I am in search of a sample/template contracts between the network contractor and the client, obviously. 
Any pointers would be greatly appreciated.
Any pointers would be greatly appreciated.
Network Contracts
- Thread starter Poontos
- Start date
There's really no template. Can you give more information like exactly what the client wants and exactly what the supplier will provide?
I've got dozens of contracts that I've signed, but that's privileged info and I can't release. Sorry.
I've got dozens of contracts that I've signed, but that's privileged info and I can't release. Sorry.
It is for the CCNA "Washington District School Board Threaded Case Study". Which, in short, is a mock network (IDF's, MDF's, all hardware, cables, routers, switches, cabinets, configuration, security, servers, workstations, etc. - the whole shabang) implementation for a whole school district, then specifically one school out of the district that we choose.
Basically, we need to come up with some sort of contract between the contractor (us - a group of students) and the client (our teacher).
A basic outline and then our teacher critique's it as if he was really the client.
Sorry for lacking specifics. Please let me know if there is further information required. Thank you.
Basically, we need to come up with some sort of contract between the contractor (us - a group of students) and the client (our teacher).
A basic outline and then our teacher critique's it as if he was really the client.
Sorry for lacking specifics. Please let me know if there is further information required. Thank you.
Cool concept! I like your instructor! I've gotta say, I've seen some bad ones in my day, but I sure like this guy's approach. Sounds like you're getting your money's worth.
As to your contract question, you might want to look at some of the CCDA study guides. They're not going to give you any contract templates, but they will give you a whole bunch of specific things to consider when entering negotiations with a client for a network install. Where is their project now, where do they want to be? Who's paying for what? How much is the budget? You get the idea.
Impress your instructor with how you were able to address the knowlwdge domain of the CCDA exam as a humble CCNA candidate, and best of luck on your exam. With an instructor like your's, you should do great!
As to your contract question, you might want to look at some of the CCDA study guides. They're not going to give you any contract templates, but they will give you a whole bunch of specific things to consider when entering negotiations with a client for a network install. Where is their project now, where do they want to be? Who's paying for what? How much is the budget? You get the idea.
Impress your instructor with how you were able to address the knowlwdge domain of the CCDA exam as a humble CCNA candidate, and best of luck on your exam. With an instructor like your's, you should do great!
IMPORTANT BOILERPLATE PROVISIONS FOR CONTRACTS
Miscellaneous
(a) Choice of Law. This Agreement, and any dispute arising from the relationship between the parties to this Agreement, shall be governed by [e.g., California] law, excluding any laws that direct the application of another jurisdiction?s laws.
(b) Attorney Fees Provision. In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract, tort, or both) or seeks a declaration of any rights or obligations under this Agreement, the prevailing party shall be awarded its reasonable attorney fees, and costs and expenses incurred.
(c) Notice. Any notices required or permitted to be given hereunder shall be given in writing and shall be delivered (a) in person,
(b) by certified mail, postage prepaid, return receipt requested, (c) by facsimile, or (d) by a commercial overnight courier that guarantees
next day delivery and provides a receipt, and such notices shall be addressed as follows:
If to ____________:
Attention:
Fax:
If to ____________:
Attention:
Fax:
or to such other address as either party may from time to time specify in writing to the other party. Any notice shall be effective only upon delivery, which for any notice given by facsimile shall mean notice which has been received by the party to whom it is sent as evidenced by confirmation slip.
(d) Modification of Agreement. This Agreement may be supplemented, amended, or modified only by the mutual agreement of the parties. No supplement, amendment, or modification of this Agreement shall be binding unless it is in writing and signed by all parties.
(e) Entire Agreement. This Agreement and all other agreements, exhibits, and schedules referred to in this Agreement constitute(s) the final, complete, and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous understandings or agreements of the parties. This Agreement may not be contradicted by evidence of any prior or contemporaneous statements or agreements. No party has been induced to enter into this Agreement by, nor is any party relying on, any representation, understanding, agreement, commitment or warranty outside those expressly set forth in this Agreement.
(f) Severability of Agreement. If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provisions or part thereof shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. If any provision or part thereof of this Agreement is stricken in accordance with the provisions of this section, then this stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible.
(g) Separate Writings and Exhibits. The following [e.g., agreements, exhibits, schedules, or other separate writings] constitute a part of this Agreement and are incorporated into this Agreement by this reference: [List separate writings by name and date]. Should any inconsistency exist or arise between a provision of this Agreement and a provision of any exhibit, schedule, or other incorporated writing, the provision of this Agreement shall prevail.
(h) Time of the Essence. Time is of the essence in respect to all provisions of this Agreement that specify a time for performance; provided, however, that the foregoing shall not be construed to limit or deprive a party of the benefits of any grace or use period allowed in this Agreement.
(i) Survival. Except as otherwise expressly provided in this Agreement, representations, warranties, and covenants contained in this Agreement, or in any instrument, certificate, exhibit, or other writing intended by the parties to be a part of this Agreement, shall survive for ___ years after the date of this Agreement.
(j) Ambiguities. Each party and its counsel have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement. The language in this Agreement shall be interpreted as to its fair meaning and not strictly for or against any party.
(k) Waiver. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies.
(l) Headings. The headings in this Agreement are included for convenience only and shall neither affect the construction or interpretation of any provision in this Agreement nor affect any of the rights or obligations of the parties to this Agreement.
(m) Necessary Acts, Further Assurances. The parties shall at their own cost and expense execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement.
(n) Execution. This Agreement may be executed in counterparts and by fax.
(o) Consent to Jurisdiction and Forum Selection. The parties hereto agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated exclusively in the State and Federal courts located in the County of , State of . The aforementioned choice of venue is intended by the parties to be mandatory and not permissive in nature, thereby precluding the possibility of litigation between the parties with respect to or arising out of this Agreement in any jurisdiction other than that specified in this paragraph. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this paragraph, and stipulates that the State and Federal courts located in the County of , State of shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this paragraph by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement. Any final judgement rendered against a party in any action or proceeding shall be conclusive as to the subject of such final judgement and may be enforced in other jurisdictions in any manner provided by law.
(p) Jury Trial Waivers. To the fullest extent permitted by law, and as separately bargained-for-consideration, each party hereby waives any right to trial by jury in any action, suit, proceeding, or counterclaim of any kind arising out of or relating to this Agreement.
(q) Specific Performance. The parties acknowledge that it will be impossible to measure in money the damage to them caused by any failure to comply with the covenants set forth in Section , that each such covenant is material, and that in the event of any such failure, the injured party will not have an adequate remedy at law or in damages. Therefore, the parties consent to the issuance of an injunction or the enforcement of other equitable remedies against them at the suit of the other, without bond or other security, to compel performance of all of the terms of Section , and waive the defense of the availability of relief in damages.
(r) Representation on Authority of Parties/Signatories. Each person signing this Agreement represents and warrants that he or she is duly authorized and has legal capacity to execute and deliver this Agreement. Each party represents and warrants to the other that the execution and delivery of the Agreement and the performance of such party?s obligations hereunder have been duly authorized and that the Agreement is a valid and legal agreement binding on such party and enforceable in accordance with its terms.
(s) Force Majeure. No party shall be liable for any failure to perform its obligations in connection with any action described in this Agreement, if such failure results from any act of God, riot, war, civil unrest, flood, earthquake, or other cause beyond such party?s reasonable control (including any mechanical, electronic, or communications failure, but excluding failure caused by a party?s financial condition or negligence).
(t) Assignment. Neither party shall voluntarily or by operation of law assign, hypothecate, give, transfer, mortgage, sublet, license, or otherwise transfer or encumber all or part of its rights, duties, or other interests in this Agreement or the proceeds thereof (collectively, ?Assignment?), without the other party?s prior written consent. Any attempt to make an Assignment in violation of this provision shall be a material default under this Agreement and any Assignment in violation of this provision shall be null and void.
[(u) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled by binding arbitration in [City], [State]. Such arbitration shall be conducted in accordance with the then prevailing commercial arbitration rules of JAMS/Endispute (?JAMS?), with the following exceptions if in conflict: (a) one arbitrator shall be chosen by JAMS; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (c) arbitration may proceed in the absence of any party if written notice (pursuant to the JAMS? rules and regulations) of the proceedings has been given to such party. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; [provided however, that nothing in this subsection shall be construed as precluding the bringing an action for injunctive relief or other equitable relief]. The arbitrator shall not have the right to award punitive damages or speculative damages to either party and shall not have the power to amend this Agreement. The arbitrator shall be required to follow applicable law. [IF FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, THEN EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.]
Miscellaneous
(a) Choice of Law. This Agreement, and any dispute arising from the relationship between the parties to this Agreement, shall be governed by [e.g., California] law, excluding any laws that direct the application of another jurisdiction?s laws.
(b) Attorney Fees Provision. In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract, tort, or both) or seeks a declaration of any rights or obligations under this Agreement, the prevailing party shall be awarded its reasonable attorney fees, and costs and expenses incurred.
(c) Notice. Any notices required or permitted to be given hereunder shall be given in writing and shall be delivered (a) in person,
(b) by certified mail, postage prepaid, return receipt requested, (c) by facsimile, or (d) by a commercial overnight courier that guarantees
next day delivery and provides a receipt, and such notices shall be addressed as follows:
If to ____________:
Attention:
Fax:
If to ____________:
Attention:
Fax:
or to such other address as either party may from time to time specify in writing to the other party. Any notice shall be effective only upon delivery, which for any notice given by facsimile shall mean notice which has been received by the party to whom it is sent as evidenced by confirmation slip.
(d) Modification of Agreement. This Agreement may be supplemented, amended, or modified only by the mutual agreement of the parties. No supplement, amendment, or modification of this Agreement shall be binding unless it is in writing and signed by all parties.
(e) Entire Agreement. This Agreement and all other agreements, exhibits, and schedules referred to in this Agreement constitute(s) the final, complete, and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous understandings or agreements of the parties. This Agreement may not be contradicted by evidence of any prior or contemporaneous statements or agreements. No party has been induced to enter into this Agreement by, nor is any party relying on, any representation, understanding, agreement, commitment or warranty outside those expressly set forth in this Agreement.
(f) Severability of Agreement. If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provisions or part thereof shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. If any provision or part thereof of this Agreement is stricken in accordance with the provisions of this section, then this stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible.
(g) Separate Writings and Exhibits. The following [e.g., agreements, exhibits, schedules, or other separate writings] constitute a part of this Agreement and are incorporated into this Agreement by this reference: [List separate writings by name and date]. Should any inconsistency exist or arise between a provision of this Agreement and a provision of any exhibit, schedule, or other incorporated writing, the provision of this Agreement shall prevail.
(h) Time of the Essence. Time is of the essence in respect to all provisions of this Agreement that specify a time for performance; provided, however, that the foregoing shall not be construed to limit or deprive a party of the benefits of any grace or use period allowed in this Agreement.
(i) Survival. Except as otherwise expressly provided in this Agreement, representations, warranties, and covenants contained in this Agreement, or in any instrument, certificate, exhibit, or other writing intended by the parties to be a part of this Agreement, shall survive for ___ years after the date of this Agreement.
(j) Ambiguities. Each party and its counsel have participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement. The language in this Agreement shall be interpreted as to its fair meaning and not strictly for or against any party.
(k) Waiver. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies.
(l) Headings. The headings in this Agreement are included for convenience only and shall neither affect the construction or interpretation of any provision in this Agreement nor affect any of the rights or obligations of the parties to this Agreement.
(m) Necessary Acts, Further Assurances. The parties shall at their own cost and expense execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement.
(n) Execution. This Agreement may be executed in counterparts and by fax.
(o) Consent to Jurisdiction and Forum Selection. The parties hereto agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated exclusively in the State and Federal courts located in the County of , State of . The aforementioned choice of venue is intended by the parties to be mandatory and not permissive in nature, thereby precluding the possibility of litigation between the parties with respect to or arising out of this Agreement in any jurisdiction other than that specified in this paragraph. Each party hereby waives any right it may have to assert the doctrine of forum non conveniens or similar doctrine or to object to venue with respect to any proceeding brought in accordance with this paragraph, and stipulates that the State and Federal courts located in the County of , State of shall have in personam jurisdiction and venue over each of them for the purpose of litigating any dispute, controversy, or proceeding arising out of or related to this Agreement. Each party hereby authorizes and accepts service of process sufficient for personal jurisdiction in any action against it as contemplated by this paragraph by registered or certified mail, return receipt requested, postage prepaid, to its address for the giving of notices as set forth in this Agreement. Any final judgement rendered against a party in any action or proceeding shall be conclusive as to the subject of such final judgement and may be enforced in other jurisdictions in any manner provided by law.
(p) Jury Trial Waivers. To the fullest extent permitted by law, and as separately bargained-for-consideration, each party hereby waives any right to trial by jury in any action, suit, proceeding, or counterclaim of any kind arising out of or relating to this Agreement.
(q) Specific Performance. The parties acknowledge that it will be impossible to measure in money the damage to them caused by any failure to comply with the covenants set forth in Section , that each such covenant is material, and that in the event of any such failure, the injured party will not have an adequate remedy at law or in damages. Therefore, the parties consent to the issuance of an injunction or the enforcement of other equitable remedies against them at the suit of the other, without bond or other security, to compel performance of all of the terms of Section , and waive the defense of the availability of relief in damages.
(r) Representation on Authority of Parties/Signatories. Each person signing this Agreement represents and warrants that he or she is duly authorized and has legal capacity to execute and deliver this Agreement. Each party represents and warrants to the other that the execution and delivery of the Agreement and the performance of such party?s obligations hereunder have been duly authorized and that the Agreement is a valid and legal agreement binding on such party and enforceable in accordance with its terms.
(s) Force Majeure. No party shall be liable for any failure to perform its obligations in connection with any action described in this Agreement, if such failure results from any act of God, riot, war, civil unrest, flood, earthquake, or other cause beyond such party?s reasonable control (including any mechanical, electronic, or communications failure, but excluding failure caused by a party?s financial condition or negligence).
(t) Assignment. Neither party shall voluntarily or by operation of law assign, hypothecate, give, transfer, mortgage, sublet, license, or otherwise transfer or encumber all or part of its rights, duties, or other interests in this Agreement or the proceeds thereof (collectively, ?Assignment?), without the other party?s prior written consent. Any attempt to make an Assignment in violation of this provision shall be a material default under this Agreement and any Assignment in violation of this provision shall be null and void.
[(u) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled by binding arbitration in [City], [State]. Such arbitration shall be conducted in accordance with the then prevailing commercial arbitration rules of JAMS/Endispute (?JAMS?), with the following exceptions if in conflict: (a) one arbitrator shall be chosen by JAMS; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (c) arbitration may proceed in the absence of any party if written notice (pursuant to the JAMS? rules and regulations) of the proceedings has been given to such party. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; [provided however, that nothing in this subsection shall be construed as precluding the bringing an action for injunctive relief or other equitable relief]. The arbitrator shall not have the right to award punitive damages or speculative damages to either party and shall not have the power to amend this Agreement. The arbitrator shall be required to follow applicable law. [IF FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, THEN EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.]
Checklist of Issues for Web Site Development Contracts
Many companies contract out the development of their Web sites to third-party developers. Companies should ensure that the contract with the Web site developer addresses several key areas, including ownership and intellectual property rights, the development process, functionality of the end product, problems that may arise and corrective measures required to be undertaken, covenants of the developer, confidentiality, and other provisions. The following is a checklist of issues.
