Can this contract be valid without any signed agreements and who owns the product?

Question

I'm trying to figure out this scenario -

• Company X (US based company) agreed to do a Joint Venture with an individual (let's call him B, he's non US citizen) to create a software product. X were to provide sales and B were to provide product development.
  • Company X agreed to pay B a fixed monthly salary for development.
  • B would get a % of sales when the product is sold.
• B began working on the product development before any agreements were signed by X (on good faith that the agreements will be signed soon).
  • At some point, B asked X for a computer with certain configurations but X provided a computer with lower configurations that was never used by B (even though the computer stayed with B and B had made it clear that it was not the required configurations).
  • X had no inputs in development of the product other than some very basic discussions regarding layout at the very beginning of the project.
• Now, over a year has passed and things stand at -
  • The product has been built by B (but not buyers yet)
  • B was never paid by X (no monthly salary or any monies whatsoever) so far (B working on good faith that payment will come).
  • No agreements have been signed so far (B working on good faith).
  • Now there are now disagreements over the terms of contract (for example X claiming B's shares are dilutable etc and X is basically trying to discount B's work and claim ownership of the product).

Now, who owns the product? Is it owned by X because X provided the computer requested by B (even though it was not exactly what was requested by B) and because of some vague layout discussions at the beginning? Or is it owned by B because B never got paid and there are no signed agreements?

Answer 1

International law is not interested in this situation - it deals with things like state to state relations, maritime law, human rights etc. Contract law is particular to national or sub-national jurisdictions, the contract must have some relationship to the jurisdiction to engage it - the location of one or more parties or the location of the work being typical reasons.

Contracts are generally valid without needing to be signed or even written down: I had my hair cut yesterday and I never wrote out a contract with the hairdresser. See What is a contract and what is required for them to be valid?. Legislation in particular jurisdictions may require written contracts for some transactions but these tend to be things like real estate related, building related, finance related etc.

The problem here is not if there is a contract (there probably is), the problem is what the terms of the contract are. The advantage of a written contract is that it provides evidence of what the terms are in the event of a dispute. Absent a written contract you need to look to other evidence including communications between the parties to determine the terms of the contract.

I can see several possibilities:

• B is an employee of X or otherwise doing work for hire: X owns the code.
• B is an independent contractor: B owns the code
• the arrangement is a partnership: X & B both own the code, see Ownership of Work Copyright by Multiple Authors