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Legal stuff... again.

Discussion in 'Off Topic' started by Slavik, Sep 6, 2011.

  1. Slavik

    Slavik XenForo Moderator Staff Member

    Right have a mate in a bit of a twist. The situation is way too complicated to explain in detail but I will try to get what needs to be explained down.

    He runs a company, that is basically a sales company selling websites.

    A customer places an order, he then outsources this order to a company who does the design and codes the template as well as provides the hosting. (there is no written contract in place between him and this company)

    He then takes the coded template, fills in the content and provides it to the customer. The customer pays him, he takes his cut and pays the 3rd company for the work and the hosting.

    Now, this 3rd party company has increased their hosting prices, and threatened to cut him off if he doesn't pay them. So, he has taken these websites, and hosted them himself rather than pay the extra. The 3rd party company is now threatening to sue him saying the code is theirs.

    As you can see... as he has no contracts in writing, its a mess. There are loads of different aspects.

    My perspective is the 3rd party has been paid for a functioning website, there is no contract in place to say the hosting HAS to be with them, as long as my mate does not re-ditribute the code or re-use the code on other websites he should be fine?

    Also, by increasing the hosting costs it is effectively tortious interference as they can be damaging the relationship between him and his clients if they do not agree to the increased prices.
  2. Shamil

    Shamil Well-Known Member

    Where are the parties located?

    I'd agree with you in that there appears to be no agreement or contract stating that the website must be hosted with them. Is the intellectual property transferred along with the purchase on a website? Does the 3rd party license the use of the template/design?

    This is why agreements and contracts are in place, as evil as they may be.
  3. Slavik

    Slavik XenForo Moderator Staff Member

    All in the UK.

    The other questions I simply cannot answer, nor can he as there is nothing in writing. As far as it goes, he asks them to design and build a website, he fills in the content and provides it to his customers.

    The hosting is just included in the price of the website for the first year and then charged per year thereafter.
  4. Shamil

    Shamil Well-Known Member

    This is terribly complex, I don't know of a resolution, but it looks like the designer/developer of the template has licensed the usage of it, or leased it. Unless he had initially specifically had said that it must be hosted on their servers, I think it would be typical and fine to have it not hosted with them.
  5. Fred Sherman

    Fred Sherman Well-Known Member

    Is there anything in the code? Comments, headers, etc?

    Can he establish web hosting as a separate service? Evidence of this would be a different billing schedule, hosting of sites by him that he didn't have them develop at the same rate as the sites they did develop, a single line bill for all sites hosted instead of listed all sites as a separate line-item, a discount based on the number of sites hosted.

    Things that could work against him - if the sites they developed are discounted while ones they didn't are full price, an annual bill in which they could claim they included licensing fees, or they only host sites they develop.

    What does the cost analysis determine? Its simple enough to compare the cost of a custom template versus a developer licensed template. Did they charge him custom prices? They goes in his favor. Have they reused that template with other customers? That goes against him.

    Who installed the template? If he installed it, it strengthens his case. One would think that if the code were licensed and hosting was part of the deal, they would have installed it. What does the invoice say, assuming there was one? Any readme or license files in the directory tree?

    Business 101 - always have a contract. Its not about trust, its about responsibilities and expectations.
  6. Fred Sherman

    Fred Sherman Well-Known Member

    As I was writing my reply, you posted this key piece of info. I'd say he's stuck unless he can show that the cost of the sites that they designed were at market value and the same with the hosting.
  7. Slavik

    Slavik XenForo Moderator Staff Member

    We had a quick chat with my solicitor (free of charge as he was packing up for the day, but also without any research), he says, if no license agreement was in place, then most likely my friend would be fine to move hosting as there was nothing to bind his usage of the site to the hosting service. The code would remain property of the 3rd party so could not be redistributed or used outside the scope of its original purpose (ie cant be re-used for a new website).
  8. TheLaw

    TheLaw Well-Known Member

    Sure there is writing. Chat logs? Emails? All of that is evidence of what the agreement actually was.

    I'm only somewhat familiar with law in the UK. This is a mess but the bottom line is you want to work it out. Don't bother with all the legal questions and then try to explain the law to the other party. If hosting wasn't part of the agreement, which unless it was explicitly it would seem that it wouldn't be, then just tell them that it's rather clear per the email that hosting was obviously something different and always is. Show them some emails. There is design and development and, once the project is done, a place to put it. We'd love to host with you but it has become too pricey although we're glad to give a premium option to customers if they would like. However, our challenge is that a customer would very likely not agree to have a website developed if they were forced to host it somewhere.

    Now here is where it gets sticky -- did he make an agreement with the company to do both so that the price was cheaper? If the price for the work was obviously low so that hosting would be part of the agreement, that's an issue. But if there is no sign of this whatsoever, then while they can get into an argument about who owns what, you can explain to them that it's their mess to explain to other hosts how they somehow own the rights to the website in the absence of an agreement and despite getting paid for it too!

    Once you got it done, put it in writing - even a confirmation that is informal. At least it's some proof of what the deal was.
  9. Floris

    Floris Guest

    So, I am a customer looking for a design.
    I hire your friend to make me one.
    I get a design with what seems hosting.

    But it's not my design, I pay a usage-license, which btw, I don't have with the guy I pay but the company that he outsources it to?

    Sounds like a guy that shouldn't run a company.
  10. jadmperry

    jadmperry Well-Known Member

    Interesting point comes to mind...not being snide, but from a legal point of view, the issue would seem to be between the customer and the third party. This scenario has so many issues and twists that come to mind and they could never be resolved without knowing all of the facts (plus some concrete action being taken, like filing suit).

    Issues that pop out (acknowledging little to no knowledge of UK approach to these issues....but, I would also point out that there may be multi jurisdictional and choice of law issues based on where the customer is, the original party and the third party...plus a few more potential twists):
    3rd Party benificiaries to contracts
    Whether the contract was for goods or services (haven't really looked at this, or whether this is even applicable, but UCC might be an issue under US law See RRX Industries, Inc. v. Lab-Con, Inc. 772 F.2d 543 (9th Cir.1985))
    Law of agency (was the first party acting under agency agreement (explicit or implied))
    Copyright/IP law (with special attention to whether templating is a copyrightable work....I think it would depend on the complexity/originality of the work; other issues would concern whether the work is in the first place derivative of others work, whether there has been transformative work done by your friend, and whether there was work for hire). Also important would be if there was any copyright registered.
    Big or little pockets (on all sides) and ability to pursue claims- would it be possible or make sense for anyone to sue (and relatedly, ability of anyone to get or enforce a judgment).

    Bottom line, seems like a crap load of issues that would possibly be answerable with a lot of "ifs and maybes" but are essentially unaswerable without a lot more facts. Unfortunately, a lot of those facts don't develop until someone takes legal action. If they never do, then there is no issue (admittedly a Catch-22).

    Fun with law! :cool:
    TheLaw likes this.
  11. TheLaw

    TheLaw Well-Known Member

    Good points... This is the type of a lawsuit where it takes 10 times the value of the goods/services in question to obtain the "right" answer. Makes for a good law school exam question but far too convoluted to practically solve in court. The real life answer is to work it out or have both of you lose. This is a case that you don't take and politely decline after proper screening! :)

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