1. A (domain) name to remember
Firstly, how will your customers locate you? You will need to have a domain name which constitutes the address at which you can be found on the web (technically referred to as your URL address). Usually this will include your company or trading name or a brand name and you will typically register the domain name through an Internet Service Provider (ISP). Registration is on a first come first served basis and you will need to check whether your chosen domain name is available or is already being used by another business. If the name you require is not available but incorporates your company/brand name you can consider whether any of your rights are being infringed by those using this name. Cybersquatting (the practice of registering a famous brand as a domain name in the hope that the owners of the brand will pay a fortune to secure that domain name) is now pretty much outlawed as the courts both here and in the US have taken a dim view of this practice. Both NSI (the organisation which allocates .com names) and Nominet (which allocates .co.uk names) have set up dispute resolution procedures for domain name disputes and you will need the help of a lawyer to take it further.

It is advisable to register as many combinations (including misspellings) of your name as possible so that you obtain maximum protection and customers can locate you easily. Once you have decided on the domain name(s) you must complete the registration template provided by the ISP so that it can be emailed to the relevant registrar. Note the renewal requirements to avoid difficulties of the registration lapsing.

2.Work on your (web) image.
Once you have secured your name you will need to consider the website itself. Unless you have specific expertise in-house you will need to engage the services of a website developer and possibly a designer also. Choose your developer carefully. It will help to find one familiar with your area of business and beware of those eager to stuff your website full of techno-gizmos – it may look impressive but take ages to download pages etc. The contract you have with them will be crucial in ensuring that setting up and operating your website is a hassle free experience. Sprecher Grier Halberstam LLP has developed template agreements to cover this complex area (www.weblaw.co.uk) and the comments below are based on elements of those templates. The most important areas include:

• Ownership of intellectual property rights – you must establish who owns the copyright and other rights in the design content of the site and it is, of course, preferable that you own these rights rather than the developer. If the contract is silent on this point you are unlikely to have any rights to the design content. The contract should include an assignment of these rights to your company or, at the least, an exclusive, world wide, free licence. The program code (or source code), which enables the website to function in the way that you require, may remain in the ownership of the developer. If it does, you should ensure that you are entitled to a licence to use the source code should you wish to have your website hosted by someone other than the developer and that a copy is stored by an independent escrow agent and is available to you should the developer become insolvent.


• Technical specifications and acceptance testing – try to be as specific as possible in your requirements as to the functioning of the website, its image and general performance. You may need external technical assistance in drawing up the specification. The more specific you can be the easier it will be to withhold payment, for example, if the website is not what you had expected. You should ensure you have the opportunity to test the site at certain intervals throughout the contract and even have a pilot version to test on a selected area or group of people to gauge the effect on potential customers. Consider testing to ensure the site can cope with the anticipated level of traffic.


• Time limits for delivery – you will have a certain timescale in mind and this should be committed to paper and agreed with the developer. There is likely to be some slippage particularly if you are being innovative as regards image or performance of the site but clear deadlines and a long stop launch date will help to keep the developer’s mind focused.


• Payment – usually developers will be paid a lump sum rather than a commission based on sales made via the website. The payments should be made in stages when specific targets are met and this can usefully be combined with acceptance testing so that payment is due on completion of a successful test. Financial provisions will often be included for breach of the contract including a default rate of interest on late payment of any instalment.


• Maintaining the site – consider whether the developer will also maintain and update your site on your behalf and agree an ongoing fee for this work. Once again, the governing contract should be specific as to what is included in the maintenance fee. Updates should be passed to them promptly so that the site does not become out of date. Virgin was recently fined for quoting a flight on the Virgin Atlantic website which the airline then refused to honour as it was out of date.


• Security and policing content – remember that your website is on a largely open network and you will need to consider the latest security devices for protecting information given or received over your website. This could include encryption devices or digital signatures both of which are of greater significance if your customers pay for goods via your website. Antivirus software is now a must for all websites and this should be updated in line with advances in technology. Consider who will be responsible for policing any chatrooms or message boards to check they contain no offensive or defamatory material. You may incur substantial legal liability if you fail to do this. In the same way that newspapers are liable for repeating libellous comments, you may be liable for any comments posted on the site – even if these are clearly not your own views. If your developer is responsible for updating the site consider requiring that it ensures that such material is detected and removed as quickly as possible.

3. Go up in the world wide web
Your other crucial initial contract will be with the ISP that will ensure your connection to the world wide web. Sprecher Grier Halberstam LLP has developed a template agreement to cover this key aspect of your project (www.weblaw.co.uk) and the recommendations below are based on the suggested terms of that template. In order to be accessible your website must be hosted on a server which is connected to the web. Your chosen ISP may host your website on their server or, for larger businesses, simply provide a connection between your dedicated server and the web. In choosing your ISP consider their capacity to deal with large volumes of traffic as this will govern how quickly customers can gain access to your website. The number and location of the ISPs points of presence on the web will be important as, generally speaking, the greater the presence the more traffic the ISP can deal with without delay or difficulty. You should also check that the ISP will block as much spam (unsolicited junk e-mail) as possible to reduce the risk of overload and of viruses arriving with these e-mails. Terms you should expect to see in the contract with your ISP include:

 Service level guarantee – The most important task of the ISP is to make the website available to visitors as quickly as possible and the contract should impose levels of speed of response times over the ISP’s own network. Inevitably the ISP’s network may not always be available to visitors as the server may crash. You may wish to impose availability (uptime) requirements for a certain percentage of the time over a certain period. Failure to hit these targets could give you the right to a refund of a proportion of the fee or termination of your contract with the ISP. It is unlikely the ISP will take responsibility for problems beyond its own network.

