

The development process

Once you have a basic specification, you can agree an implementation plan with the client for the web development. The implementation plan should clearly specify any deliverables which are the responsibility of the client, and when it must deliver them to allow you to deliver the website on time. You should also define any acceptance tests to be carried out to determine whether the website has been developed in accordance with the specification, including details of who will carry out any such tests and when they will take place.

Getting paid

The agreement should also clearly set out the payment terms, the timing of payment, whether payment is conditional upon any "triggers" (for example successful acceptance tests or the provision by you of an invoice containing certain information), and whether the client is entitled to withhold any element of the payment (and in what circumstances) are examples of issues which should be considered.

Your liability for content

If you are adding content to the website or hosting the website, you should be aware of your potential liability for defamation (see OUT-LAW's guide on Defamation).

Certain defences may be available to you for content which you did not originate.

Protection may also exist for you if you host any content on behalf of third parties. However you should be careful that you do not become liable for any alleged or defamatory content posted by a third party.

Who will own the intellectual property rights?

You may create a number of things for a client in developing the website, e.g. development of branding, graphics, databases, the website itself and associated materials for the client. In the absence of any agreement to the contrary, you will own the intellectual property rights in anything you create for the client. It is therefore important to identify what should belong to the client, in what circumstances and whether your fee will need to be adjusted to reflect this.

Where the client is providing much of the content and graphics for the website, and particularly where the client is a large corporate organisation, you may find that the justification for your retaining all intellectual property rights connected with the work done by you will be lower.

In any event, if the client is providing the content, make sure the client gives you a warranty that it has obtained all consents required to use/reproduce any content to which third party intellectual property rights relate.

If you want to be able to use the applications developed for a particular client in other projects you must make it clear that all intellectual property rights in the applications belong to you, and offer a royalty free licence to use those applications to the client to facilitate this.

What happens if things go wrong?

Things can and do go wrong. The agreement should specify what will happen if the relationship terminates before the website is completed. For example, it should specify whether you will be entitled to payment in relation to any work properly carried out by you prior to termination, and what will happen to any materials generated by you as a consequence of the website development.

Data Protection / information gathering

If the website is in any way interactive, then personal information about site users may be collected. Such information must be obtained lawfully and in accordance with the provisions of the Personal Data (Privacy) Ordinance. If the provisions of the Ordinance are not complied with, the client may be unable to use the information it has collected and may also be subject to enforcement action in relation to its breach – both outcomes which are likely to have a detrimental financial impact on the client and may also generate bad publicity for them (and you).

Although the obligations of the Personal Data (Privacy) Ordinance rest with the client, you need to produce a website and database which complies with the data protection legislation. This means providing fields which enable certain information to be collected, and including functions in the software which enable the client to carry out its business in accordance with data protection law.

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