Website Buying Contract For Buyers - Terms, Clauses and Caveats

[Clinton]

Thought I'd start a thread that could develop over the weeks/months into a good resource for the kind of protection a buyer needs to build into the contract for the purchase of a website business. Obviously, this applies to those looking to put together a written contract. If you know the seller well enough or it's a small value transaction, you might just work on a handshake.

IANAL, this isn't a detailed guide to the law of any particular jurisdiction, each case could have traits that require coverage not mentioned here, and not all the below may be applicable or of interest in every case. But let's kick it off.

All Sites.

AS1: Make sure you define all the main terms well. Don't refer to "website" unless you have defined "website" as the domain name xyz.com plus all the content, design, scripts, subscribers, affiliates, other business relationships, licences, trademarks blah, blah.

AS2: Define also who the parties to the transaction are. It's your responsibility to ensure that the seller is an adult, of sound mind and voluntarily entering into the agreement. If he happens to be a fifteen year old who claims he's an adult, the contract is void ab initio i.e. he could come back to you in a couple of years and demand the site back (for free) because the contract you entered into wasn't valid. You need to also be clear whether a party is acting in their own name or on behalf of an organisation. If the person is married you may want to consider adding their spouse to the contract (see posts below)

AS3: Build in a confidence clause to hold the seller from discussing details of the deal or, in fact, business operational, financial and other data - whether it's during the sale process or after completion

AS4: Build a non-compete clause in. This is tricky as it can easily run foul of legislation to prevent "restriction of trade".

AS5: Get a "No Outstanding Creditors" commitment from the seller. You could include taxes, fees, salaries, prize money (as you'd have with PTC and other incentivised sites), affiliate commissions etc.

AS6: Describe how the payment and the transfer of the property will take place.

AS7: Include a dispute resolution mechanism and agree a jurisdiction. You could add that both parties waive their right to a jury trial.

AS8: Include that if any part of the contract is not enforceable that it won't affect other parts

AS9: Protect against the seller having any other agreements that conflict with this one by making him agree that there aren't any and that he won't be entering into any agreements which conflict

AS10: Describe the "Consideration" i.e. price. It's essential to the contract. If there's no consideration, it's not a valid contract

AS11: State that this is the complete agreement, supercedes any previous agreement and that rights in it can be assigned/transfered.

AS12: If there are any liabilities being assumed by the buyer they need to be clearly and comprehensively stated

AS13: For completeness, it's helpful to require a Bill of Sale at the end of the transaction that the seller can use to formally hand over ownership and rights

AS14: At closing there shall be no material adverse change in the financial position of the buyer or the property.

AS15: Secure the future of the site's backlinks that are within the seller's control by contractually requiring him to keep them in place for a pre-agreed number of year/s.

Then we have clauses and caveats that apply to certain types of sites. I've provided some examples below and am hoping you can add some.


Content Sites

CS1: Establish ownership of the content and rights to the content. If any of it was created by third-parties, are there contracts with those parties giving full rights to the site owner?

CS2: Get the seller to certify that no content infringes the rights of others.

...more


PPC Sites (content sites, product sites or any other sites that use PPC to drive traffic)

PPC1: A clause that details of campaigns run so far, conversion information etc., will remain confidential and won't be shared with any other party during or after the sale.

PPC2: A list of keywords and terms that the seller agrees not to compete on for X months after handover.

...more


Contextual Programs (sites earning from Adsense etc)

CP1: An agreement on whether the contextual program accounts are included with the sale or not.

CP2: Detailed stats for the last X months will be provided in CSV/XLS format on handover. Information on "channels" used in the contextual program and the performance of those channels will be provided broken down by day and by channel. Seller will keep his contextual account in good standing for X months after handover and provide other stats info from the history as and when required

....more


Product Sales

PS1: Define whether existing inventory is part of the sale.

PS2: If it's a site using dropshippers add an exit clause if any dropshipper accounts or payment accounts can't be moved over to your name.

Your contributions for titles and/or clauses/caveats to be considered when drawing up the contract? Don't be shy, all suggestions gratefully received whatever your level of experience.

<added> Related thread: Free NDAs, contracts etc.

[tke71709]

PS1: Define whether the existing inventory is part of the sale

[Clinton]

Thanks. Updated, and I'll keep updating the OP with suggestions received so please go ahead, folk, and keep making suggestions.

[bobactuallyismyuncle]

Also be certain that you know who you are buying from. In many states property like this will be considered to be jointly owned by husband and wife (for example) -- you need both of their names on the contract as "sellers". You don't want to find out later that the property sale is going to be contested through divorce proceedings, and you don't want to test the definition of "third party" in this sense, either. Make it clear up front.

Edit: Another one I always state: "both parties waive their right to a jury trial in any matter requiring adjudication under this Agreement". If anything goes south on these you don't want the expense of a jury trial.

[Clinton]

bobactuallyismyuncle, you raise an interesting point. AFAIK, domains can't be held in joint names. What's the official position if it's owned in joint names and one party sells the domain without the consent of the others? As far as the registrar and the buyer are concerned it's a clean transaction, isn't it? Would the aggrevied parties have any claim on the reg and buyer or will it be only on the seller? Anyone knows?

[bobactuallyismyuncle]

Good questions for a lawyer...but I would say that in these cases where there is a "sole proprietor" (not a business entity) selling a domain and/or website then the safest thing is to get the spouse on the contract. Simple domain name sale might be ok but a website/business is essentially an annuity stream of income and you can bet that if sold by a spouse involved in a nasty divorce proceeding without the knowledge of the other, the injured party's attorney is going to smell blood.

If your seller says they can't get their spouse to agree to sign then that ought to be a big red flag on the transaction.

[Clinton]

I've added the spouse bit to AS2.

Any other suggestions anyone?

June 7th: Added PS2 which kind of occured to me reading Eric's thread.

July 14th: Added AS15 suggested here by Avid.