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5 key contracts for an online business

An online business website typically requires five key legally binding contracts. They form the foundation for building an online business.

No online business can live without them.

If they are not in place, or they are poorly prepared or assessed, any one of them can at any stage weaken or ruin a business.

So what are the five key contracts for an online business?  

 

  1. Agreement with website developer. This should cover a range of needs, including transfer or licensing of copyright and other intellectual property. This agreement needs proper and broad-based consideration of management as well as legal needs. Many practical and legal issues often exist. They are best set out in a needs review or proposal document for testing before entering into a legally binding agreement. Some developers offer umbrella services that cover some of the topics in items 2, 4 and 5 below.
  2. contract_gourland_1920sAgreement with other creatives. The creatives include the logo designer, text writers, photographers, suppliers of graphics, and the brains trust of collaborators who pitch various ideas or provide content for the website. One template contract can be developed to deal with all of these types of contracts. If the needs are more sophisticated, then some contracts will have to be customised to meet specific requirements.
  3. Website terms of use. These are for both website browsers as well as for those who become subscriber customers. A terms of use can be prepared to be a contract or part of a contract. Terms should deal with copyright in some detail and a very wide range of other legal considerations. They vary depending on the type and level of functionality of the website. Variations depend on many things, eg whether the site provides for comments or has a forum or user groups as well as whether it is set up for ecommerce transactions. The terms of use can be critical for maximising the long term valuation of the site and its related business. It will be looked at carefully by potential future collaborators, investors, financiers and site buyers.
  4. contract_olympias_m3_scientific_c1955Agreement with software suppliers. These should be reviewed even if it is open source software, eg Drupal, WordPress or Joomla.
  5. Agreement with hosting company. While a hosting company will provide its standard agreement there are practical considerations that should be tested before its acceptance or variation. They include - what is backed up (content plus all supporting software?), where are the backups held (onsite and offsite?), when are they made (daily, weekly, something else?), and how are support services provided (to deal with technical problems, cyberattacks, upgrading for increased traffic)?

 

There are many other legal needs for building a strong business foundation for a website. Two are mentioned below as they often require careful consideration.contract_remington_no3_1930

  • Appropriate business structuring. This is a complex subject involving management, legal, taxation and accounting considerations.
  • Privacy policy. The implementation of the policy should connect with the other areas of the growing field which in our firm we refer to as "information law compliance", eg spam and confidentiality law.

Many online businesses operate without knowing much about the key contracts or keeping copies of them.

But the bigger or more financially successful a business becomes, the higher the likelihood that any one of the key contracts will raise issues, disputes or even litigation. At that stage fixing the problem is usually costly, drains management time, creates bad publicity, and can affect the internal culture of the business.

When you are closer to knowing your needs and which ones you wish to address, call for a costed proposal for any of the numbered or bullet pointed items.


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