A domain transfer agreement: what is transferred and how to tie payment to the transfer

A company finds a domain that would suit its new product and discovers that it is held by a private individual or another company willing to sell it. On a domain transfer there is no authority to examine the agreement as the Land Register does with real estate, and both the payment and the technical transfer take place outside any official supervision. Both sides are therefore protected above all by the agreement and by the right sequence of steps.

What happens in law on a domain transfer

A domain does not pass to the buyer by handover in the way goods do. The .sk registry rules describe the holder as the person who, on a successful registration, acquired rights and obligations in respect of the domain, including the right to use it and dispose of it. Those rights arise from the domain contract with the registry. Under the SK-NIC rules, a successful transfer terminates the original holder’s contract and the registry concludes a new contract with the new holder. The CZ.NIC rules for .cz domains describe the change of holder as a transfer of the domain name or an assignment of the contract establishing the holder’s relationship to the domain.

The agreement between seller and buyer is therefore generally not treated as a contract of sale of a thing. Between entrepreneurs it is usually concluded as an innominate contract, for which the law insists on one condition:

The parties may also conclude a contract that is not regulated as a contract type. If, however, the parties do not sufficiently determine the subject matter of their obligations, the contract is not concluded.

— Section 269(2) of Act No. 513/1991 Coll. (unofficial English translation)

The subject matter is therefore not merely “the domain”, but precisely described obligations: the seller will procure the change of holder to the buyer, will provide the necessary co-operation and will maintain the domain until the transfer; the buyer will pay the agreed price. If the domain is sold by a private individual outside business, the agreement is generally governed by the Civil Code, which likewise permits innominate contracts (Section 51 of Act No. 40/1964 Coll.). The Czech Civil Code also permits innominate contracts (Section 1746(2) of Act No. 89/2012 Sb.), so with a .cz domain the agreement is built on the same logic.

How the registry effects the change of holder

Signing the agreement changes nothing in the registry. SK-NIC transfers a domain to another registry user on the basis of an application by the holder delivered through the authorised registrar for that domain. The registrar is entitled to submit the application only on the holder’s written request and with the new holder’s consent. For .cz domains, the designated registrar submits the instruction to change the holder on the written request of both the current and the future holder, and the future holder must express consent to the current registration rules.

Three practical consequences follow. Without an active step by the seller, the buyer will not appear in the registry, so the agreement must specify by when the seller will submit the application and what happens if it does not. With a .sk domain, the buyer must be recorded in the registry as a user, and that must happen before the transfer. A transfer does not change the domain’s expiry date, so if the seller lets the registration lapse, the subject matter of the agreement may cease to exist before the transfer is completed.

Tying payment to the transfer

The main risk lies in the order of steps. If the buyer pays in advance, it is relying on the seller to submit the application. If the seller transfers the domain first, it is relying on the buyer to pay. The solution is escrow: on signing the agreement, the buyer deposits the price into notarial or lawyer’s escrow and the escrow holder releases it to the seller only once the new holder is recorded in the registry. The agreement should at the same time set a date after which, if the transfer has not happened, the money is returned to the buyer and the agreement terminates, so that the escrow does not hang indefinitely.

At a lower price, or on a transfer between connected companies, escrow may be unnecessary. Even then it is worth splitting the payment so that the larger part follows only after the change has been registered.

The seller’s representations and third-party rights

Under the SK-NIC rules, registration of a domain does not mean protection against third-party objections to the registration or use of the domain. The buyer therefore takes the domain with all the risks attaching to it. The agreement should accordingly contain a representation by the seller that it is the holder of the domain, that no dispute concerning it is pending before a court or in alternative dispute resolution, that the domain is not blocked and that it is not aware of any third-party claims, together with the consequences of those representations being untrue. Before signing, check the trademark registers as well. How trademark proprietors defend themselves is discussed in a demand to hand over a domain because of a trademark, and the routes to a dispute according to the extension in the article on a dispute over a .sk, .cz or .eu domain.

Related designations and the technical handover

If the seller owns a trademark in the same wording, the domain without it may be of limited value to you. The agreement should also address a transfer of the trademark or a surrender of it. If no trademark exists for the designation, consider registering your own trademark so that the designation is protected by more than the domain. An undertaking by the seller not to register confusingly similar domains or trademarks after the transfer is also useful. Technically, do not forget the handover of access to the DNS settings and e-mail forwarding, so that after the transfer the seller no longer controls where the domain points.

We prepare a domain transfer agreement with escrow and representations through our domains and domain disputes service. If you are buying a domain together with an entire e-shop, see buying an e-shop and the transfer of the domain.