Advisory Case on Legal Review and Dispute Prevention for a Web-Based Service Development Consignment Agreement

1. The Client's Situation

The client sought to carry out the development of a new web-based service on an outsourced basis, but the initial draft agreement contained numerous unclear points regarding the development scope, the method for handling additional development, copyright ownership, and the scope of maintenance. In particular, there were concerns about a high likelihood of future disputes over matters such as the payment method, liability in the event of schedule delays, and rights issues arising from the use of open source. Accordingly, the client requested advice on supplementing the agreement so that it could prevent disputes and proceed with the project in a stable manner.

After reviewing the draft agreement, Your Legal Team proposed measures to clarify the development scope and additional-development procedures through an attached document and change-management provisions, and to reduce unnecessary disputes by including a deemed-approval rule in the inspection and acceptance procedures. In addition, we stipulated that copyright and ownership of deliverables would transfer at the point of "full payment plus completion of inspection," and added reporting and approval obligations for the use of open source, thereby minimizing intellectual property risks. For payment and maintenance rates, we distinguished between the escrow-payment and direct-payment methods and specified withholding-tax provisions, thereby also blocking tax risks. Furthermore, we systematically organized the method for calculating the completed-work amount upon rescission or termination, the scope of warranties and indemnification, and the cap on damages, thereby enhancing the stability of the agreement.

The final agreement reflecting this advice clearly organized the rights and obligations between the developer and the ordering party, greatly reducing the potential for unnecessary legal disputes. The client was able to secure legal safeguards throughout the project regarding schedule management, payment, and maintenance, and was also able to enhance its credibility with future investors and business partners.