A. Ownership and Intellectual Property Issues. The development agreement should clearly address the issue of ownership of and intellectual property issues related to the content, screens, software, and information developed. The agreement can address:
* That the Web site developer is an independent contractor performing a work-for-hire service under the Copyright Act;
* That all screens, graphics, domain names, content and the look-and-feel of the site developed shall be owned solely by the company, together with all underlying software, object code, digital programming, source code, and the like;
* Provisions addressing whether the developer retains rights to use any materials or software it gains from its creation of the Web site;
* That all intellectual property developed in connection with the site will be owned solely by the company;
* That the developer in developing the site, will not infringe or violate the copyright and other intellectual property rights of third parties;
* That if the developer is bundling or using any prior intellectual property that it owns and of which it wishes to keep ownership, that the company will receive a perpetual, irrevocable, worldwide, royalty-free transferable license to the same;
* Which party is responsible for securing various rights, licenses, clearances, and other permissions related to works, graphics or other copyrighted materials to be used or otherwise incorporated in the Web site; and
* That a copyright notice will be displayed on designated parts of the company's site.
B. The Development Process. The development agreement can address various issues associated with the development of the site, progress payments, and acceptance procedures. Such provisions could address:
* A timetable and budget for completion of the site, including specific payment milestones as progress is made on site development;
* A mechanism allowing for change orders by the company regarding the specifications for the site, without the change orders resulting in exorbitant extra costs or delays;
* That the developer will timely provide documentation and source codes for all software associated with the site;
* That the developer will train employees of the company to use and maintain the software associated with the site, both initially and at the time of each upgrade; the number of business days and the location of the training can be specified;
* That the developer assumes responsibility for transferring the site?including all software?to the company's server and (if applicable) agrees to oversee the site's installation on that server;
* That the developer provides alternative screen page shots for the company to review and decide upon;
* A commitment by the developer to a period of joint beta testing of the site and a subsequent Acceptance Testing period during which the company may evaluate the site on its premises to make sure the site functions as anticipated and in accordance with the agreement;
* That the company will have the right to reject the site if it does not meet designated specifications and the company options regarding corrections at the time of a rejection; and
That a copyright notice will be displayed on each page of the company's site;
C. Functionality of the Site. The development agreement should clearly specify the anticipated functionality and technological requirements from the site, including provisions that address:
* Use by the developer of the most current standards of technology in development of the site;
* The maximum download time for any web page;
* The inclusion of a user option for a low graphics version of the site in order to minimize download time;
* The desired speed and bandwidth of the Internet connection;
* That the site be compatible with the latest versions of Internet browser software, especially the Microsoft, Netscape and AOL browsers;
* That the site will be functioning 24 hours a day, seven days a week, except for scheduled maintenance/downtime;
* The number of users that will be able to simultaneously access the site as well as response time for user requests;
* How the site will be properly integrated with the company's intranet or other data server structure;
* That additions, corrections or modifications to the site may be made by the company without interference with site operations;
* The security safeguards, procedures and firewalls that the site must contain;
* The expected functionality of online credit verification and acceptance procedures; and
* The scope and procedure for the company being able to easily access, record, and compile information about the site?s users and customers.
D. Problems and Corrective Measures. The development agreement should address the problems that may arise and the developer's duty to promptly correct such problems, including:
* The developer's duty to fix any bugs and failed links, including maximum time for correction;
* The revision of the site to comply with the functionality specifications;
* Any particular warranties or disclaimers by the developer;
* That the developer agrees to ensure that the software for the site is free of any viruses or disabling devices; and
* The rights of the company for termination of the agreement and the liability of the developer upon such termination.
E. Covenants of the Developer. The development agreement may impose a variety of additional duties on the developer, such as:
* That the developer will, if requested by the company, publish information about the site with a mutually agreeable set of search engines and directions;
* That the developer will not during the site development or thereafter use the company's trademarks, service marks or logos, except with the company's express written approval;
* That the developer will not use its service affiliation with the company for its own promotional purposes without prior written consent;
* That the developer will comply with all applicable laws in connection with its activities; and
* That the developer will maintain satisfactory insurance and will provide proof of its policies.
F. Confidentiality. The company will want to obligate the developer to keep all confidential or proprietary information that it learns about the company or its customers strictly confidential, and not use such information other than in connection with the developer's obligations under the development agreement. The agreement may also require that the developer's employees and consultants working on the site development project execute a Confidentiality and Invention Assignment Agreement. The agreement may also address the issue of whether the developer is permitted to subcontract portions of the development project.
G. Miscellaneous. As in any good contract, the following types of clauses should be considered for the development agreement:
* That in the event of a dispute, the prevailing party will be entitled to recoup its attorneys' fees and costs;
* Whether disputes will be handled by litigation or arbitration;
* What governing law will govern and where any disputes must be brought;
* That the contract contains the complete and entire understanding and agreement of the parties;
* That the agreement can only be amended in writing; and
* That the agreement is not assignable by the developer.
Many companies contract out the development of their Web sites to third-party developers. Companies should ensure that the contract with the Web site developer addresses several key areas, including ownership and intellectual property rights, the development process, functionality of the end product, problems that may arise and corrective measures required to be undertaken, covenants of the developer, confidentiality, and other provisions. The following is a checklist of issues.
A. Ownership and Intellectual Property Issues. The development agreement should clearly address the issue of ownership of and intellectual property issues related to the content, screens, software, and information developed. The agreement can address:
* That the Web site developer is an independent contractor performing a work-for-hire service under the Copyright Act;
* That all screens, graphics, domain names, content and the look-and-feel of the site developed shall be owned solely by the company, together with all underlying software, object code, digital programming, source code, and the like;
* Provisions addressing whether the developer retains rights to use any materials or software it gains from its creation of the Web site;
* That all intellectual property developed in connection with the site will be owned solely by the company;
* That the developer in developing the site, will not infringe or violate the copyright and other intellectual property rights of third parties;
* That if the developer is bundling or using any prior intellectual property that it owns and of which it wishes to keep ownership, that the company will receive a perpetual, irrevocable, worldwide, royalty-free transferable license to the same;
* Which party is responsible for securing various rights, licenses, clearances, and other permissions related to works, graphics or other copyrighted materials to be used or otherwise incorporated in the Web site; and
* That a copyright notice will be displayed on designated parts of the company's site.
B. The Development Process. The development agreement can address various issues associated with the development of the site, progress payments, and acceptance procedures. Such provisions could address:
* A timetable and budget for completion of the site, including specific payment milestones as progress is made on site development;
* A mechanism allowing for change orders by the company regarding the specifications for the site, without the change orders resulting in exorbitant extra costs or delays;
* That the developer will timely provide documentation and source codes for all software associated with the site;
* That the developer will train employees of the company to use and maintain the software associated with the site, both initially and at the time of each upgrade; the number of business days and the location of the training can be specified;
* That the developer assumes responsibility for transferring the site?including all software?to the company's server and (if applicable) agrees to oversee the site's installation on that server;
* That the developer provides alternative screen page shots for the company to review and decide upon;
* A commitment by the developer to a period of joint beta testing of the site and a subsequent Acceptance Testing period during which the company may evaluate the site on its premises to make sure the site functions as anticipated and in accordance with the agreement;
* That the company will have the right to reject the site if it does not meet designated specifications and the company options regarding corrections at the time of a rejection; and
That a copyright notice will be displayed on each page of the company's site;
C. Functionality of the Site. The development agreement should clearly specify the anticipated functionality and technological requirements from the site, including provisions that address:
* Use by the developer of the most current standards of technology in development of the site;
* The maximum download time for any web page;
* The inclusion of a user option for a low graphics version of the site in order to minimize download time;
* The desired speed and bandwidth of the Internet connection;
* That the site be compatible with the latest versions of Internet browser software, especially the Microsoft, Netscape and AOL browsers;
* That the site will be functioning 24 hours a day, seven days a week, except for scheduled maintenance/downtime;
* The number of users that will be able to simultaneously access the site as well as response time for user requests;
* How the site will be properly integrated with the company's intranet or other data server structure;
* That additions, corrections or modifications to the site may be made by the company without interference with site operations;
* The security safeguards, procedures and firewalls that the site must contain;
* The expected functionality of online credit verification and acceptance procedures; and
* The scope and procedure for the company being able to easily access, record, and compile information about the site?s users and customers.
D. Problems and Corrective Measures. The development agreement should address the problems that may arise and the developer's duty to promptly correct such problems, including:
* The developer's duty to fix any bugs and failed links, including maximum time for correction;
* The revision of the site to comply with the functionality specifications;
* Any particular warranties or disclaimers by the developer;
* That the developer agrees to ensure that the software for the site is free of any viruses or disabling devices; and
* The rights of the company for termination of the agreement and the liability of the developer upon such termination.
E. Covenants of the Developer. The development agreement may impose a variety of additional duties on the developer, such as:
* That the developer will, if requested by the company, publish information about the site with a mutually agreeable set of search engines and directions;
* That the developer will not during the site development or thereafter use the company's trademarks, service marks or logos, except with the company's express written approval;
* That the developer will not use its service affiliation with the company for its own promotional purposes without prior written consent;
* That the developer will comply with all applicable laws in connection with its activities; and
* That the developer will maintain satisfactory insurance and will provide proof of its policies.
F. Confidentiality. The company will want to obligate the developer to keep all confidential or proprietary information that it learns about the company or its customers strictly confidential, and not use such information other than in connection with the developer's obligations under the development agreement. The agreement may also require that the developer's employees and consultants working on the site development project execute a Confidentiality and Invention Assignment Agreement. The agreement may also address the issue of whether the developer is permitted to subcontract portions of the development project.
G. Miscellaneous. As in any good contract, the following types of clauses should be considered for the development agreement:
* That in the event of a dispute, the prevailing party will be entitled to recoup its attorneys' fees and costs;
* Whether disputes will be handled by litigation or arbitration;
* What governing law will govern and where any disputes must be brought;
* That the contract contains the complete and entire understanding and agreement of the parties;
* That the agreement can only be amended in writing; and
* That the agreement is not assignable by the developer.
Contract Checklist
1. Identity of Parties
? Name
? Type of entity of each party (corporation, LLC, etc.)
? Addresses
2. Recitals
? Background of agreement
? Purpose for entering into the contract
? Key assumptions for the contract
3. Obligations of the Parties
? What is each side required to do?
? By what date?
? If something has to be delivered, whose obligation is it and at who?s cost?
4. Terms of the Contract
? Is the contract a one-shot situation or will it last for some designated time period?
? How can the term be renewed or extended?
5. Price
? What is the price for the product or service?
? Is it a fixed price, determined by a formula, by a project fee, or some other manner?
? Who pays any tax?
6. Payment Terms
? When is payment due?
? Will there be installment payments?
? Will interest be charged?
? Is there a penalty for late payment?
7. Representations and Warranties
? What representations and warranties are to be made by the parties?
? Are certain warranties disclaimed (e.g., merchantability or fitness for a particular purpose)?
? How long are any warranties good for?
8. Liability
? What limitations of liability exist (e.g., no liability in excess of payment received, or no liability for consequential damage or lost profits)?
? Under what circumstances is one party liable (e.g., material breach of agreement or grossly negligent in performing services)?
9. Termination of Contract
? When can one party terminate the contract early?
? What are the consequences of termination?
? What post-termination obligations are there?
10. Confidentiality
? What confidentiality obligations are there?
? What are the exclusions from confidentiality?
11. Default
? What are the events of default?
? Does a party have a period to cure a default?
? What are the consequences of a default?
12. Disputes
? How are disputes to be handled ? litigation, mediation or arbitration?
? If arbitration, what rules will govern? (e.g., JAMS/Endispute or the American Arbitration Association)
? If arbitration, how many arbitrators and how will they be picked?
? If arbitration, will there be procedures for discovery and what the arbitrator can and can?t do?
? If litigation, where can or must the litigation be brought?
13. Indemnification
? Is there indemnification for certain breaches or problems?
? What is the procedure required to obtain indemnification?
? Is there a cap on or exclusions from indemnification?
14. Miscellaneous
? Governing law
? Attorneys fees
? Modification of Agreement
? Notice
? Entire Agreement
? Severability
? Time of the Essence
? Survival
? Ambiguities
? Waiver
? Headings
? Necessary Acts and Further Assurances
? Execution
? Jury Trial Waivers
? Specific Performances
? Representation on Authority of Parties
? Force Majuere
? Assignment
15. Signatures
? What authority is required for one party to sign the contract (e.g., Board of Directors approval)?
? How many signatures are required?
? Are the signature blocks correct? For corporations, this is a typical appropriate signature block:
ABC, Inc.
By:
John Smith, President
1. Identity of Parties
? Name
? Type of entity of each party (corporation, LLC, etc.)
? Addresses
2. Recitals
? Background of agreement
? Purpose for entering into the contract
? Key assumptions for the contract
3. Obligations of the Parties
? What is each side required to do?
? By what date?
? If something has to be delivered, whose obligation is it and at who?s cost?
4. Terms of the Contract
? Is the contract a one-shot situation or will it last for some designated time period?
? How can the term be renewed or extended?
5. Price
? What is the price for the product or service?
? Is it a fixed price, determined by a formula, by a project fee, or some other manner?
? Who pays any tax?
6. Payment Terms
? When is payment due?
? Will there be installment payments?
? Will interest be charged?
? Is there a penalty for late payment?
7. Representations and Warranties
? What representations and warranties are to be made by the parties?
? Are certain warranties disclaimed (e.g., merchantability or fitness for a particular purpose)?
? How long are any warranties good for?
8. Liability
? What limitations of liability exist (e.g., no liability in excess of payment received, or no liability for consequential damage or lost profits)?
? Under what circumstances is one party liable (e.g., material breach of agreement or grossly negligent in performing services)?
9. Termination of Contract
? When can one party terminate the contract early?
? What are the consequences of termination?
? What post-termination obligations are there?
10. Confidentiality
? What confidentiality obligations are there?
? What are the exclusions from confidentiality?
11. Default
? What are the events of default?
? Does a party have a period to cure a default?
? What are the consequences of a default?
12. Disputes
? How are disputes to be handled ? litigation, mediation or arbitration?
? If arbitration, what rules will govern? (e.g., JAMS/Endispute or the American Arbitration Association)
? If arbitration, how many arbitrators and how will they be picked?
? If arbitration, will there be procedures for discovery and what the arbitrator can and can?t do?
? If litigation, where can or must the litigation be brought?
13. Indemnification
? Is there indemnification for certain breaches or problems?
? What is the procedure required to obtain indemnification?
? Is there a cap on or exclusions from indemnification?
14. Miscellaneous
? Governing law
? Attorneys fees
? Modification of Agreement
? Notice
? Entire Agreement
? Severability
? Time of the Essence
? Survival
? Ambiguities
? Waiver
? Headings
? Necessary Acts and Further Assurances
? Execution
? Jury Trial Waivers
? Specific Performances
? Representation on Authority of Parties
? Force Majuere
? Assignment
15. Signatures
? What authority is required for one party to sign the contract (e.g., Board of Directors approval)?
? How many signatures are required?
? Are the signature blocks correct? For corporations, this is a typical appropriate signature block:
ABC, Inc.
By:
John Smith, President
DEVELOPMENT/WORK-FOR-HIRE AGREEMENT
This DEVELOPMENT/WORK-FOR-HIRE AGREEMENT is entered into as of September 30, 2000, by and between Network Consultant , and Client (?Client?). Collectively, Network Consultant and Client are called the ?Parties? in this Agreement.
