Avoiding the pitfalls - a guide to extranets

In recent years the use of extranet sites in the construction industry has increased. Businesses that use an extranet to assist in a collaborative project can gain several commercial advantages in doing so, including:

• time and cost savings - through circulating information in an electronic, as opposed to a manual, format;

• efficiency - in that all extranet users have instant access to information on the extranet relating to the project; and

• security - in the creation of a secure online network that only users with valid usernames and passwords can access.

While considering the benefits of using an extranet site however, be aware of contractual issues, legal admissibility, security/ confidentiality, intellectual property rights, defamation, limiting risk and anti-discrimination concerns.

Contractual issues

Typically the contractual process involved in setting up an extranet will be two-fold:

(1) A contract between the property developer or its customer and the extranet provider (the "provider"), agreeing the extranet services to be provided; and (2) once (1) has been completed, a contract between the provider and each of the other users of the extranet, governing their use of the site.

The developer's chosen provider will likely seek to agree both forms of contract using its own terms and conditions. Standard terms will always be drafted in favour of the business whose terms they are. As such, it will be in a developer's interest to read these carefully and to raise any questions before signing. Issues to consider include:

• The extent of the services and the service levels offered by the provider. In a time-critical project, it will be vital that the extranet is able to meet the developer's reliability and responsiveness requirements. For example, how often is the system down for repair or maintenance reasons or upgrades? Service levels will be key here. What systems are in place for data or disaster recovery? Is technical support included, and if not, how much extra will this cost?

• Whose responsibility is it to ensure the security of the extranet? The provider should offer some form of virus protection. However, the developer should be aware that the provider's standard terms may seek an indemnity from, or make it a requirement on the developer and other users to retain responsibility in putting effective systems in place to prevent viruses from being transmitted to the extranet. If a developer is required to agree to an indemnity, effective monitoring procedures should be put in place to ensure all items are screened before being posted.

• The developer should ensure any intellectual property rights in documents to be transmitted to the extranet, whether owned by it, other users or by any other relevant third parties, are properly protected before documents are transmitted to the extranet.

• Provider standard terms are likely to state its agreed limitation of liability for the extranet services provided. It is not uncommon for extranet providers to seek to exclude consequential losses.

Legal admissibility

What is the position regarding the legal admissibility of documents stored on an extranet, if the original hardcopy documents have been destroyed? Any print-out of an electronically stored document will be a copy. How does this affect its admissibility in court?

The main issue will be to demonstrate the authenticity of the copy document. The British Standards Institution recently introduced a British Standard - BSI BIP 008: 2004.

This standard contains recommendations that, if followed correctly, are designed to help you achieve this demonstration of authenticity.

One of these recommendations regards audit trails. An example of this is maintaining a record of when the documents have been created, updated or removed from the extranet.

In the event of a challenge to the authenticity of a particular document, this will be vitally important information to have available.

Monitoring content

Most standard terms for extranet providers will include a condition making extranet content the responsibility of the developer. As the likely party with control over extranet content, it is best that the developer discusses with the provider, at the outset, means of setting up effective measures to deal with monitoring all pieces of information before they are published.

Also there should be a reliable removal process in the event, for example, of a complaint alleging information on the extranet is defamatory, threatening or obscene, or is infringing the copyright of any other person, company or partnership, anywhere in the world.

Extranet sites can prove to be a valuable commercial asset to meeting deadlines. Provided consideration is given at the outset towards ensuring the extranet services agreed fit the commercial requirements of the project, legal issues should not prevent you from getting the most out of working online.

Anthony Lee is a partner and Janet Lane is an assistant solicitor at Fladgate Fielder.