 Liability and indemnities – The ISP will require some assurances as to the content of the website (no defamatory or offensive material or material which breaches another’s intellectual property rights) as it may be liable to third parties for unlawful content. Generally any liability accepted by the ISP will be limited to a specific sum – usually expressed as the amount received by the ISP under the contract or possibly a multiple of this figure. There is some doubt as to whether any arbitrary limit on liability will be effective but, to be on the safe side, assume that the limit will be enforceable and negotiate it upwards if you believe it will not be sufficient to compensate you. Consider limiting your liability under the contract in the same way as the ISP limits its own. Try to avoid the ISP excluding liability for any consequential loss (such as loss of profits, business etc) although ISPs will generally be reluctant to open themselves up to this sort of liability.

 Security – A firewall put in place by the ISP can prevent viruses from infecting your data. We are all aware of the potentially damaging effects of viruses (the love bug was a particularly virulent example) and any protection your ISP can provide to reduce the risk of infection may be invaluable. Antivirus software should be updated regularly.

4. Content of the website: looks are not everything
The decision as to what appears on your website will be taken with a variety of factors in mind including marketing, ease of use by customers and how to turn hits (those hitting on your site but not buying) into sales. Although not uppermost in your mind at the time of designing your site, it is important to consider the legal framework within which your site must operate. We have already touched on defamatory and offensive material for which you may be liable. In addition, any material which may be the copyright of another cannot be displayed without its consent.

Consider the policy statements and disclaimers that you may wish to insert including a copyright notice, trademark notice (if applicable), possibly age and geographical restrictions depending on the market the site is aimed at and applicable laws, a restriction on downloading images and a disclaimer of warranties and liability. This last statement could, for example, include a disclaimer of responsibility for viruses carried away by visitors to your website and an exclusion of any implied warranty that information is suitable for any purpose, accurate or up-to-date. Usually implied warranties are excluded to the fullest extent permitted by law. If you intend to operate cookies (programmes which track the movements of individual visitors to your site and gather information useful for marketing purposes) this should also be explained.

Under the new Data Protection Act which came into force in March 2000 a privacy statement is now a must on every website where customers provide their details. This should state any use to which you will be putting personal data collected from visitors to your site such as for marketing purposes. If the data is to be sent outside the EU you may need specific permission for this plus a short explanation of the data protection laws of the recipient country.

Consider also establishing the jurisdiction under which any contract is concluded. The very nature of the world wide web has led to jurisdictional difficulties – if a contract is concluded on your website with a customer from China what law applies to the contract? These problems can be partly solved with a choice of law jurisdiction clause but other problems remain. If your website is available to be accessed by customers from other jurisdictions (as it almost certainly will be) certain laws of that country such as consumer protection laws, pricing regulations and public policy laws may apply to your site. For example, in Germany it is illegal to offer ‘two for the price of one’ promotions and free offers and it may be possible for a German customer to prosecute a UK business for breach of German laws. If there is any particular country you will be targeting a legal audit by a local lawyer would be advisable. In other cases a certain amount of risk will need to be accepted. The e-commerce Directive seeks to address some of these issues. One of the main points it will establish is that consumers can sue through the courts of their own country and this could give rise to higher legal costs for web businesses.

5. Contracting on the web: business as usual?
Last but not least you will need to consider how your customers will contract with you over the web. It is a widely held misconception that the internet is a law-free zone. Sadly this is not the case although it is true that legal principles governing this area were not designed to deal with the immediacy of the web. It is advisable to have a specially customised version of your standard set of terms and conditions apply to contracts concluded in this way. In order to incorporate your standard terms into contracts with customers they must be forced to view the terms and click their acceptance before being able to click on the BUY button. If you give customers the option to view your terms (through a hyperlink connected to your terms, for example) this is unlikely to be sufficient to make them applicable to the relevant contracts. Although your marketing department is unlikely to be keen to force customers to trawl through the tedious terms and conditions there is no other way of being certain of incorporating them into the contract. The same comments apply to disclaimers and privacy statements – customers should be forced to view these and click acceptance before proceeding.

There are other areas you may wish to consider such as advertising and sponsorship, links to related sites, how you will monitor visitors and sales, tax treatment of sales on the web and keeping up-to-date with the latest advances in security. As the web becomes more regulated through domestic and European legislation as well as self-regulation the need to look before you leap will become increasingly apparent and businesses that fail to do so may be counting the costs well into the next decade.

Useful Web addresses:
DTI: www.dti.gov.uk
NSI: www.nsi.org
ICANN: www.icann.org
Legal E-Commerce Issues:- www.weblaw.co.uk
Nominet: www.nic.co.uk
Internet Service Providers Association: www.ispa.org.uk
TrustUK: www.trustuk.org.uk

Emma Shipp Partner, Company / Commercial Department 020 7544 5550 emmas@sghlaw.com