Recitals
A. Network Consultant is in the business of developing networks and other technology based solutions
B. Client is a firm and wishes to have Network Consultant develop for Client?s ownership and operation a network consisting of ___________
C. This Agreement sets forth the terms and conditions under which Network Consultant will undertake and Client will pay for the work described below.
Based on these recitals, the Parties agree as follows
1. Definitions.
For purposes of this Agreement, the following terms have the indicated meanings:
1.1 ?Correction? means the ?debugging? or elimination of programming errors or defects that for any reason cause the Program to fail to function in accordance with the specifications or introduce results that the typical user would believe are unintended and/or undesirable.
1.2 ?Deliverable? means the version of the Program, Documentation, Work Product, Specifications, and/or any other items to be
delivered by Network Consultant to Client by a specified date in accordance with the Milestone Delivery Schedule. The Deliverables are set forth in Exhibit A to this Agreement.
1.3 ?Documentation? means all instructions that are necessary or useful in order to assist Client in maintaining, modifying and improving the Program, including without limitation all written materials developed pursuant to the Statement of Work, such as linkage reports, the style guide (if any), all templates, specifications, programmers? notes, and technical documentation, and a listing of any Utilities required to implement or modify any of the functions of the Program.
1.4 ?Client Content? means the content of Client to be used online, as well as design structure, imagery, and any audio and audiovisual material, photographs, logos, trademarks, and other materials provided to Network Consultant by Client. Network Consultant will have no rights in any Client Content.
1.5 ?Intellectual Property Rights? means any and all rights, known now or later, associated with works of authorship or inventions throughout the universe, including but not limited to copyrights, patents, trademarks, and all other intellectual and industrial property and proprietary rights (of every kind and nature throughout the universe and however designated) relating to intangible property.
1.6 ?Maintenance? means (a) making any and all corrections to the Program and to all related hardware and network connections
required to ensure that the Program will be available for use at all times required by this Agreement, (b) making refinements as deemed necessary by Client to improve user interaction, (c) training Client personnel in the operation, maintenance and alteration of the Program, and (d) assisting Client in recovering lost data and establishing a mutually agreed upon back-up data protection plan for Client.
1.7 ?Milestone? means any task to be completed by Network Consultant by a specified date in accordance with the Milestone Delivery Schedule. The Milestones are set forth in Exhibit A to this Agreement.
1.8 ?Milestone Delivery Schedule? means the description set forth in Exhibit A to this Agreement of the Milestones and Deliverables to be delivered and the dates by which each Milestone is to be completed and each Deliverable is to be delivered to Client.
1.9 ?Performance Specifications? means the detailed written description of the technical standards for the performance and data capacity of the Program, including without limitation, requirements for hardware, software, Internet connectivity and telecommunications requirements, error occurrences and error correction response times, as set forth in Exhibit D to this Agreement.
1.10 ?Revisions? means any changes or additions to the Program, including without limitation any changes or additions which give the Program features or capabilities not described in the Specifications.
1.11 ?Service Fee Schedule? means the schedule attached as Exhibit B to this Agreement of the fees payable to Network Consultant
for services rendered under this Agreement.
1.12 ?Specifications? means the detailed written description of the Program?s functional and aesthetic aspects including, without
limitation, the Program design, scripts (functions), computer program operating features, interfaces and technical requirements, as set forth in Exhibit D.
1.13 ?Source Code? means the computer programs in human-readable form, including programmers? comments, data files and structures, header and include files, macros, object libraries, programming tools not commercially available, technical specifications, flowcharts and logic diagrams, schematics, annotations and documentation reasonably required or necessary to enable an independent third party programmer with a reasonable level of programming skills to create, maintain, modify or enhance the Program without the help of any other person. Data files containing Source Code must be in standard ASCII format and be readable by a text editor.
1.14 ?Statement of Work? means the written description attached as Exhibit A to this Agreement of the work to be performed by
Network Consultant in the development of the Program.
1.15 ?Utilities? means all Source Code and object code for development tools or other technology embodied in or used in connection with the development of the Program, whether they are Program-specific in application or not, and are written, licensed or otherwise legally acquired by Network Consultant , either prior to or after the date of this Agreement.
1.16 ?Program? means the program to be developed for Client by Network Consultant under this Agreement and includes all and all portions of linked pages capable of running in a satisfactory manner on a computer system to be specified by Client, including without limitation, all HTML or other formatted text files, all related graphics files, data files, modules, routines and objects, and the computer software and all other script or program files required to exploit such materials and that collectively control the display of and user interaction with the Program and have the features and capabilities described in the Specifications, together with all of their Corrections, Revisions and Maintenance. Without limitation of the foregoing, ?Program? includes the complete Source Code for the Program and all portions thereof, all material created by Network Consultant or its permitted subcontractors hereunder and all related data or information required to enable Client to support, maintain and modify the Program.
1.17 ?Work Product? means any and all existing or to-be-developed parts, work-in-progress, components, elements, portions or aspects of the Program that are developed, created or contributed to by or on behalf of Network Consultant under this Agreement, and any and all other results or proceeds of the services of Network Consultant , and of all persons and entities rendering services, in connection with the Program from the inception of Network Consultant ?s and such persons? and entities? efforts with respect to those services, in each case including all physical embodiments of those services, whether or not incorporated in a Deliverable and including without limitation, object code, Source Code, the computer programming for the Program and Documentation, each Deliverable and each constituent portion and element of the foregoing.
2. Network DEVELOPMENT SERVICES
2.1 Development Services. The Program will be developed in accordance with Specifications to be identified by Network Consultant
and approved by Client. In accordance with the Milestone Delivery Schedule and the Statement of Work, Network Consultant will develop the Specifications, design and implement the interfaces and navigation (information design) for the Program, and develop, install and test the Program. Client will provide Network Consultant with design hierarchy, imagery and other Client Content as Client deems appropriate for incorporation into the Program. The Specifications and all other aspects of the Program will be developed by Network Consultant and are subject to approval by Client prior to implementation. The Program will include the Client Content, as well as original graphics and other material created by Network Consultant exclusively for the Program. Network Consultant will develop, produce, complete and deliver the Deliverables to Client, all in conformity with the Specifications, the Statement of Work, and Milestone Delivery Schedule. Network Consultant will provide or obtain, at its expense, all necessary programming and other production services and materials in order to implement the Specifications. Network Consultant will consult with Client throughout the development of the Program. Client will have the right, at Client?s expense, to send Client personnel to Network Consultant ?s place of business upon reasonable notice during normal business hours for consultation with respect to the Program?s development.
2.2 Program Deliverables. Notwithstanding anything to the contrary contained in the Milestone Delivery Schedule, Network Consultant will deliver to Client: (a) all HTML or other formatted text files, all related graphics files, data files, modules, routines, objects, computer software, all Utilities developed by Network Consultant and a list of Utilities approved by Client which are provided by third parties, and all other script or program files required to operate the Program, (b) the complete Source Code for the Program and all portions of the Source Code, and (c) all related data or information required to enable Client to support, maintain and modify the Program, including without limitation, Utilities and other programs enabling Client to generate detailed statistical reports on user access of the Program, self-authoring tools enabling Client to easily update the Program without third party assistance, and all programs and information required for Client to maintain and operate the Program to ensure access to the Program by all users at all times on a 24-hour per day, seven days per week basis. Deliverables will in all cases conform to the Specifications and/or any modifications to them in accordance with section 2.4 of this Agreement. Network Consultant agrees to develop the Documentation and to deliver the Documentation to Client for approval according to the Statement of Work and on the dates specified in the Milestone Delivery Schedule, but in no event later than November 1, 2001
2.3 Program Hardware and Software. Network Consultant will develop an appropriate system for the hardware and software architecture for the Program by in accordance with the Performance Specifications and Specifications (the ?System Architecture?). Network Consultant will obtain the computer hardware and operating system software necessary to operate the Program, in accordance with the System Architecture and the Performance Specifications and Specifications. Network Consultant will load the Program and all supporting data files and data structures onto the server computers so as to cause the Program to be fully functional and operational on the World Wide Web and using Client?s specified domain name. All HTML Source Code as well as CGI and other back-end programming, will be subject to prior Client approval. Network Consultant will verify HTML specification compliance of all Program files to be uploaded to the Program. Network Consultant will work with Client?s third party hosting Client to coordinate and support whatever is reasonably necessary to have the Program launched and properly operating and to educate the Web-hosting Client as to the System Architecture.
2.4 Change Requests. If Client desires to alter the Statement of Work or other work to be performed by Network Consultant in any significant way, the following procedures will apply:
(a) Client will forward to Network Consultant the change request (?Change Request?) which will include (i) a description of the proposed change, and (ii) the reason for the proposed change or other relevant background information.
(b) If the Change Request will not increase price of the project to Client or adversely affect the timetable for completion of the Program, Network Consultant will promptly undertake to effect the Change Request. If Network Consultant notifies Client in writing within three (3) days of the Change Request that it will adversely affect the price or timetable, the parties will meet and decide on the appropriate course of action.
2.5 Project Liaisons. Unless and until otherwise designated in writing by Network Consultant or Client, as the case may be, the project liaison for Network Consultant is Dave Prouhet and for Client is Pat Batson. All discussions involving the Statement of Work will be conducted by these persons, or their designees, and any agreement on the Specifications or Performance Specifications and any changes thereto will be documented in writing with these two people, or their designees, as joint signatories.
2.6 Firm Project Deadlines. Network Consultant agrees to develop the Program and deliver all Deliverables to Client for approval according to the Specifications and the Statement of Work and on the dates specified in the Milestone Delivery Schedule. Network Consultant will deliver to Client all of the items listed in the Milestone Delivery Schedule on the date so indicated. Time is of the essence with respect to such delivery.
2.7 Program Approvals. Network Consultant understands and agrees that Client will have final approval over all elements and content (including but not limited to all creative aspects thereof and all text, graphics, characters, banners and screens) of the Program, including without limitation the Specifications. All aspects of the development and operation of the Program will be subject to the requirements and final approval of Client, including the ?look and feel? of the Program, the use of the Client Content, all technical development, all hardware, software, and platform decisions, and any advertising, links or other elements of the Program. All uses of the Client Content are subject to the prior approval of Client, and must be consistent with the high standards of Client. Client has the final decision on whether to launch the Program once development is completed. Client may also modify, change or alter the Program in any respect at any time, whether before, at or after the Program goes online. To that end, Client will review from time to time Network Consultant ?s proposed implementation of the Specifications (including without limitation each Deliverable and any Work Product that is not otherwise delivered as a Deliverable) and have the right of final approval thereof, which approval may be granted or withheld in Client?s sole discretion. Network Consultant recognizes that Client will exercise its discretion hereunder in all instances to maintain Client?s high standards and good image and reputation. Promptly following receipt of each Deliverable, Client will provide Network Consultant with either: (a) approval (i.e., acceptance) of the Deliverable; or (b) changes that must be made before Client will approve such Deliverable and the date by which such changes must be received by Client. Failure by Client to provide any such approval will be deemed disapproval by Client. Client will endeavor to provide its approvals or disapprovals hereunder reasonably promptly.
3. PROGRAM MAINTENANCE SERVICES
3.1 Program Maintenance. For a period of 90 days following Final Acceptance (as defined in Section 8.1), Network Consultant will
provide 10 hours per month of Program support and maintenance services for the Program. Thereafter, such support and maintenance services will be provided at the rate of $95 per hour of support, with additional hours billed at the rate of $95 per hour, or Network Consultant ?s then-current rate, to its most favored customers, whichever is less. This Section 3.1 does not cover the matters set forth in Section 3.4.
3.2 Client Training. Upon request from Client, Network Consultant will train Client personnel in the development, maintenance and operation of the Program so that such personnel will be able to perform such activities without consultation by Network Consultant at no cost to Client, in amounts reasonably requested by Client.
3.3 Revisions and Updates. Network Consultant will not have any right to make any Revisions to the Program or to make any other use of the Program or any materials contained therein without Client?s prior consent. Client reserves the right to make (or have made by Network Consultant or any third party) any and all Revisions to the Program. At any time upon request, Network Consultant will make such Revisions to the Program as Client will request from time to time. Network Consultant will alter the Program as Client will direct, including removing material or adding new or additional material. Any new or additional material will be subject to the terms of this Agreement. Network Consultant will enable Client to alter or update the Program on its own, without the aid or involvement of Network Consultant or any third party, including without limitation, by providing Client at not charge with self-authoring (so-called ?back-end scripting?) tools.
3.4 Corrections. Notwithstanding Client?s approval of the Program and Documentation pursuant to Section 2.7 above, Network Consultant will make, at its own expense, whatever Corrections are necessary with respect to the Program. Network Consultant will promptly notify Client of any claimed or suspected defect in any aspect of the Program or any Deliverable. In the event Network Consultant fails to make such Corrections or does not make Corrections to Client?s satisfaction within the Correction Response Times set forth in Exhibit C, Client will have the right, in addition to Client?s rights under Section 3.7 below, but not the obligation, to make such Corrections itself or have a third party make such Corrections and the cost of making such Corrections (by Client or by a third party) will, at Client?s option, be deducted from payments otherwise due to Network Consultant hereunder or separately billed to Network Consultant . Network Consultant ?s obligation to make Corrections to the Program pursuant to this Section 3.4 will continue during the period of operation of the Program.
3.5 Updates and Enhancements. Network Consultant will promptly notify Client of any Updates and Enhancements (as defined in this Section) to the Utilities, self-authoring tools, back-end scripting or other programs which are developed by Network Consultant or licensed to Client pursuant to Section 5 below. For purposes of this Agreement, ?Updates? will mean any revisions, updates, ?bug? fixes and corrections of the Utilities or any part thereof, and ?Enhancements? will mean any further developments, extensions, improvements or modifications of the Utilities, or any part thereof. Network Consultant will provide all Updates free of charge during the term of this Agreement, and will make available all Enhancements at the same standard published rates as it charges its other customers.
3.6 Mirror Site. Network Consultant will maintain a mirrored development environment for offline (i.e., non-public access) development and testing of intended changes to the Program, to which they will provide Client continuous secure access. All changes to the Program will be made first in this environment, and tested thereon, before being mirrored out to the production server.
3.7 Compliance With Performance Specifications. In the event that, at any time following the Scheduled Launch Date, Network Consultant fails to maintain the Program in full compliance with the provisions of this Section 3, then Network Consultant will have a 24 hour grace period during which to restore the Program to full operation and compliance, provided that during such grace period Network Consultant will use its best efforts in such respect, including without limitation, compliance with the Correction Response Times set forth in Exhibit C.
4. FINANCIAL TERMS
Provided that Network Consultant is not in breach of this Agreement, upon proper submission of an invoice by Network Consultant , Client will make the payments to Network Consultant set forth in the Service Fee Schedule attached hereto as Exhibit B within thirty (30) days of the receipt of invoice. For each payment in the Service Fee Schedule to be made after Client?s acceptance of a Deliverable, Network Consultant will submit an invoice to Client after, and only after, Client has accepted in writing in accordance with Section 2.7 above, each of the Deliverables corresponding to the payment under the Service Fee Schedule. Unless otherwise agreed in writing in advance, Client will not reimburse Network Consultant for travel or other expenses. Network Consultant ?s service fees will be Network Consultant ?s sole remuneration in connection with its services hereunder. All payments due hereunder will be made in U.S. dollars by check or wire transfer.
