SEO and SEA.
Service contract or
Contract for work.
SEO and SEA.
Service contract or
Contract for work.
from
Search engine optimization (SEO for short) and search engine advertising (SEA for short) are important tools for boosting sales in today’s Internet age. Many agencies offer their services for this purpose. But what do customers get for their money and what contractual claims do they have? The Cologne Regional Court has taken a position on this.
What is it all about?
In 2012, a company acquired license rights to a textile brand for Germany, Austria, Switzerland, France and Benelux. Initially, distribution was only to take place via the internet, which is why the company commissioned an internet and advertising agency. The agency proposed a contract to the company for an “internet agency flat rate” with an hourly quota of 575 hours per year, which would be sufficient for the desired scope of the online store. Any remaining time could be used for other advertising.
At the end of 2012, the parties then concluded a contract for an “Internet agency flat rate” with a monthly flat fee of EUR 4,400 net. The price of EUR 2,990 included an “online marketing flat rate”. Its scope of services was described as follows:
The scope of services includes the following in-house services: Project management, consulting, conception / strategy, online advertising media (e.g. banners), search engine optimization (SEO), search engine advertising (SEA, e.g. Google-Adwords / Facebook, each excl. media budget / switching volume), affiliate marketing, newsletter marketing, voucher portal support, price search engines, web controlling (e.g. with Google-Analytics), social media consulting, a monthly reporting of online marketing key figures, activities as well as also a compact competitive comparison of up to three relevant competitors. A maximum of 350 hours are available per year (per 12-month period).
The scope of services of the Internet agency flat rate was defined as follows:
The scope of services includes all services of the above-mentioned online marketing flat rate as well as the following in-house services in relation to all Internet activities: project management, consulting, conception / strategy, creation / design / layout / final artwork, text work in German (excl. translations) as well as all Internet programming services. A maximum of 575 hours are available per year (per 12-month period).
The GTC went on to say:
The services to be provided are jointly planned, decided and implemented by the agency. The client pays a fixed, monthly flat fee (depending on the above-mentioned flat rate model) plus VAT (…) A flat-rate service contract is concluded between the client and the agency rather than a contract for work and services. Excluded from the framework agreement are third-party services, such as media budgets for Google Adwords, affiliate commissions, ad placements, etc. The framework agreement begins on the desired start date and has an initial term of 24 months from this date. Unless the framework agreement is terminated in writing by one of the parties 6 months before expiry, the agreement is always extended by a further 12 months under the same conditions. (…).
A kick-off workshop was then held in 2013. The contract was then duly terminated in June with effect from 31.12.2013. The company ceased payment after June 2013 and demanded the return of the amounts previously paid in the amount of EUR 36,652.00 due to fraudulent misrepresentation, as the services provided had a value of EUR 3,000.00 at most.
The agency took a different view. In its view, there was a service contract, meaning that the company had to pay the agreed flat-rate remuneration.
Decision by the court
The Regional Court of Cologne (Judgment of 20.02.2015 – Ref. 12 O 186/13 ) ruled in favor of the agency.
The contract is a service contract. This is clear from the wording and the fact that it is a framework agreement under which several individual services can be called up. Online marketing services, which are to be qualified as contractual services, are an essential part. In this case, mere action and no success was owed.
In contrast, the “internet agency flat rate” with performance-related services is only an extension. Although these were elements of a contract for work, they were not so significant that the entire contract had to be classified as a contract for work.
As this is a service contract, acceptance by the agency client is therefore irrelevant. Rather, the payment promised to the agency was to be made regardless of the actual performance. The Cologne judges were also unable to identify any grounds for rescission.
Conclusion
The case shows once again what serious consequences the contractual classification can have in the event of a dispute and that attention must be paid to this when drafting contracts. It is correct that SEO and SEA contracts are generally to be classified as service contracts. The fact that all services are accordingly subject to service contract law could have been seen differently.
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