Domain name contracts

Domain name contracts

Our domain name contracts fall into two categories: domain name licence agreements and domain name sale agreements.

A domain name is not usually considered to be an item of property, and the sale of a domain name is really a transfer of contractual rights and obligations. Domain names can change hands for thousands, tens of thousands, and sometimes hundreds of thousands of pounds (million pound plus domains are very rare). A domain name sale agreement can help the parties to the sale to safeguard their rights in the domain name, and in the money or other consideration that is being exchanged for the domain name.

A licence of a domain name, by contrast, involves the owner of the domain name (the licensor) granting another person (the licensee) the right to use the domain name. A licence will almost always be revocable or terminable, in at least some circumstances. Some registration authorities do not allow the licensing of domain names. Before you enter into - or for that matter begin considering or negotiating - a licence agreement, you should check whether the authority that administers the relevant domain name extension permits licences.

Domain name sale agreements

We offer three different domain name sale contract templates. One balances the interests of the two parties, whilst the other two favour the interests of one party over another. The differences are most visible in the warranties given by the seller to the buyer. In the pro-seller document, there are few warranties; whereas in the pro-buyer document, there are many.

Not all domain name sales warrant a written domain name sale agreement. Circumstances where a formal written agreement may be justified include:

• where a domain name has been previously used in the course of a business and the goodwill (unregistered trade mark rights) in the domain name are to be assigned along with the domain;
• if the seller requires warranties from the seller in relation to the domain name, for example a warranty that there are no third party rights affecting the domain name;
• where a transaction is at arms' length or there is a lack of trust between the parties; and
• transfers of valuable domain names.

An agreement might by overkill, for example, in the case of a transfer of an inexpensive domain between friends.

The key provisions of our domain name sale agreements are as follows.

Purchase Price

The domain name sale agreements incorporate three alternative clauses about the payment of the purchase price. The first clause may be used where the buyer must pay the purchase price to the seller by an agreed date. The second clause may be used where the buyer has already paid the purchase price, and the parties wish to formally acknowledge payment. The third clause may be used where the buyer will pay the purchase price to an escrow agent, and the agent will hold the money pending transfer of the domain name.

Assignment

In addition to the transfer of the (contractual) right to use a domain name, you should consider whether you need transfer any goodwill, trade mark rights or rights in passing off associated with the domain name. If the domain name or a very similar domain name has been previously used by or under the authority of the domain name seller, then it may be appropriate to transfer these supplemental rights.

The assignment clause in the domain name sale agreement may cover unregistered trade mark rights and goodwill. Registered trade mark rights should be the subject of a separate trade mark assignment.

Transfer process

Different domain name types and different domain registrars will operate different transfer processes. The transfer process clause in the domain name sale agreements therefore places general obligations on the seller and the buyer to ensure that the process is promptly completed.

Costs and expenses

A number of costs may arise on the transfer of a domain name. The registration authority may levy a charge, the registrars and/or registration agents may levy charges, the bank handling the funds may levy a charge, and the escrow agent will usually charge. This clause specifies where the charges fall.

Domain name licence agreements

It is becoming more common for domain names to be licensed - often as a precursor to an outright sale - to enable a potential buyer to assess the domain name. We offer two different template documents. The only significant difference between them is that the second contract contains an option to purchase (i.e. to force a sale) benefiting the licensee. Note that domain name licence agreements are also sometimes called "domain name lease agreements" or "domain name rental agreements".

The terms of a domain name licence must be carefully considered to ensure that the rights of both the licensor and the licensee are protected. The key provisions of our domain name licence agreements are detailed below.

Licence

In these agreements, the licence simply provides that the licensee may use the domain name during the term of the agreement. The licensee may also be granted the right to sub-license the domain name for others to use.

Licensor's obligations

A spectrum of optional licensor obligations are included in the draft domain name licence agreements. These are designed to protect the interests of the licensee to the domain name: for example, to ensure that the domain name remains registered to the licensor.

Included in the agreement, are obligations to:

• edit (promptly) the name servers associated with the domain name in accordance with the written instructions of the licensee;
• ensure that the licensor remains at all times the registrant of the domain name;
• ensure that the owner contact details and billing contact details associated with the domain name are kept updated;
• renew the domain name in good time before the expiry of any period of the domain name registration;
• notify the licensee of any disputes relating to the domain name;
• supply to the licensee copies of all correspondence sent by the registry of the domain name to the licensor relating to the domain name.

Negative obligations are also included in the template contracts. For instance, the licensor's may be restricted from:

• editing the name servers associated with the domain name save in accordance with the written instructions of the licensee;
• selling, renting, assigning, licensing or transferring the domain name to any third party;
• suspending or cancelling the domain name, or allow the registration of the domain name to lapse.

Licensors will usually want to limit the extent of these obligations.

Licensee obligations

While the licensee will be interested in ensuring that the domain name remains in the control of the licensor, the licensor will want to ensure that the practical use of the domain name by the licensee does not damage the licensor's interests.

The licensee obligations clause as drafted includes undertakings not to use the domain name in any unlawful way, and also indemnities benefiting the licensor in the event of unlawful use or the loss of the domain name through the default of the licensee.