5. PROPRIETARY RIGHTS
5.1 Ownership Rights to Program. Subject to Sections 5.2 and 5.3 below, Client will own all rights in and to the Program, the Work Product, Deliverables, Utilities and all results and proceeds of Network Consultant ?s services hereunder, including without limitation the name and URL associated therewith, and all Intellectual Property Rights therein and thereto. Network Consultant ?s services hereunder will be rendered on a work-made-for-hire basis, with Client being deemed the sole author of the Program, all Deliverables, Work Product and all related works of authorship under this Agreement, and Network Consultant hereby irrevocably transfers and assigns to Client all Intellectual Property Rights therein and thereto. Network Consultant will provide Client with reasonable assistance to further evidence and set of record Client?s Intellectual Property Rights, and Network Consultant will make no claim inconsistent with Client?s Intellectual Property Rights. All value and goodwill accruing in connection with the Program will inure to the sole benefit of Client. With respect to any so-called ?moral rights,? Network Consultant hereby unconditionally waives such rights and the enforcement thereof. Client will be entitled to full ownership of the original and all copies of all Work Product. Network Consultant acknowledges that Client may register the copyright for the Program (and each element thereof) and any Work Product or derivative work in its own name or that of any of its designees for the full term of copyright and all renewals and extensions thereof.
5.2 Third-Party License Rights. To the extent that the development, hosting or operation of the Program requires the use of any third-party intellectual property, Network Consultant will obtain the prior written consent of Client for the use of such third-party intellectual property, and Network Consultant will obtain at its own expense a perpetual, irrevocable, royalty-free, worldwide right and license to use such third-party intellectual property in the name of, and for the benefit of Client.
5.3 Network Consultant License Rights. To the extent any pre-existing intellectual property owned or licensed by Network Consultant is used in connection with development or maintenance of the Program (?Network Consultant Intellectual Property?) pursuant to Sections 2, 3.3, 3.4 or 3.5, Network Consultant will obtain the prior written consent of Client for such use and Network Consultant will grant and hereby grants Client a perpetual, irrevocable, royalty-free, worldwide right and license to use such Network Consultant intellectual property in connection with the Program. Subject to the foregoing, Network Consultant retains ownership rights to all of the Network Consultant Intellectual Property.
5.4 Customer Data. All customer lists, customer data and other information collected by Network Consultant in connection with the operation of the Program will be solely owned by Client.
5.5 Proprietary Notices. Client will provide Network Consultant with appropriate notices of copyright, trademark and other proprietary rights in Client?s name, and Network Consultant will place such notices in such a manner as Client will direct. In no event will Network Consultant alter, remove, obscure, erase or deface or otherwise hide from view, any copyright, trademark or other proprietary rights notice of Client contained on or incorporated in the Program. Client will have the right to develop and implement any method or mechanism Client deems appropriate to prevent or protect against unauthorized copying of the HTML code for the Program, the Program, or any materials on the Program.
5.6 Further Assurances. Network Consultant will, and will cause every party acting under it in relation to this Agreement to, execute any and all documents and do such other acts requested at any time by Client as may be required to evidence, perfect, confirm and/or further effect the rights granted Client under this Section 5. In the event Network Consultant fails to execute and deliver any such documents and instruments promptly upon request therefor by Client, Client is hereby authorized and appointed attorney-in-fact of and for Network Consultant to make, execute and deliver any and all such documents and instruments, it being understood that such power is coupled with an interest and is therefore irrevocable.
5.7 Client Goodwill. Network Consultant acknowledges that the rights and powers retained by or granted to Client under this Agreement are necessary to protect ?Allbusiness.com? Intellectual Property Rights of Client and, specifically, to conserve the goodwill and good name of its products and the name ?Allbusiness.com?, and therefore Network Consultant agrees that it will not, and it will not allow or assist any other party to, perform any act that would result in any of Client?s products or the name ?Allbusiness.com? to become involved in matters that will or could detract from, or impugn, their public acceptance and popularity, or impair their legal status. Network Consultant acknowledges and agrees that, as between Network Consultant and Client, all Client Content is owned by Client.
5.8 Litigation. Should Network Consultant become aware of any infringing use of the Program (or any element thereof), Network Consultant will notify Client and Client may, within its sole discretion, undertake to prosecute necessary actions to prevent such use or distribution. In the event Network Consultant is joined in any such litigation, the decisions of Client?s counsel with reference to matters of procedure, conduct of such litigation and/or the handling thereof, will prevail and Network Consultant will cooperate with and assist Client?s counsel. Any recovery will be the sole property of Client.
6. CONFIDENTIAL INFORMATION
6.1 Confidential Information. Network Consultant may, during the performance of its services under this Agreement, have access to and acquire knowledge from, material, data, systems and other information concerning the operation, business, financial affairs, products, customers and Intellectual Property Rights of Client that may not be accessible or known to the general public (referred to as ?Confidential Information?). ?Confidential Information? also includes (a) the terms of this Agreement and the fact of its existence and
(b) any information or materials that Client obtains from any third party that Client treats as proprietary or designates as Confidential Information, whether or not owned by Client. ?Confidential Information? does not include information that Network Consultant can document in reasonable detail and to Client?s reasonable satisfaction: (i) is known by Network Consultant at the time of receipt from Client and is not subject to any other non-disclosure agreement between the parties; (ii) is now, or hereafter becomes, generally known to the public through no fault of Network Consultant ; or (iii) is otherwise lawfully and independently developed by Network Consultant , or lawfully acquired from a third party without any obligation of confidentiality.
6.2 No Disclosure. Any Confidential Information acquired by Network Consultant will not be used, published or divulged by Network Consultant to any other person or entity in any manner whatsoever without the prior clear and express written approval of Client, which approval Client may withhold in its sole discretion. Network Consultant will not disclose any Confidential Information to any such person or entity until the same will have signed such a Confidentiality Agreement, and upon such signature will only disclose such of the Confidential Information as is reasonably necessary to permit performance of Network Consultant ?s obligations hereunder. Network Consultant will, and will cause its employees, agents and every other person and entity it employs in connection with its services under this Agreement to, protect and safeguard the Confidential Information by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination or publication of the Confidential Information as Network Consultant uses to protect its own confidential or proprietary information of a like nature. In the event that Network Consultant is directed to disclose any portion of any Confidential Information of Client or any other materials proprietary to Client in conjunction with a judicial proceeding or arbitration, Network Consultant will immediately notify Client both orally and in writing. Network Consultant agrees to provide Client with reasonable cooperation and assistance in obtaining a suitable protective order and in taking any other steps to preserve confidentiality. Upon any termination or expiration of this Agreement or upon the request of Client, Network Consultant will immediately return all Confidential Information to Client.
6.3 No Confidential Information of Other Parties. Network Consultant represents and warrants that it will not use in the course of its performance hereunder, and will not disclose to Client, any confidential information of any third party (including competitors of Client or Network Consultant ) unless Network Consultant is expressly authorized in writing by such third party to do so.
6.4 Program Confidential. Until the public launch of the Program, Network Consultant will not, and will have no right to, release, distribute or disclose to any third party the Program or any Work Product or any portion thereof or any of the materials provided by Client hereunder. Network Consultant will not provide advance access to the Program or any portion thereof to any person or entity without the prior written consent of Client, which consent may be granted or withheld by Client in its sole discretion. All so-called ?test pages? for the Program that Network Consultant may make available on the Internet for review by Client will be password protected.
6.5 Specific Performance. The parties specifically acknowledge and agree that the provisions of this Section 6 are reasonable and necessary for the protection of the Confidential Information and to prevent damage or loss to Client. Network Consultant understands and agrees that Client may suffer irreparable harm in the event that Network Consultant fails to comply with any of its obligations under this Section 6, and that monetary damages in such event would be substantial and inadequate to compensate Client. Consequently, Network Consultant agrees that in such event Client will be entitled, in addition to such monetary relief as may be recoverable by law, to such temporary, preliminary and/or permanent injunctive or other equitable relief as may be necessary to restrain any threatened, continuing or further breach by Network Consultant , without showing or proving any actual damages sustained by Client, without bond.
7. REPRESENTATIONS, WARRANTIES, INDEMNIFICATION AND INSURANCE
7.1 Network Consultant Representations and Warranties. Network Consultant represents and warrants that
(a) it has the right, power and authority to enter into this Agreement and to fully perform its obligations under this Agreement;
(b) the making of this Agreement by it does not violate any agreement existing between it and any other person or entity;
(c) it owns or has acquired all necessary license rights in and to all materials it contributes to the Program,
(d) it complies, and at all times will comply, with all applicable laws, rules and regulations in effect at the time services are
performed pursuant to this Agreement, including without limitation all professional registration requirements and technical specifications pertaining to any aspect of the Program.
(e) subject to the provisions of Sections 5.2 and 5.3 hereof, the Program and all Work Product therein that is not supplied by Client, as delivered by Network Consultant is original, has not been previously published in any form and is not in the public domain,
(f) the Program and all Work Product are delivered free and clear of any liens, charges, encumbrances or restrictions, including those of Network Consultant ?s suppliers,
(g) all HTML or other formatted text files, Source Code and object code as delivered by Network Consultant is complete and accurate;
(h) all Source Code is and will be fully narrated with logic diagrams and flow charts and is human readable and can be translated by a computer or assembler for execution;
(i) The Program and all Work Product, including without limitation, any images or graphics contained therein which is not supplied by Client do not violate or infringe any right of privacy or publicity or any other Intellectual Property Right, or contain any libelous, defamatory, obscene or unlawful material, or otherwise violate or infringe any other right of any person or entity, and that Network Consultant will not exercise any of the rights granted to it under or pursuant to this Agreement in a manner that will violate any applicable law, rule or regulation;
(j) The Program, as delivered by Network Consultant , will be free of any computer virus or any other similar harmful, malicious or hidden program or data and will operate in accordance with the Specifications. Without limitation of the foregoing, Network Consultant warrants that the Program, as delivered by Network Consultant will be free of any hardware or software device or code which will prevent Client from accessing or using the Program or any portion thereof.
(k) All of the services provided by Network Consultant or a permitted subcontractor thereof will be rendered very sound, professional practices and in a competent and professional matter by knowledgeable, trained and qualified personnel; and
(l) The Program will be developed and will operate in conformance with the terms and conditions of this Agreement.
7.2 Network Consultant Indemnification. Network Consultant agrees to, and will, indemnify, defend and hold harmless Client and its directors, shareholders, officers, agents, employees, successors and assigns from and against any and all claims, demands, suits, actions, judgments, damages, costs, losses, expenses (including attorneys? fees and expenses) and other liabilities arising from, in connection with or related in any way to, directly or indirectly, (a) its performance of this Agreement, (b) any breach or alleged breach of any of the representations, warranties, undertakings or agreements made by it under this Agreement, (c) its activities under this Agreement, including without limitation, any unauthorized use by it or any of its subcontractors of any portion of the Client Content or the Program, or (d) any act or omission of it, its directors, officers, agents, employees or subcontractors. Client will promptly notify Network Consultant of any such claim. Network Consultant will bear full responsibility for the defense (including any settlements); provided however, that (i) Network Consultant will keep Client informed of, and consult with Client in connection with the progress of such litigation or settlement; and (ii) Network Consultant will not have any right, without Client?s written consent, to settle any such claim if such settlement arises from or is part of any criminal action, suit or proceeding or contains a stipulation to or admission or acknowledgment of, any liability or wrongdoing (whether in contract, tort or otherwise) on the part of Client.
7.3 Client General Representations and Warranties. Client represents and warrants that (a) it has the right, power and authority to enter into this Agreement and to fully perform its obligations under this Agreement; (b) the making of this Agreement by it does not violate any agreement existing between it and any other person or entity; and (c) it has all necessary rights in and to the Client Content and any other materials it contributes to the Program. Client further represents and warrants that such materials contributed by Client do not violate or infringe any Intellectual Property Rights of any other person or entity.
7.4 Client Indemnification. Client agrees to, and will, indemnify, defend and hold harmless Network Consultant , and its directors, shareholders, officers, agents, employees, successors and assigns from and any and all claims, demands, suits, actions, judgments, damages, costs, losses, expenses (including attorneys? fees and expenses) and other liabilities arising from, in connection with or related in any way to, indirectly or indirectly, a breach or alleged breach of the representations and warranties set forth in Section 7.6 hereof. Network Consultant will promptly notify Client of any such claim, and Client will bear full responsibility for the defense of such claim (including any settlements).
7.5 Attorneys. Notwithstanding any of the foregoing, Client will have the right, in its absolute discretion, to employ attorneys of its own choice and to institute or defend any matter, claim, action or proceeding and to take any other appropriate steps to protect all rights and interest in and title to the Program and every element thereof and, in that connection, to settle, compromise in good faith, or in any other manner dispose of any matter, claim action, or proceeding and to satisfy any judgment that may be rendered, in any manner as Client in its sole discretion may determine.
8. TERM AND TERMINATION
8.1 Term. The term of this Agreement will commence as of the Effective Date and will continue until all obligations hereunder have been performed, unless terminated sooner in accordance with this Agreement.
8.2 Termination for Default. Either party will have the right to terminate this Agreement for material breach of a material obligation that is not cured within thirty (30) days after written notice of such breach. For purposes of this Agreement, any act or failure to act by any third party contractor of Network Consultant or any employee of Network Consultant or such third party contractor will be deemed an act or failure to act by Network Consultant .
8.3 Termination for Insolvency. Client will have the right to terminate this Agreement upon written notice to Network Consultant in the event that Network Consultant makes any assignment for the benefit of creditors or files a petition in bankruptcy or is adjudged bankrupt or becomes insolvent or is placed in the hands of a receiver or if the equivalent of any of the proceedings or acts referred to in this clause, though known and/or designated by some other name or term will occur.
8.4 Termination for Convenience. Client will have the right to terminate this Agreement for convenience upon fifteen (15) days? advance written notice to Network Consultant . In the event of termination for convenience of this Agreement, in whole or in part, Client?s sole liability to Network Consultant will be payment of invoices for services rendered prior to the termination date.
8.5 Effect of Termination. Upon expiration or termination, in whole or in part, of this Agreement, or at any time upon the request of Client, Network Consultant will immediately deliver to Client all inventory, customer data, intellectual property, Source Code and object code of software, materials and other elements of the Program necessary for Client or a provider selected by Client to continue the uninterrupted operation of the Program. In addition, Network Consultant will provide Client with reasonable assistance in transitioning the Program in-house or to an alternate provider of services on a times and materials basis at the hourly rates identified in Exhibit . Upon termination Network Consultant will cease any use of the Client Content or any trademarks or trade names of Client, including without limitation, the Program name.
8.6 Survival of Terms. Sections 5, 6, 7, 8.5, 8.6, 9 and 10 will survive the expiration or termination of this Agreement for any reason. In no event will Network Consultant have any right to recover or obtain any Intellectual Property Rights in or to the Program or any Work Product, or enjoin or otherwise interfere with Client?s development, provision or other exploitation of the Program (or any element thereof), or any Work Product. No breach of this Agreement by Client will entitle Network Consultant to terminate or rescind this Agreement or to injunctive or other equitable relief, it being agreed that Network Consultant ?s sole remedy, if any, in the event of such a breach will be an action for damages.
9. INDEPENDENT CONTRACTOR; NO AGENCY
9.1 Independent Contractor. Network Consultant is, and will remain, an independent contractor with respect to services performed pursuant to this Agreement. The parties are independent contractors and no agency, partnership, franchise or other relationship is created hereby. Nothing contained herein will be construed to constitute the parties as principal and agent, employer and employee, partners or joint venturers, nor will any similar relationship be deemed to exist between the parties. Neither party will have any power to obligate or bind the other party, except as specifically provided.
