e-businessguide - The development contract

A development contract to govern the actions of the web development team is extremely important, assuming the team comprises, in part or in whole, people from outside the organisation. The Agreement should complement the Development Brief and would be presented with it to potential developers at the tendering stage.

The development contract should be constructed jointly by the project manager and an appropriately qualified and experienced lawyer.

It is an essential risk management tool and should be crafted to provide maximum possible protection for the organisation against litigation from third parties, or damage or loss arising from a negligent or rogue developer. If composed in the right way, it also has the potential to enhance the efficiency of the development process by providing a framework for decision-making and dispute resolution.

One difficult issue that can arise with regard the development contract and the resulting website is its applicability and treatment in different jurisdictions - across states, national and international borders. If the chosen web developer is in another state or country (and this is not uncommon) the extent to which the development contract is binding may be questionable. In addition, content that is perfectly lawful in one state or country may be unlawful in other. The jurisdiction issues should be raised with your lawyers and steps taken to address any potential difficulties in this regard.

Do not accept the developer's contract. The contract should be one that your organisation has drawn up with assistance from your legal advisors, who have been instructed to ensure that the contract is as favourable to your organisation as is reasonable and fair. Getting the balance right is difficult. The development contract can be drafted from a very risk-averse stance with terms and conditions that are grossly in your favour and punitive towards the developer. A contract that recognises both parties' rights will be more constructive to your relationship with the developer and of greater assistance to the project manager in the day-to-day management of the project.

What to do

Before speaking to your legal advisors, consider your response to the following issues that should be addressed in the development contract:

a description of the products and services - this project and what is to be delivered
project management procedures - who is responsible, weekly meetings, agenda, location and minute taking
stages of the project, deliverables and exit clauses - 1) technical specifications (provide the opportunity to terminate the agreement if the developer has proven to be disappointing or worse) 2) development and testing 3) launch
payment schedule, terms and conditions and what constitutes acceptance - when and how much at each stage, what constitutes failure to perform and what rights you will have to withhold payment in part or in whole if the deliverables at any milestone are unsatisfactory
variations to the agreement - procedures for raising, negotiating and amending the agreement
intellectual property - ensure there is an assignment of IP to your organisation, or at least the granting by the developer of a perpetual, world-wide, non-exclusive royalty-free license over the IP
maintenance and support - level of maintenance required, by whom, for how much and for how long at the quoted price
warranties - that the website will be error and virus-free (and for what period), that the web developers have not infringed anyone's rights in supplying the solution
penalty clauses - a dollar penalty for failure by the developer to complete the site according to the agreed timeframe (as amended from time-to-time) without an acceptable reason and due notice
insurance - professional indemnity, public liability and others required by law
dispute resolution - procedure and who will be the mediator
termination - terms and conditions under which the organisation can terminate the agreement, make it so general as to allow you to terminate the project whenever the need arises, and, of course, to pay outstanding fees to that point.

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