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Beit Midrash Series P'ninat Mishpat

Poor Job of Setting Up an Internet Site? – part II

An NPO (=pl) hired the defendant (=def) to help set up an internet site for fundraising use. Def identified three stages in developing the site, which was the basis for a contract to pay def for the first stage, including a functional specification document and other groundwork. During that time, they would negotiate the terms for work on the other stages. Def’s salary was 12,000 shekel plus 4% of revenue raised for a certain time. After presenting the functional specification, def helped pl choose a site developing software company (=SC) to do the next stage and negotiated their fee. Pl decided to hire a programmer (=RP) to replace def. RP reported to pl that def was responsible for many flaws in the planning, and pl also held def responsible for difficulties working with SC, including that SC was promised too much pay and was not sufficiently held responsible. Pl stopped paying def the promised percentage of profits and demanded a return of some of the money already paid. Def is countersuing with the claim that pl did not do enough to maximize profits, and he only agreed to a low salary because he was promised a percentage of the income. The sides also dispute if the 4% is of the revenue produced specifically through the site, or whether it is for all of pl’s revenues during the period.
---- ---Iyar 11 5779
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Based on ruling 76109 of the Eretz Hemdah-Gazit Rabbinical Courts)

Case:
An NPO (=pl) hired the defendant (=def) to help set up an internet site for fundraising use. Def identified three stages in developing the site, which was the basis for a contract to pay def for the first stage, including a functional specification document and other groundwork. During that time, they would negotiate the terms for work on the other stages. Def’s salary was 12,000 shekel plus 4% of revenue raised for a certain time. After presenting the functional specification, def helped pl choose a site developing software company (=SC) to do the next stage and negotiated their fee. Pl decided to hire a programmer (=RP) to replace def. RP reported to pl that def was responsible for many flaws in the planning, and pl also held def responsible for difficulties working with SC, including that SC was promised too much pay and was not sufficiently held responsible. Pl stopped paying def the promised percentage of profits and demanded a return of some of the money already paid. Def is countersuing with the claim that pl did not do enough to maximize profits, and he only agreed to a low salary because he was promised a percentage of the income. The sides also dispute if the 4% is of the revenue produced specifically through the site, or whether it is for all of pl’s revenues during the period.



Ruling: Last time we saw that pl does not have sufficient grounds to withhold def’s fee.

The contract states that def will receive 4% of the funds that are raised through the "ma’arechet" (system). If there is a doubt whether this refers to the internet site or to their income producing system in general, the benefit of the doubt goes to pl for a few reasons: 1. The one who wants to use a document to produce rights has to prove that they are included in the document (Shulchan Aruch, CM 42:8). 2. We sometimes apply the idea that the one who wrote the document (in this case, def) is held accountable for lack of clarity, for he had reason to spell out his rights clearly. 3. Elsewhere in the document, "ma’arechet" refers to the internet site.

Even though pl used the promise of a percentage of profits to justify def’s low base salary, def has a right to influence how pl will have to work in producing profits only if he has the status of a partner. In this case, def was hired as a consultant, did not invest any money in the operation, and was not granted decision-making power. Therefore, there are no signs of partnership, and def cannot sue for pl’s lack of profit production.

Def is also not entitled to compensation for late payment. Since there was a valid question as to whether def had his full salary coming to him, it was legitimate for pl to withhold payment until this point was clarified.
הלכה פסוקה
הרה"ג דוב ליאור
1 - אחריות לווה על פרעון ההלואה לאחר שנתן המחאה
2 - נזק תוך כדי בדיקת קנייה של אופנוע
3 - שטר שנכתב שלא כדין ובסופו היה קניין
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