9.2 Personnel. Personnel supplied by Network Consultant will work exclusively for Network Consultant and will not, for any purpose, be considered employees or agents of Client. Network Consultant assumes full responsibility for the actions of such personnel while performing services pursuant to this Agreement and will be solely responsible for and will indemnify Client and hold it harmless from their supervision, daily direction and control (including without limitation Network Consultant ?s and such personnel?s compliance with all applicable laws, regulations and ordinances), compensation, benefits (including without limitation any pension or welfare plans and workers? compensation program) and taxes (including without limitation all withholding taxes, payroll taxes, disability insurance payments, unemployment taxes, and other similar taxes, assessments, contributions and charges on the payments made or required to be made by Network Consultant to such personnel). Network Consultant will file all returns and reports that may be required by any governmental or professional agency with respect to any of the foregoing. Network Consultant will ensure that all employees or consultants working for Network Consultant in connection with this Agreement will have executed appropriate Confidentiality and Invention Assignment Agreements such that all work product developed by such parties will be deemed owned by Client pursuant to Section 5.1 hereto.
9.3 Injuries. Client will have no obligation whatsoever to compensate Network Consultant on account of any damages or injuries which Network Consultant or any person or entity engaged by Network Consultant may sustain as a result or in the course of the performance of Network Consultant ?s or such employee?s services under this Agreement. Network Consultant will indemnify and hold Client harmless from and against any claims, losses, or liabilities arising out of the development or operation of the Program except to the extent such relate to the Client Content.
9.4 Independent Contractors. Network Consultant will directly render all services to be performed by Network Consultant under this Agreement exclusively through its employees and independent contractors under its control. Client will have the right, in its sole discretion, to approve any third party from whom Network Consultant obtains services or rights which pertain to the Program and any Work Product and Client will have the right to approve the form of contract entered into between Network Consultant and any such third party to ensure assignment of rights consistent with Client?s rights pursuant to Section 5 above.
10. GENERAL PROVISIONS
10.1 Notices. All notices which either party is required or may desire to serve upon any other party will be in writing and addressed to the party to be served as follows:
(a) if to Client:
.
Attn:
With a copy to:
.
Attn:
(b) if to Network Consultant :
.
Attn:
Any such notice may be served personally or by certified mail (postage prepaid), internationally commercially recognized overnight delivery service (such as Federal Express or DHL), courier or other written communication. Notice will be deemed served upon personal delivery or upon the second business day after the date sent. Either party may change the address to which notices are to be delivered by written notice to the other party served as provided in this Section 10.1.
10.2 Entire Agreement. This Agreement, together with the Exhibits attached hereto, constitutes the entire understanding and agreement between Client and Network Consultant with respect to the transactions contemplated, and supersedes any and all prior or contemporaneous oral or written representation, understanding, agreement or communication between Client and Network Consultant concerning the subject matter hereof. Neither party is relying upon any warranties, representations, assurances or inducements not expressly set forth.
10.3 Amendments. All amendments or modifications of this Agreement will be binding upon the parties despite any lack of consideration so long as the same will be in writing and executed by each of the parties hereto. It is expressly understood and agreed that no usage of trade or other regular practice or method of dealing between the parties hereto will be used to modify, interpret, supplement or alter in any manner the express terms of this Agreement or any part hereof.
10.4 Waiver. No waiver of any provision of this Agreement or any rights or obligations of either party hereunder will be effective, except pursuant to a written instrument signed by the party waiving compliance, and any such waiver will be effective only in the specific instance and for the specific purpose stated in such writing.
10.5 Construction. This Agreement has been negotiated by the parties hereto and by their respective counsel. This Agreement will be fairly interpreted and construed in accordance with its terms and without strict interpretation or construction in favor of or against either party.
10.6 Headings. The section and paragraph headings appearing in this Agreement are inserted only as a matter of convenience and in no way define, govern, limit, modify or construe the scope or extent of the provisions of this Agreement to which they may relate. Such headings are not part of this Agreement and will not be given any legal effect.
10.7 Severability. In the event that any provision of this Agreement should be found by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
10.8 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument.
10.9 Publicity. Network Consultant may not make any disclosure or announcement relating to this Agreement without the prior written consent of Client. Network Consultant may not use Client?s name for any endorsement or other usage without the prior consent of Client. Provided that this Agreement has not been terminated by Client pursuant to Section 8.2 above due to breach or default by Network Consultant , Network Consultant may reference the services rendered under this Agreement when asked for references from other potential customers.
10.10 Assignment. The services rendered by Network Consultant are personal in nature and Network Consultant may not assign its obligations or this Agreement without the prior written consent of Client, including any assignment by operation of law or pursuant to any change of ownership control of Network Consultant . All subcontractors will be subject to the prior approval of Client. Subject to the foregoing, this Agreement will inure to the benefit of the parties and their successors and permitted assigns.
10.11 Governing Law. This Agreement will be governed by the laws of the State of Illinois without reference to conflict of law principles. All disputes arising out of or relating to this Agreement will be subject to the exclusive jurisdiction and venue of the state courts sitting in Columbia, Illinois, and the federal courts and each party irrevocably consents to such exclusive jurisdiction and venue and waives any objection thereto.
IN WITNESS WHEREOF, the duly authorized representatives of each of the parties hereto have executed this Agreement as of the day and year first written above.
Client Network Consultant
By: By:
Name: Name:
Title: Title:
EXHIBIT A
STATEMENT OF WORK
Milestones/Deliverable Milestone Delivery Schedule
Alpha Version
(design & core functionality)
Beta Version
(full functionality subject to errors)
Final Version
(full functionality & errors corrected)
Launch Version/Scheduled Launch Date
(full functionality & errors corrected)
Final Documentation
EXHIBIT B
SERVICE FEE SCHEDULE
[Specify fees and cap on fees]
EXHIBIT C
PROGRAM PERFORMANCE SPECIFICATIONS
Error Occurrences/Correction Response Times
Level 1 Bugs (errors which significantly impair the core functionality of the Program or cause other gross problems) will be fixed by Network Consultant within 24 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Level 2 Bugs (errors which detract significantly from the Program?s appearance, navigation, layout, but which do not impede core functionality) will be fixed by Network Consultant within 12 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Level 3 Bugs (minor errors, misspellings, etc) will be fixed by Network Consultant within 24 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Performance Requirement
The following performance requirement is based on our estimate of peak traffic situation. The average numbers are much smaller for the most part. However, the system must be able to handle routine peak traffic. When necessary, the system must also be readily upgraded to handle spike of traffic due to heavy marketing campaign or special events.
Measurement criteria Performance requirement Note
Connections per second This assumes HTTP 1.0
Concurrent session per second This is the logical sessions created for unique users. Sessions are created in the database. Note that not all sessions generate connection at every second as it takes time for the user to browse through the contents
# of sessions per hour This number smoothes out spurts of peak traffic during the peak hour.
Pages viewed per second This includes all elements of the page
Bits per second transferred
Median response time Note: this is not the same as average. This is measured from the web server, not from browser, because the delay at the browser is highly dependent on the user connection. The number can be obtained from analyzing the log files of web servers.
Max response time Same as the note on median response time, except that this must also apply during the peak period.
EXHIBIT D
SPECIFICATIONS
This DEVELOPMENT/WORK-FOR-HIRE AGREEMENT is entered into as of September 30, 2000, by and between Network Consultant , and Client (?Client?). Collectively, Network Consultant and Client are called the ?Parties? in this Agreement.
Recitals
A. Network Consultant is in the business of developing networks and other technology based solutions
B. Client is a firm and wishes to have Network Consultant develop for Client?s ownership and operation a network consisting of ___________
C. This Agreement sets forth the terms and conditions under which Network Consultant will undertake and Client will pay for the work described below.
Based on these recitals, the Parties agree as follows
1. Definitions.
For purposes of this Agreement, the following terms have the indicated meanings:
1.1 ?Correction? means the ?debugging? or elimination of programming errors or defects that for any reason cause the Program to fail to function in accordance with the specifications or introduce results that the typical user would believe are unintended and/or undesirable.
1.2 ?Deliverable? means the version of the Program, Documentation, Work Product, Specifications, and/or any other items to be
delivered by Network Consultant to Client by a specified date in accordance with the Milestone Delivery Schedule. The Deliverables are set forth in Exhibit A to this Agreement.
1.3 ?Documentation? means all instructions that are necessary or useful in order to assist Client in maintaining, modifying and improving the Program, including without limitation all written materials developed pursuant to the Statement of Work, such as linkage reports, the style guide (if any), all templates, specifications, programmers? notes, and technical documentation, and a listing of any Utilities required to implement or modify any of the functions of the Program.
1.4 ?Client Content? means the content of Client to be used online, as well as design structure, imagery, and any audio and audiovisual material, photographs, logos, trademarks, and other materials provided to Network Consultant by Client. Network Consultant will have no rights in any Client Content.
1.5 ?Intellectual Property Rights? means any and all rights, known now or later, associated with works of authorship or inventions throughout the universe, including but not limited to copyrights, patents, trademarks, and all other intellectual and industrial property and proprietary rights (of every kind and nature throughout the universe and however designated) relating to intangible property.
1.6 ?Maintenance? means (a) making any and all corrections to the Program and to all related hardware and network connections
required to ensure that the Program will be available for use at all times required by this Agreement, (b) making refinements as deemed necessary by Client to improve user interaction, (c) training Client personnel in the operation, maintenance and alteration of the Program, and (d) assisting Client in recovering lost data and establishing a mutually agreed upon back-up data protection plan for Client.
1.7 ?Milestone? means any task to be completed by Network Consultant by a specified date in accordance with the Milestone Delivery Schedule. The Milestones are set forth in Exhibit A to this Agreement.
1.8 ?Milestone Delivery Schedule? means the description set forth in Exhibit A to this Agreement of the Milestones and Deliverables to be delivered and the dates by which each Milestone is to be completed and each Deliverable is to be delivered to Client.
1.9 ?Performance Specifications? means the detailed written description of the technical standards for the performance and data capacity of the Program, including without limitation, requirements for hardware, software, Internet connectivity and telecommunications requirements, error occurrences and error correction response times, as set forth in Exhibit D to this Agreement.
1.10 ?Revisions? means any changes or additions to the Program, including without limitation any changes or additions which give the Program features or capabilities not described in the Specifications.
1.11 ?Service Fee Schedule? means the schedule attached as Exhibit B to this Agreement of the fees payable to Network Consultant
for services rendered under this Agreement.
1.12 ?Specifications? means the detailed written description of the Program?s functional and aesthetic aspects including, without
limitation, the Program design, scripts (functions), computer program operating features, interfaces and technical requirements, as set forth in Exhibit D.
1.13 ?Source Code? means the computer programs in human-readable form, including programmers? comments, data files and structures, header and include files, macros, object libraries, programming tools not commercially available, technical specifications, flowcharts and logic diagrams, schematics, annotations and documentation reasonably required or necessary to enable an independent third party programmer with a reasonable level of programming skills to create, maintain, modify or enhance the Program without the help of any other person. Data files containing Source Code must be in standard ASCII format and be readable by a text editor.
1.14 ?Statement of Work? means the written description attached as Exhibit A to this Agreement of the work to be performed by
Network Consultant in the development of the Program.
1.15 ?Utilities? means all Source Code and object code for development tools or other technology embodied in or used in connection with the development of the Program, whether they are Program-specific in application or not, and are written, licensed or otherwise legally acquired by Network Consultant , either prior to or after the date of this Agreement.
1.16 ?Program? means the program to be developed for Client by Network Consultant under this Agreement and includes all and all portions of linked pages capable of running in a satisfactory manner on a computer system to be specified by Client, including without limitation, all HTML or other formatted text files, all related graphics files, data files, modules, routines and objects, and the computer software and all other script or program files required to exploit such materials and that collectively control the display of and user interaction with the Program and have the features and capabilities described in the Specifications, together with all of their Corrections, Revisions and Maintenance. Without limitation of the foregoing, ?Program? includes the complete Source Code for the Program and all portions thereof, all material created by Network Consultant or its permitted subcontractors hereunder and all related data or information required to enable Client to support, maintain and modify the Program.
1.17 ?Work Product? means any and all existing or to-be-developed parts, work-in-progress, components, elements, portions or aspects of the Program that are developed, created or contributed to by or on behalf of Network Consultant under this Agreement, and any and all other results or proceeds of the services of Network Consultant , and of all persons and entities rendering services, in connection with the Program from the inception of Network Consultant ?s and such persons? and entities? efforts with respect to those services, in each case including all physical embodiments of those services, whether or not incorporated in a Deliverable and including without limitation, object code, Source Code, the computer programming for the Program and Documentation, each Deliverable and each constituent portion and element of the foregoing.
2. Network DEVELOPMENT SERVICES
2.1 Development Services. The Program will be developed in accordance with Specifications to be identified by Network Consultant
and approved by Client. In accordance with the Milestone Delivery Schedule and the Statement of Work, Network Consultant will develop the Specifications, design and implement the interfaces and navigation (information design) for the Program, and develop, install and test the Program. Client will provide Network Consultant with design hierarchy, imagery and other Client Content as Client deems appropriate for incorporation into the Program. The Specifications and all other aspects of the Program will be developed by Network Consultant and are subject to approval by Client prior to implementation. The Program will include the Client Content, as well as original graphics and other material created by Network Consultant exclusively for the Program. Network Consultant will develop, produce, complete and deliver the Deliverables to Client, all in conformity with the Specifications, the Statement of Work, and Milestone Delivery Schedule. Network Consultant will provide or obtain, at its expense, all necessary programming and other production services and materials in order to implement the Specifications. Network Consultant will consult with Client throughout the development of the Program. Client will have the right, at Client?s expense, to send Client personnel to Network Consultant ?s place of business upon reasonable notice during normal business hours for consultation with respect to the Program?s development.
2.2 Program Deliverables. Notwithstanding anything to the contrary contained in the Milestone Delivery Schedule, Network Consultant will deliver to Client: (a) all HTML or other formatted text files, all related graphics files, data files, modules, routines, objects, computer software, all Utilities developed by Network Consultant and a list of Utilities approved by Client which are provided by third parties, and all other script or program files required to operate the Program, (b) the complete Source Code for the Program and all portions of the Source Code, and (c) all related data or information required to enable Client to support, maintain and modify the Program, including without limitation, Utilities and other programs enabling Client to generate detailed statistical reports on user access of the Program, self-authoring tools enabling Client to easily update the Program without third party assistance, and all programs and information required for Client to maintain and operate the Program to ensure access to the Program by all users at all times on a 24-hour per day, seven days per week basis. Deliverables will in all cases conform to the Specifications and/or any modifications to them in accordance with section 2.4 of this Agreement. Network Consultant agrees to develop the Documentation and to deliver the Documentation to Client for approval according to the Statement of Work and on the dates specified in the Milestone Delivery Schedule, but in no event later than November 1, 2001
2.3 Program Hardware and Software. Network Consultant will develop an appropriate system for the hardware and software architecture for the Program by in accordance with the Performance Specifications and Specifications (the ?System Architecture?). Network Consultant will obtain the computer hardware and operating system software necessary to operate the Program, in accordance with the System Architecture and the Performance Specifications and Specifications. Network Consultant will load the Program and all supporting data files and data structures onto the server computers so as to cause the Program to be fully functional and operational on the World Wide Web and using Client?s specified domain name. All HTML Source Code as well as CGI and other back-end programming, will be subject to prior Client approval. Network Consultant will verify HTML specification compliance of all Program files to be uploaded to the Program. Network Consultant will work with Client?s third party hosting Client to coordinate and support whatever is reasonably necessary to have the Program launched and properly operating and to educate the Web-hosting Client as to the System Architecture.
2.4 Change Requests. If Client desires to alter the Statement of Work or other work to be performed by Network Consultant in any significant way, the following procedures will apply:
(a) Client will forward to Network Consultant the change request (?Change Request?) which will include (i) a description of the proposed change, and (ii) the reason for the proposed change or other relevant background information.
(b) If the Change Request will not increase price of the project to Client or adversely affect the timetable for completion of the Program, Network Consultant will promptly undertake to effect the Change Request. If Network Consultant notifies Client in writing within three (3) days of the Change Request that it will adversely affect the price or timetable, the parties will meet and decide on the appropriate course of action.
2.5 Project Liaisons. Unless and until otherwise designated in writing by Network Consultant or Client, as the case may be, the project liaison for Network Consultant is Dave Prouhet and for Client is Pat Batson. All discussions involving the Statement of Work will be conducted by these persons, or their designees, and any agreement on the Specifications or Performance Specifications and any changes thereto will be documented in writing with these two people, or their designees, as joint signatories.
2.6 Firm Project Deadlines. Network Consultant agrees to develop the Program and deliver all Deliverables to Client for approval according to the Specifications and the Statement of Work and on the dates specified in the Milestone Delivery Schedule. Network Consultant will deliver to Client all of the items listed in the Milestone Delivery Schedule on the date so indicated. Time is of the essence with respect to such delivery.
2.7 Program Approvals. Network Consultant understands and agrees that Client will have final approval over all elements and content (including but not limited to all creative aspects thereof and all text, graphics, characters, banners and screens) of the Program, including without limitation the Specifications. All aspects of the development and operation of the Program will be subject to the requirements and final approval of Client, including the ?look and feel? of the Program, the use of the Client Content, all technical development, all hardware, software, and platform decisions, and any advertising, links or other elements of the Program. All uses of the Client Content are subject to the prior approval of Client, and must be consistent with the high standards of Client. Client has the final decision on whether to launch the Program once development is completed. Client may also modify, change or alter the Program in any respect at any time, whether before, at or after the Program goes online. To that end, Client will review from time to time Network Consultant ?s proposed implementation of the Specifications (including without limitation each Deliverable and any Work Product that is not otherwise delivered as a Deliverable) and have the right of final approval thereof, which approval may be granted or withheld in Client?s sole discretion. Network Consultant recognizes that Client will exercise its discretion hereunder in all instances to maintain Client?s high standards and good image and reputation. Promptly following receipt of each Deliverable, Client will provide Network Consultant with either: (a) approval (i.e., acceptance) of the Deliverable; or (b) changes that must be made before Client will approve such Deliverable and the date by which such changes must be received by Client. Failure by Client to provide any such approval will be deemed disapproval by Client. Client will endeavor to provide its approvals or disapprovals hereunder reasonably promptly.
3. PROGRAM MAINTENANCE SERVICES
3.1 Program Maintenance. For a period of 90 days following Final Acceptance (as defined in Section 8.1), Network Consultant will
provide 10 hours per month of Program support and maintenance services for the Program. Thereafter, such support and maintenance services will be provided at the rate of $95 per hour of support, with additional hours billed at the rate of $95 per hour, or Network Consultant ?s then-current rate, to its most favored customers, whichever is less. This Section 3.1 does not cover the matters set forth in Section 3.4.
3.2 Client Training. Upon request from Client, Network Consultant will train Client personnel in the development, maintenance and operation of the Program so that such personnel will be able to perform such activities without consultation by Network Consultant at no cost to Client, in amounts reasonably requested by Client.
3.3 Revisions and Updates. Network Consultant will not have any right to make any Revisions to the Program or to make any other use of the Program or any materials contained therein without Client?s prior consent. Client reserves the right to make (or have made by Network Consultant or any third party) any and all Revisions to the Program. At any time upon request, Network Consultant will make such Revisions to the Program as Client will request from time to time. Network Consultant will alter the Program as Client will direct, including removing material or adding new or additional material. Any new or additional material will be subject to the terms of this Agreement. Network Consultant will enable Client to alter or update the Program on its own, without the aid or involvement of Network Consultant or any third party, including without limitation, by providing Client at not charge with self-authoring (so-called ?back-end scripting?) tools.
3.4 Corrections. Notwithstanding Client?s approval of the Program and Documentation pursuant to Section 2.7 above, Network Consultant will make, at its own expense, whatever Corrections are necessary with respect to the Program. Network Consultant will promptly notify Client of any claimed or suspected defect in any aspect of the Program or any Deliverable. In the event Network Consultant fails to make such Corrections or does not make Corrections to Client?s satisfaction within the Correction Response Times set forth in Exhibit C, Client will have the right, in addition to Client?s rights under Section 3.7 below, but not the obligation, to make such Corrections itself or have a third party make such Corrections and the cost of making such Corrections (by Client or by a third party) will, at Client?s option, be deducted from payments otherwise due to Network Consultant hereunder or separately billed to Network Consultant . Network Consultant ?s obligation to make Corrections to the Program pursuant to this Section 3.4 will continue during the period of operation of the Program.
3.5 Updates and Enhancements. Network Consultant will promptly notify Client of any Updates and Enhancements (as defined in this Section) to the Utilities, self-authoring tools, back-end scripting or other programs which are developed by Network Consultant or licensed to Client pursuant to Section 5 below. For purposes of this Agreement, ?Updates? will mean any revisions, updates, ?bug? fixes and corrections of the Utilities or any part thereof, and ?Enhancements? will mean any further developments, extensions, improvements or modifications of the Utilities, or any part thereof. Network Consultant will provide all Updates free of charge during the term of this Agreement, and will make available all Enhancements at the same standard published rates as it charges its other customers.
3.6 Mirror Site. Network Consultant will maintain a mirrored development environment for offline (i.e., non-public access) development and testing of intended changes to the Program, to which they will provide Client continuous secure access. All changes to the Program will be made first in this environment, and tested thereon, before being mirrored out to the production server.
3.7 Compliance With Performance Specifications. In the event that, at any time following the Scheduled Launch Date, Network Consultant fails to maintain the Program in full compliance with the provisions of this Section 3, then Network Consultant will have a 24 hour grace period during which to restore the Program to full operation and compliance, provided that during such grace period Network Consultant will use its best efforts in such respect, including without limitation, compliance with the Correction Response Times set forth in Exhibit C.
4. FINANCIAL TERMS
Provided that Network Consultant is not in breach of this Agreement, upon proper submission of an invoice by Network Consultant , Client will make the payments to Network Consultant set forth in the Service Fee Schedule attached hereto as Exhibit B within thirty (30) days of the receipt of invoice. For each payment in the Service Fee Schedule to be made after Client?s acceptance of a Deliverable, Network Consultant will submit an invoice to Client after, and only after, Client has accepted in writing in accordance with Section 2.7 above, each of the Deliverables corresponding to the payment under the Service Fee Schedule. Unless otherwise agreed in writing in advance, Client will not reimburse Network Consultant for travel or other expenses. Network Consultant ?s service fees will be Network Consultant ?s sole remuneration in connection with its services hereunder. All payments due hereunder will be made in U.S. dollars by check or wire transfer.
5. PROPRIETARY RIGHTS
5.1 Ownership Rights to Program. Subject to Sections 5.2 and 5.3 below, Client will own all rights in and to the Program, the Work Product, Deliverables, Utilities and all results and proceeds of Network Consultant ?s services hereunder, including without limitation the name and URL associated therewith, and all Intellectual Property Rights therein and thereto. Network Consultant ?s services hereunder will be rendered on a work-made-for-hire basis, with Client being deemed the sole author of the Program, all Deliverables, Work Product and all related works of authorship under this Agreement, and Network Consultant hereby irrevocably transfers and assigns to Client all Intellectual Property Rights therein and thereto. Network Consultant will provide Client with reasonable assistance to further evidence and set of record Client?s Intellectual Property Rights, and Network Consultant will make no claim inconsistent with Client?s Intellectual Property Rights. All value and goodwill accruing in connection with the Program will inure to the sole benefit of Client. With respect to any so-called ?moral rights,? Network Consultant hereby unconditionally waives such rights and the enforcement thereof. Client will be entitled to full ownership of the original and all copies of all Work Product. Network Consultant acknowledges that Client may register the copyright for the Program (and each element thereof) and any Work Product or derivative work in its own name or that of any of its designees for the full term of copyright and all renewals and extensions thereof.
5.2 Third-Party License Rights. To the extent that the development, hosting or operation of the Program requires the use of any third-party intellectual property, Network Consultant will obtain the prior written consent of Client for the use of such third-party intellectual property, and Network Consultant will obtain at its own expense a perpetual, irrevocable, royalty-free, worldwide right and license to use such third-party intellectual property in the name of, and for the benefit of Client.
5.3 Network Consultant License Rights. To the extent any pre-existing intellectual property owned or licensed by Network Consultant is used in connection with development or maintenance of the Program (?Network Consultant Intellectual Property?) pursuant to Sections 2, 3.3, 3.4 or 3.5, Network Consultant will obtain the prior written consent of Client for such use and Network Consultant will grant and hereby grants Client a perpetual, irrevocable, royalty-free, worldwide right and license to use such Network Consultant intellectual property in connection with the Program. Subject to the foregoing, Network Consultant retains ownership rights to all of the Network Consultant Intellectual Property.
5.4 Customer Data. All customer lists, customer data and other information collected by Network Consultant in connection with the operation of the Program will be solely owned by Client.
5.5 Proprietary Notices. Client will provide Network Consultant with appropriate notices of copyright, trademark and other proprietary rights in Client?s name, and Network Consultant will place such notices in such a manner as Client will direct. In no event will Network Consultant alter, remove, obscure, erase or deface or otherwise hide from view, any copyright, trademark or other proprietary rights notice of Client contained on or incorporated in the Program. Client will have the right to develop and implement any method or mechanism Client deems appropriate to prevent or protect against unauthorized copying of the HTML code for the Program, the Program, or any materials on the Program.
5.6 Further Assurances. Network Consultant will, and will cause every party acting under it in relation to this Agreement to, execute any and all documents and do such other acts requested at any time by Client as may be required to evidence, perfect, confirm and/or further effect the rights granted Client under this Section 5. In the event Network Consultant fails to execute and deliver any such documents and instruments promptly upon request therefor by Client, Client is hereby authorized and appointed attorney-in-fact of and for Network Consultant to make, execute and deliver any and all such documents and instruments, it being understood that such power is coupled with an interest and is therefore irrevocable.
5.7 Client Goodwill. Network Consultant acknowledges that the rights and powers retained by or granted to Client under this Agreement are necessary to protect ?Allbusiness.com? Intellectual Property Rights of Client and, specifically, to conserve the goodwill and good name of its products and the name ?Allbusiness.com?, and therefore Network Consultant agrees that it will not, and it will not allow or assist any other party to, perform any act that would result in any of Client?s products or the name ?Allbusiness.com? to become involved in matters that will or could detract from, or impugn, their public acceptance and popularity, or impair their legal status. Network Consultant acknowledges and agrees that, as between Network Consultant and Client, all Client Content is owned by Client.
5.8 Litigation. Should Network Consultant become aware of any infringing use of the Program (or any element thereof), Network Consultant will notify Client and Client may, within its sole discretion, undertake to prosecute necessary actions to prevent such use or distribution. In the event Network Consultant is joined in any such litigation, the decisions of Client?s counsel with reference to matters of procedure, conduct of such litigation and/or the handling thereof, will prevail and Network Consultant will cooperate with and assist Client?s counsel. Any recovery will be the sole property of Client.
6. CONFIDENTIAL INFORMATION
6.1 Confidential Information. Network Consultant may, during the performance of its services under this Agreement, have access to and acquire knowledge from, material, data, systems and other information concerning the operation, business, financial affairs, products, customers and Intellectual Property Rights of Client that may not be accessible or known to the general public (referred to as ?Confidential Information?). ?Confidential Information? also includes (a) the terms of this Agreement and the fact of its existence and
(b) any information or materials that Client obtains from any third party that Client treats as proprietary or designates as Confidential Information, whether or not owned by Client. ?Confidential Information? does not include information that Network Consultant can document in reasonable detail and to Client?s reasonable satisfaction: (i) is known by Network Consultant at the time of receipt from Client and is not subject to any other non-disclosure agreement between the parties; (ii) is now, or hereafter becomes, generally known to the public through no fault of Network Consultant ; or (iii) is otherwise lawfully and independently developed by Network Consultant , or lawfully acquired from a third party without any obligation of confidentiality.
6.2 No Disclosure. Any Confidential Information acquired by Network Consultant will not be used, published or divulged by Network Consultant to any other person or entity in any manner whatsoever without the prior clear and express written approval of Client, which approval Client may withhold in its sole discretion. Network Consultant will not disclose any Confidential Information to any such person or entity until the same will have signed such a Confidentiality Agreement, and upon such signature will only disclose such of the Confidential Information as is reasonably necessary to permit performance of Network Consultant ?s obligations hereunder. Network Consultant will, and will cause its employees, agents and every other person and entity it employs in connection with its services under this Agreement to, protect and safeguard the Confidential Information by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination or publication of the Confidential Information as Network Consultant uses to protect its own confidential or proprietary information of a like nature. In the event that Network Consultant is directed to disclose any portion of any Confidential Information of Client or any other materials proprietary to Client in conjunction with a judicial proceeding or arbitration, Network Consultant will immediately notify Client both orally and in writing. Network Consultant agrees to provide Client with reasonable cooperation and assistance in obtaining a suitable protective order and in taking any other steps to preserve confidentiality. Upon any termination or expiration of this Agreement or upon the request of Client, Network Consultant will immediately return all Confidential Information to Client.
6.3 No Confidential Information of Other Parties. Network Consultant represents and warrants that it will not use in the course of its performance hereunder, and will not disclose to Client, any confidential information of any third party (including competitors of Client or Network Consultant ) unless Network Consultant is expressly authorized in writing by such third party to do so.
6.4 Program Confidential. Until the public launch of the Program, Network Consultant will not, and will have no right to, release, distribute or disclose to any third party the Program or any Work Product or any portion thereof or any of the materials provided by Client hereunder. Network Consultant will not provide advance access to the Program or any portion thereof to any person or entity without the prior written consent of Client, which consent may be granted or withheld by Client in its sole discretion. All so-called ?test pages? for the Program that Network Consultant may make available on the Internet for review by Client will be password protected.
6.5 Specific Performance. The parties specifically acknowledge and agree that the provisions of this Section 6 are reasonable and necessary for the protection of the Confidential Information and to prevent damage or loss to Client. Network Consultant understands and agrees that Client may suffer irreparable harm in the event that Network Consultant fails to comply with any of its obligations under this Section 6, and that monetary damages in such event would be substantial and inadequate to compensate Client. Consequently, Network Consultant agrees that in such event Client will be entitled, in addition to such monetary relief as may be recoverable by law, to such temporary, preliminary and/or permanent injunctive or other equitable relief as may be necessary to restrain any threatened, continuing or further breach by Network Consultant , without showing or proving any actual damages sustained by Client, without bond.
7. REPRESENTATIONS, WARRANTIES, INDEMNIFICATION AND INSURANCE
7.1 Network Consultant Representations and Warranties. Network Consultant represents and warrants that
(a) it has the right, power and authority to enter into this Agreement and to fully perform its obligations under this Agreement;
(b) the making of this Agreement by it does not violate any agreement existing between it and any other person or entity;
(c) it owns or has acquired all necessary license rights in and to all materials it contributes to the Program,
(d) it complies, and at all times will comply, with all applicable laws, rules and regulations in effect at the time services are
performed pursuant to this Agreement, including without limitation all professional registration requirements and technical specifications pertaining to any aspect of the Program.
(e) subject to the provisions of Sections 5.2 and 5.3 hereof, the Program and all Work Product therein that is not supplied by Client, as delivered by Network Consultant is original, has not been previously published in any form and is not in the public domain,
(f) the Program and all Work Product are delivered free and clear of any liens, charges, encumbrances or restrictions, including those of Network Consultant ?s suppliers,
(g) all HTML or other formatted text files, Source Code and object code as delivered by Network Consultant is complete and accurate;
(h) all Source Code is and will be fully narrated with logic diagrams and flow charts and is human readable and can be translated by a computer or assembler for execution;
(i) The Program and all Work Product, including without limitation, any images or graphics contained therein which is not supplied by Client do not violate or infringe any right of privacy or publicity or any other Intellectual Property Right, or contain any libelous, defamatory, obscene or unlawful material, or otherwise violate or infringe any other right of any person or entity, and that Network Consultant will not exercise any of the rights granted to it under or pursuant to this Agreement in a manner that will violate any applicable law, rule or regulation;
(j) The Program, as delivered by Network Consultant , will be free of any computer virus or any other similar harmful, malicious or hidden program or data and will operate in accordance with the Specifications. Without limitation of the foregoing, Network Consultant warrants that the Program, as delivered by Network Consultant will be free of any hardware or software device or code which will prevent Client from accessing or using the Program or any portion thereof.
(k) All of the services provided by Network Consultant or a permitted subcontractor thereof will be rendered very sound, professional practices and in a competent and professional matter by knowledgeable, trained and qualified personnel; and
(l) The Program will be developed and will operate in conformance with the terms and conditions of this Agreement.
7.2 Network Consultant Indemnification. Network Consultant agrees to, and will, indemnify, defend and hold harmless Client and its directors, shareholders, officers, agents, employees, successors and assigns from and against any and all claims, demands, suits, actions, judgments, damages, costs, losses, expenses (including attorneys? fees and expenses) and other liabilities arising from, in connection with or related in any way to, directly or indirectly, (a) its performance of this Agreement, (b) any breach or alleged breach of any of the representations, warranties, undertakings or agreements made by it under this Agreement, (c) its activities under this Agreement, including without limitation, any unauthorized use by it or any of its subcontractors of any portion of the Client Content or the Program, or (d) any act or omission of it, its directors, officers, agents, employees or subcontractors. Client will promptly notify Network Consultant of any such claim. Network Consultant will bear full responsibility for the defense (including any settlements); provided however, that (i) Network Consultant will keep Client informed of, and consult with Client in connection with the progress of such litigation or settlement; and (ii) Network Consultant will not have any right, without Client?s written consent, to settle any such claim if such settlement arises from or is part of any criminal action, suit or proceeding or contains a stipulation to or admission or acknowledgment of, any liability or wrongdoing (whether in contract, tort or otherwise) on the part of Client.
7.3 Client General Representations and Warranties. Client represents and warrants that (a) it has the right, power and authority to enter into this Agreement and to fully perform its obligations under this Agreement; (b) the making of this Agreement by it does not violate any agreement existing between it and any other person or entity; and (c) it has all necessary rights in and to the Client Content and any other materials it contributes to the Program. Client further represents and warrants that such materials contributed by Client do not violate or infringe any Intellectual Property Rights of any other person or entity.
7.4 Client Indemnification. Client agrees to, and will, indemnify, defend and hold harmless Network Consultant , and its directors, shareholders, officers, agents, employees, successors and assigns from and any and all claims, demands, suits, actions, judgments, damages, costs, losses, expenses (including attorneys? fees and expenses) and other liabilities arising from, in connection with or related in any way to, indirectly or indirectly, a breach or alleged breach of the representations and warranties set forth in Section 7.6 hereof. Network Consultant will promptly notify Client of any such claim, and Client will bear full responsibility for the defense of such claim (including any settlements).
7.5 Attorneys. Notwithstanding any of the foregoing, Client will have the right, in its absolute discretion, to employ attorneys of its own choice and to institute or defend any matter, claim, action or proceeding and to take any other appropriate steps to protect all rights and interest in and title to the Program and every element thereof and, in that connection, to settle, compromise in good faith, or in any other manner dispose of any matter, claim action, or proceeding and to satisfy any judgment that may be rendered, in any manner as Client in its sole discretion may determine.
8. TERM AND TERMINATION
8.1 Term. The term of this Agreement will commence as of the Effective Date and will continue until all obligations hereunder have been performed, unless terminated sooner in accordance with this Agreement.
8.2 Termination for Default. Either party will have the right to terminate this Agreement for material breach of a material obligation that is not cured within thirty (30) days after written notice of such breach. For purposes of this Agreement, any act or failure to act by any third party contractor of Network Consultant or any employee of Network Consultant or such third party contractor will be deemed an act or failure to act by Network Consultant .
8.3 Termination for Insolvency. Client will have the right to terminate this Agreement upon written notice to Network Consultant in the event that Network Consultant makes any assignment for the benefit of creditors or files a petition in bankruptcy or is adjudged bankrupt or becomes insolvent or is placed in the hands of a receiver or if the equivalent of any of the proceedings or acts referred to in this clause, though known and/or designated by some other name or term will occur.
8.4 Termination for Convenience. Client will have the right to terminate this Agreement for convenience upon fifteen (15) days? advance written notice to Network Consultant . In the event of termination for convenience of this Agreement, in whole or in part, Client?s sole liability to Network Consultant will be payment of invoices for services rendered prior to the termination date.
8.5 Effect of Termination. Upon expiration or termination, in whole or in part, of this Agreement, or at any time upon the request of Client, Network Consultant will immediately deliver to Client all inventory, customer data, intellectual property, Source Code and object code of software, materials and other elements of the Program necessary for Client or a provider selected by Client to continue the uninterrupted operation of the Program. In addition, Network Consultant will provide Client with reasonable assistance in transitioning the Program in-house or to an alternate provider of services on a times and materials basis at the hourly rates identified in Exhibit . Upon termination Network Consultant will cease any use of the Client Content or any trademarks or trade names of Client, including without limitation, the Program name.
8.6 Survival of Terms. Sections 5, 6, 7, 8.5, 8.6, 9 and 10 will survive the expiration or termination of this Agreement for any reason. In no event will Network Consultant have any right to recover or obtain any Intellectual Property Rights in or to the Program or any Work Product, or enjoin or otherwise interfere with Client?s development, provision or other exploitation of the Program (or any element thereof), or any Work Product. No breach of this Agreement by Client will entitle Network Consultant to terminate or rescind this Agreement or to injunctive or other equitable relief, it being agreed that Network Consultant ?s sole remedy, if any, in the event of such a breach will be an action for damages.
9. INDEPENDENT CONTRACTOR; NO AGENCY
9.1 Independent Contractor. Network Consultant is, and will remain, an independent contractor with respect to services performed pursuant to this Agreement. The parties are independent contractors and no agency, partnership, franchise or other relationship is created hereby. Nothing contained herein will be construed to constitute the parties as principal and agent, employer and employee, partners or joint venturers, nor will any similar relationship be deemed to exist between the parties. Neither party will have any power to obligate or bind the other party, except as specifically provided.
9.2 Personnel. Personnel supplied by Network Consultant will work exclusively for Network Consultant and will not, for any purpose, be considered employees or agents of Client. Network Consultant assumes full responsibility for the actions of such personnel while performing services pursuant to this Agreement and will be solely responsible for and will indemnify Client and hold it harmless from their supervision, daily direction and control (including without limitation Network Consultant ?s and such personnel?s compliance with all applicable laws, regulations and ordinances), compensation, benefits (including without limitation any pension or welfare plans and workers? compensation program) and taxes (including without limitation all withholding taxes, payroll taxes, disability insurance payments, unemployment taxes, and other similar taxes, assessments, contributions and charges on the payments made or required to be made by Network Consultant to such personnel). Network Consultant will file all returns and reports that may be required by any governmental or professional agency with respect to any of the foregoing. Network Consultant will ensure that all employees or consultants working for Network Consultant in connection with this Agreement will have executed appropriate Confidentiality and Invention Assignment Agreements such that all work product developed by such parties will be deemed owned by Client pursuant to Section 5.1 hereto.
9.3 Injuries. Client will have no obligation whatsoever to compensate Network Consultant on account of any damages or injuries which Network Consultant or any person or entity engaged by Network Consultant may sustain as a result or in the course of the performance of Network Consultant ?s or such employee?s services under this Agreement. Network Consultant will indemnify and hold Client harmless from and against any claims, losses, or liabilities arising out of the development or operation of the Program except to the extent such relate to the Client Content.
9.4 Independent Contractors. Network Consultant will directly render all services to be performed by Network Consultant under this Agreement exclusively through its employees and independent contractors under its control. Client will have the right, in its sole discretion, to approve any third party from whom Network Consultant obtains services or rights which pertain to the Program and any Work Product and Client will have the right to approve the form of contract entered into between Network Consultant and any such third party to ensure assignment of rights consistent with Client?s rights pursuant to Section 5 above.
10. GENERAL PROVISIONS
10.1 Notices. All notices which either party is required or may desire to serve upon any other party will be in writing and addressed to the party to be served as follows:
(a) if to Client:
.
Attn:
With a copy to:
.
Attn:
(b) if to Network Consultant :
.
Attn:
Any such notice may be served personally or by certified mail (postage prepaid), internationally commercially recognized overnight delivery service (such as Federal Express or DHL), courier or other written communication. Notice will be deemed served upon personal delivery or upon the second business day after the date sent. Either party may change the address to which notices are to be delivered by written notice to the other party served as provided in this Section 10.1.
10.2 Entire Agreement. This Agreement, together with the Exhibits attached hereto, constitutes the entire understanding and agreement between Client and Network Consultant with respect to the transactions contemplated, and supersedes any and all prior or contemporaneous oral or written representation, understanding, agreement or communication between Client and Network Consultant concerning the subject matter hereof. Neither party is relying upon any warranties, representations, assurances or inducements not expressly set forth.
10.3 Amendments. All amendments or modifications of this Agreement will be binding upon the parties despite any lack of consideration so long as the same will be in writing and executed by each of the parties hereto. It is expressly understood and agreed that no usage of trade or other regular practice or method of dealing between the parties hereto will be used to modify, interpret, supplement or alter in any manner the express terms of this Agreement or any part hereof.
10.4 Waiver. No waiver of any provision of this Agreement or any rights or obligations of either party hereunder will be effective, except pursuant to a written instrument signed by the party waiving compliance, and any such waiver will be effective only in the specific instance and for the specific purpose stated in such writing.
10.5 Construction. This Agreement has been negotiated by the parties hereto and by their respective counsel. This Agreement will be fairly interpreted and construed in accordance with its terms and without strict interpretation or construction in favor of or against either party.
10.6 Headings. The section and paragraph headings appearing in this Agreement are inserted only as a matter of convenience and in no way define, govern, limit, modify or construe the scope or extent of the provisions of this Agreement to which they may relate. Such headings are not part of this Agreement and will not be given any legal effect.
10.7 Severability. In the event that any provision of this Agreement should be found by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
10.8 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument.
10.9 Publicity. Network Consultant may not make any disclosure or announcement relating to this Agreement without the prior written consent of Client. Network Consultant may not use Client?s name for any endorsement or other usage without the prior consent of Client. Provided that this Agreement has not been terminated by Client pursuant to Section 8.2 above due to breach or default by Network Consultant , Network Consultant may reference the services rendered under this Agreement when asked for references from other potential customers.
10.10 Assignment. The services rendered by Network Consultant are personal in nature and Network Consultant may not assign its obligations or this Agreement without the prior written consent of Client, including any assignment by operation of law or pursuant to any change of ownership control of Network Consultant . All subcontractors will be subject to the prior approval of Client. Subject to the foregoing, this Agreement will inure to the benefit of the parties and their successors and permitted assigns.
10.11 Governing Law. This Agreement will be governed by the laws of the State of Illinois without reference to conflict of law principles. All disputes arising out of or relating to this Agreement will be subject to the exclusive jurisdiction and venue of the state courts sitting in Columbia, Illinois, and the federal courts and each party irrevocably consents to such exclusive jurisdiction and venue and waives any objection thereto.
IN WITNESS WHEREOF, the duly authorized representatives of each of the parties hereto have executed this Agreement as of the day and year first written above.
Client Network Consultant
By: By:
Name: Name:
Title: Title:
EXHIBIT A
STATEMENT OF WORK
Milestones/Deliverable Milestone Delivery Schedule
Alpha Version
(design & core functionality)
Beta Version
(full functionality subject to errors)
Final Version
(full functionality & errors corrected)
Launch Version/Scheduled Launch Date
(full functionality & errors corrected)
Final Documentation
EXHIBIT B
SERVICE FEE SCHEDULE
[Specify fees and cap on fees]
EXHIBIT C
PROGRAM PERFORMANCE SPECIFICATIONS
Error Occurrences/Correction Response Times
Level 1 Bugs (errors which significantly impair the core functionality of the Program or cause other gross problems) will be fixed by Network Consultant within 24 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Level 2 Bugs (errors which detract significantly from the Program?s appearance, navigation, layout, but which do not impede core functionality) will be fixed by Network Consultant within 12 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Level 3 Bugs (minor errors, misspellings, etc) will be fixed by Network Consultant within 24 hours of discovery by Network Consultant , or verbal/email notification by Client or anyone else.
Performance Requirement
The following performance requirement is based on our estimate of peak traffic situation. The average numbers are much smaller for the most part. However, the system must be able to handle routine peak traffic. When necessary, the system must also be readily upgraded to handle spike of traffic due to heavy marketing campaign or special events.
Measurement criteria Performance requirement Note
Connections per second This assumes HTTP 1.0
Concurrent session per second This is the logical sessions created for unique users. Sessions are created in the database. Note that not all sessions generate connection at every second as it takes time for the user to browse through the contents
# of sessions per hour This number smoothes out spurts of peak traffic during the peak hour.
Pages viewed per second This includes all elements of the page
Bits per second transferred
Median response time Note: this is not the same as average. This is measured from the web server, not from browser, because the delay at the browser is highly dependent on the user connection. The number can be obtained from analyzing the log files of web servers.
Max response time Same as the note on median response time, except that this must also apply during the peak period.
EXHIBIT D
SPECIFICATIONS
Rip these examples apart and put something nice together for your teacher. These are the real deal and exactly the type of agreements you will see in the real world.
None of these are completely appropriate for your situation, but I could definately put together a solid agreement with what I have posted.
Your job is to spell out the tasks you will be completely for the client, in detail. Use this information along with the provision you like best and you should have yourself something nice.
None of these are completely appropriate for your situation, but I could definately put together a solid agreement with what I have posted.
Your job is to spell out the tasks you will be completely for the client, in detail. Use this information along with the provision you like best and you should have yourself something nice.
Hiring Independent Contractors FAQ
ICs may call themselves by a variety of names -- the self-employed, consultants, entrepreneurs, freelancers or business owners -- it makes no difference in the eyes of the law.
What's Below:
? What is an independent contractor?
? What are the benefits of hiring independent contractors?
? What are the risks of hiring independent contractors?
? When do workers qualify as independent contractors?
? How do government agencies determine whether workers are ICs or employees?
? What test does the IRS use to determine whether workers are ICs or employees?
? What tests do agencies besides the IRS use to determine whether a worker is an employee or an independent contractor?
? Should companies have freelancers and consultants sign written independent contractor agreements?
? What about intellectual property ownership?
What is an independent contractor?
Independent contractors, or ICs, are people who contract to perform services for others, but don't have the legal status of employees. Businesses can save time, money and headaches by hiring ICs instead of employees.
ICs may call themselves by a variety of names -- freelancers, consultants, the self-employed, entrepreneurs or business owners -- it makes no difference in the eyes of the law.
What are the benefits of hiring independent contractors?
Businesses can usually save money by hiring ICs instead of employees. In addition to salaries or other compensation, employers usually must pay employee expenses such as:
? federal payroll taxes, including a 7.65% Social Security tax and a usually small (.08%) federal unemployment insurance tax
? state unemployment insurance premiums
? workers' compensation insurance premiums
? employee benefits, such as health insurance, paid vacations, sick leave, retirement benefits and life or disability insurance, and
? office space and equipment.
These expenses add at least 20% to 30% (often more) to payroll costs. For example, if you pay an employee $10 per hour, you will probably pay another $2 to $3 per hour in employee expenses. You incur none of these expenses when you hire an IC. So even though ICs are often paid more per hour than employees doing the same work, they still cost less.
In addition, when you hire ICs instead of employees, you have reduced exposure to some types of lawsuits, such as those alleging job discrimination or wrongful termination.
Finally, and most important for many firms, ICs provide a level of flexibility that can't be obtained with employees. You can pay an IC to accomplish only a specific task, allowing your business to get specialized expertise for a short period. You need not go through the trauma (not to mention potential severance costs and lawsuits) of laying off or firing an employee. Moreover, an experienced IC can be productive immediately, eliminating the time and expense involved in training employees.
What are the risks of hiring independent contractors?
Despite the advantages, many businesses are terrified of using ICs because they have heard about or experienced the consequences of misclassifying as ICs workers who are, legally, employees. And it's true that the consequences can be economically devastating. A business must pay the IRS all back taxes owed, with interest, plus a penalty of 12% to 35% of the tax bill.
Audits by state agencies are even more common than IRS audits. State audits most frequently occur when workers classified as ICs apply for unemployment compensation after their services are terminated. An investigation by your state unemployment compensation agency will ensue, and you will be subject to fines and penalties if it is determined that workers should have been classified as employees for unemployment compensation purposes.
Another major disadvantage of hiring ICs is that they can sue you for negligence if they are injured on the job. This is something employees covered by workers' compensation normally cannot do.
When do workers qualify as independent contractors?
Most people who qualify as independent contractors follow their own trade, business or profession -- that is, they are in business for themselves. This is why they are called "independent" contractors. They earn their livelihoods from their own independent businesses instead of depending upon an employer.
Good examples of ICs are professionals with their own practices, like doctors, lawyers and accountants. For example, dentists who have their own practices are independent businesspersons offering dental services to the public; although you pay your dentist for work, he or she is not your employee.
A worker doesn't have to be a professional, however, to be an IC. A person you hire to paint your office or mow your lawn can be in business for himself or herself and qualify as an IC.
How do government agencies determine whether workers are ICs or employees?
There is no single, clear-cut test for classification. Different legal tests for determining worker status are used by various government agencies, including:
? the Internal Revenue Service
? state unemployment compensation insurance agencies
? state workers' compensation insurance agencies
? state tax departments
? the United States Labor Department, and
? the National Labor Relations Board.
Each of these agencies is concerned with worker classification for different reasons, and has different biases and practices. Each agency normally makes classification decisions on its own and need not consider what other agencies have done, though they are often strongly influenced by it. As a result, it's possible for one agency to find that a worker is an IC and another that he or she is an employee. It's also possible, though rare, for a worker to be deemed an IC in one state and an employee in another.
What test does the IRS use to determine whether workers are ICs or employees?
Under the IRS test, workers are employees if the people they work for have the right to direct and control them in the way they work -- both as to the final results and as to the details of when, where and how to work.
In contrast, ICs are not controlled by the companies that hire them. A hiring firm's control is limited to accepting or rejecting the final results an IC achieves.
The IRS has developed a list of 20 factors it uses to measure control under the common law test. These include whether a worker:
? can earn a profit or suffer a loss from the activity
? is told where to work by the hiring firm
? offers his or her services to the general public
? can be fired by the hiring firm
? furnishes the tools and materials needed to do the work
? is paid by the job or by the hour
? works for more than one firm at a time
? has a continuing relationship with the hiring firm
? invests in equipment and facilities
? pays his or her own business and traveling expenses
? has the right to quit without incurring liability
? receives instructions from the hiring firm
? is told in what sequence or order to work by the hiring firm
? receives training from the hiring firm
? performs the services personally
? hires and pays assistants
? sets his or her own working hours
? works full-time for the hiring firm
? provides regular oral or written progress reports to the hiring firm, or
? provides services that are an integral part of the hiring firm's day-to-day operations.
Note: The IRS has recently issued a new training manual discussing the 20-factor test. The manual deemphasizes some factors that were formally considered important. For more information, see Chapter 6 of Hiring Independent Contractors: A Legal Guide, by Stephen Fishman (Nolo).
What tests do agencies besides the IRS use to determine whether a worker is an employee or an independent contractor?
State workers' compensation, unemployment compensation and tax agencies use various tests to determine worker status. Many use the common law right of control test, but emphasize different factors than the IRS. Some use an economic reality test that focuses on whether a worker is economically dependent upon a hiring firm.
Many state unemployment compensation agencies use a special statutory test, also called the ABC test. This test focuses on just a few factors:
? whether the hiring firm controls the worker on the job
? whether the worker is operating an independent business, and
? where the work is performed -- that is, where the hiring firm says or where the worker wants to work.
Should companies have freelancers and consultants sign written independent contractor agreements?
Absolutely. Using a written agreement avoids later disputes by providing a written description of the services the IC is to perform, when they are to be performed and how much the IC will be paid.
A written IC agreement can also help establish a worker's IC status. Although an agreement by itself is never enough to make a worker an IC, it will help show the IRS and other agencies that both you and the worker intended to create a hiring firm-IC relationship, not an employer-employee relationship. Newly published IRS training materials state that where all the other factors are evenly balanced, a written IC agreement may tip the scale to the IC side.
But remember, an IC agreement is only useful if it's obeyed. It will be useless if you treat a worker like an employee.
What about intellectual property ownership?
When you hire an IC to create a work of authorship such as a computer program, written work, artwork, musical work, photographs or multimedia work, you need to be concerned with copyright ownership.
The copyright laws contain a major trap for the unwary -- they say that unless the work an IC creates falls into one of nine categories, the hiring firm will not own the copyright to the IC's work unless it obtains a written assignment of copyright ownership. An assignment is simply a transfer of copyright ownership. It should be obtained before an IC starts work. This assignment should be included in the IC agreement.
Certain specially commissioned or ordered works by ICs are considered to be works for hire to which the hiring firm automatically owns all copyright rights. However, both you and the IC must both sign an written agreement stating that the work is made for hire. Again, this should be included in the IC agreement.
These works include:
? a contribution to a collective work -- for example, a work created by more than one author, such as a newspaper, magazine, anthology or encyclopedia
? a part of an audiovisual work -- for example, a motion picture screenplay
? a translation
? supplementary works -- for example, forewords, afterwords, supplemental pictorial illustrations, maps, charts, editorial notes, bibliographies, appendixes and indexes
? a compilation -- for example, an electronic database
? an instructional text
? a test
? answer material for a test, and
? an atlas.
ICs may call themselves by a variety of names -- the self-employed, consultants, entrepreneurs, freelancers or business owners -- it makes no difference in the eyes of the law.
What's Below:
? What is an independent contractor?
? What are the benefits of hiring independent contractors?
? What are the risks of hiring independent contractors?
? When do workers qualify as independent contractors?
? How do government agencies determine whether workers are ICs or employees?
? What test does the IRS use to determine whether workers are ICs or employees?
? What tests do agencies besides the IRS use to determine whether a worker is an employee or an independent contractor?
? Should companies have freelancers and consultants sign written independent contractor agreements?
? What about intellectual property ownership?
What is an independent contractor?
Independent contractors, or ICs, are people who contract to perform services for others, but don't have the legal status of employees. Businesses can save time, money and headaches by hiring ICs instead of employees.
ICs may call themselves by a variety of names -- freelancers, consultants, the self-employed, entrepreneurs or business owners -- it makes no difference in the eyes of the law.
What are the benefits of hiring independent contractors?
Businesses can usually save money by hiring ICs instead of employees. In addition to salaries or other compensation, employers usually must pay employee expenses such as:
? federal payroll taxes, including a 7.65% Social Security tax and a usually small (.08%) federal unemployment insurance tax
? state unemployment insurance premiums
? workers' compensation insurance premiums
? employee benefits, such as health insurance, paid vacations, sick leave, retirement benefits and life or disability insurance, and
? office space and equipment.
These expenses add at least 20% to 30% (often more) to payroll costs. For example, if you pay an employee $10 per hour, you will probably pay another $2 to $3 per hour in employee expenses. You incur none of these expenses when you hire an IC. So even though ICs are often paid more per hour than employees doing the same work, they still cost less.
In addition, when you hire ICs instead of employees, you have reduced exposure to some types of lawsuits, such as those alleging job discrimination or wrongful termination.
Finally, and most important for many firms, ICs provide a level of flexibility that can't be obtained with employees. You can pay an IC to accomplish only a specific task, allowing your business to get specialized expertise for a short period. You need not go through the trauma (not to mention potential severance costs and lawsuits) of laying off or firing an employee. Moreover, an experienced IC can be productive immediately, eliminating the time and expense involved in training employees.
What are the risks of hiring independent contractors?
Despite the advantages, many businesses are terrified of using ICs because they have heard about or experienced the consequences of misclassifying as ICs workers who are, legally, employees. And it's true that the consequences can be economically devastating. A business must pay the IRS all back taxes owed, with interest, plus a penalty of 12% to 35% of the tax bill.
Audits by state agencies are even more common than IRS audits. State audits most frequently occur when workers classified as ICs apply for unemployment compensation after their services are terminated. An investigation by your state unemployment compensation agency will ensue, and you will be subject to fines and penalties if it is determined that workers should have been classified as employees for unemployment compensation purposes.
Another major disadvantage of hiring ICs is that they can sue you for negligence if they are injured on the job. This is something employees covered by workers' compensation normally cannot do.
When do workers qualify as independent contractors?
Most people who qualify as independent contractors follow their own trade, business or profession -- that is, they are in business for themselves. This is why they are called "independent" contractors. They earn their livelihoods from their own independent businesses instead of depending upon an employer.
Good examples of ICs are professionals with their own practices, like doctors, lawyers and accountants. For example, dentists who have their own practices are independent businesspersons offering dental services to the public; although you pay your dentist for work, he or she is not your employee.
A worker doesn't have to be a professional, however, to be an IC. A person you hire to paint your office or mow your lawn can be in business for himself or herself and qualify as an IC.
How do government agencies determine whether workers are ICs or employees?
There is no single, clear-cut test for classification. Different legal tests for determining worker status are used by various government agencies, including:
? the Internal Revenue Service
? state unemployment compensation insurance agencies
? state workers' compensation insurance agencies
? state tax departments
? the United States Labor Department, and
? the National Labor Relations Board.
Each of these agencies is concerned with worker classification for different reasons, and has different biases and practices. Each agency normally makes classification decisions on its own and need not consider what other agencies have done, though they are often strongly influenced by it. As a result, it's possible for one agency to find that a worker is an IC and another that he or she is an employee. It's also possible, though rare, for a worker to be deemed an IC in one state and an employee in another.
What test does the IRS use to determine whether workers are ICs or employees?
Under the IRS test, workers are employees if the people they work for have the right to direct and control them in the way they work -- both as to the final results and as to the details of when, where and how to work.
In contrast, ICs are not controlled by the companies that hire them. A hiring firm's control is limited to accepting or rejecting the final results an IC achieves.
The IRS has developed a list of 20 factors it uses to measure control under the common law test. These include whether a worker:
? can earn a profit or suffer a loss from the activity
? is told where to work by the hiring firm
? offers his or her services to the general public
? can be fired by the hiring firm
? furnishes the tools and materials needed to do the work
? is paid by the job or by the hour
? works for more than one firm at a time
? has a continuing relationship with the hiring firm
? invests in equipment and facilities
? pays his or her own business and traveling expenses
? has the right to quit without incurring liability
? receives instructions from the hiring firm
? is told in what sequence or order to work by the hiring firm
? receives training from the hiring firm
? performs the services personally
? hires and pays assistants
? sets his or her own working hours
? works full-time for the hiring firm
? provides regular oral or written progress reports to the hiring firm, or
? provides services that are an integral part of the hiring firm's day-to-day operations.
Note: The IRS has recently issued a new training manual discussing the 20-factor test. The manual deemphasizes some factors that were formally considered important. For more information, see Chapter 6 of Hiring Independent Contractors: A Legal Guide, by Stephen Fishman (Nolo).
What tests do agencies besides the IRS use to determine whether a worker is an employee or an independent contractor?
State workers' compensation, unemployment compensation and tax agencies use various tests to determine worker status. Many use the common law right of control test, but emphasize different factors than the IRS. Some use an economic reality test that focuses on whether a worker is economically dependent upon a hiring firm.
Many state unemployment compensation agencies use a special statutory test, also called the ABC test. This test focuses on just a few factors:
? whether the hiring firm controls the worker on the job
? whether the worker is operating an independent business, and
? where the work is performed -- that is, where the hiring firm says or where the worker wants to work.
Should companies have freelancers and consultants sign written independent contractor agreements?
Absolutely. Using a written agreement avoids later disputes by providing a written description of the services the IC is to perform, when they are to be performed and how much the IC will be paid.
A written IC agreement can also help establish a worker's IC status. Although an agreement by itself is never enough to make a worker an IC, it will help show the IRS and other agencies that both you and the worker intended to create a hiring firm-IC relationship, not an employer-employee relationship. Newly published IRS training materials state that where all the other factors are evenly balanced, a written IC agreement may tip the scale to the IC side.
But remember, an IC agreement is only useful if it's obeyed. It will be useless if you treat a worker like an employee.
What about intellectual property ownership?
When you hire an IC to create a work of authorship such as a computer program, written work, artwork, musical work, photographs or multimedia work, you need to be concerned with copyright ownership.
The copyright laws contain a major trap for the unwary -- they say that unless the work an IC creates falls into one of nine categories, the hiring firm will not own the copyright to the IC's work unless it obtains a written assignment of copyright ownership. An assignment is simply a transfer of copyright ownership. It should be obtained before an IC starts work. This assignment should be included in the IC agreement.
Certain specially commissioned or ordered works by ICs are considered to be works for hire to which the hiring firm automatically owns all copyright rights. However, both you and the IC must both sign an written agreement stating that the work is made for hire. Again, this should be included in the IC agreement.
These works include:
? a contribution to a collective work -- for example, a work created by more than one author, such as a newspaper, magazine, anthology or encyclopedia
? a part of an audiovisual work -- for example, a motion picture screenplay
? a translation
? supplementary works -- for example, forewords, afterwords, supplemental pictorial illustrations, maps, charts, editorial notes, bibliographies, appendixes and indexes
? a compilation -- for example, an electronic database
? an instructional text
? a test
? answer material for a test, and
? an atlas.
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