This, right here, is exactly why we do these things.
>>Verbal contracts are binding.<<
You cannot legally agree to something on the phone and then change your mind when it comes time to sign the written form of the contract. Period.
Perhaps this is due to flags from people who don't like the story, or maybe mods have manually down-ranked it.
Top of first page has 201 points after 6 hours.
Lastly, I wouldn't care even if some internet lynch mobbing were going on. Between being broke for no fault of mine because x behaved irresponsibly and making x's life miserable so that I can be slightly better than broke, I would pick the latter.
Net-30 (meaning, let's just pretend we're going to pay you within 30 days of getting invoiced so we can stop talking about this part of the contract) is a standard term. Is it your expectation that when you don't have a contract, you can expect "Net-1" payment?
I could easily recreate that screenshot in a couple hours in photoshop - but that doesn't mean it TOOK a couple hours in photoshop.
The majority of design is thinking through how the app will be used, researching similar apps, figuring out intended user goals, etc etc. Then theres a long process of experimentation until you get to a point where you're comfortable to send it to the client.
*http://www.howdesign.com/design-business/pricing/hourly-rate...
I want to like them, but they aren't perfect, and they haven't made a big deal out of "not evil" in their positioning.
But anyways: LESSON LEARNED for startup CEOs. Here it is, it's very simple:
If you want to question or slowroll an invoice, direct it to finance@, not legal@.
You have exactly the same set of options with finance@, and your legal can still review the invoice, ping the vendor, or what-have-you, but you haven't escalated the situation.
Like most here, I wouldn't have let myself get into the position of this freelance designer or chosen to air my dirty laundry in public. On the other hand, if I had sent a legitimate invoice and a CEO tried to fob me off with the kind of attitude claimed here (he says, noting that we haven't heard the other side of the story yet) then I would be extremely unsympathetic to flippant comments and requests to mess around with underlings. I imagine my response would be to send the final claim letter by registered post with a note that legal action would follow if the invoice remained unpaid after a reasonable period.
Of course, in this case, it doesn't matter: the Internet hype machine has been started, and if the reported claims are accurate, it is presumably a matter of time before everyone who has anything to do with this start-up starts forgetting to return their calls. Who wants to be associated with someone who thinks it's funny not to pay their bills, particularly when it's a small business working with another small business?
Lesson: Get paid first when working with new clients. There just is no other way.
People throw these threats into all kinds I thins, whether it be something as simple as a request for a refund on a $1 purchase or a thousand dollar consulting bill. People even seem to believe that it helps: that it provides motivation to be heard.
On my end, however, the second there is a threat is the moment I cannot help you any more: I refer you to legal. If you threaten legal action, it is no longer a business decision, it is a legal one. Likewise, of I threaten legal action, it is because I've already given up on business and have already talked to a lawyer, and actually want to talk to yours.
Here, we just don't know. We have some sentences taken out of context that are designed to make this designer seem reasonable. ...but... that "I figured :)" from the CEO is, to me, really telling: it tells me that this person probably thought the designer was "over the top" in their reaction and of course would try to escalate with lynch mob...
So, in that possible context: does "talk to finance help"? If it does, I feel like it would send the wrong message: that you really are now in legal land, not in finance or business land. Again, though: just "possible context", as we don't have the entire email exchange (leading me to be stuck in "people who have reacted like this at me had these associated behaviors" world).
From what I've seen so far, this client did two things wrong:
* They scoffed at the invoice
* They told the vendor to send the invoice to legal@
If the client had declined to do EITHER of those things --- not both, just not do one of them --- there wouldn't be even half as much drama as there is now. "Send it to legal@" was just a dumb move.
Im sure this particular situation is nuanced, and both parties seem to be unhappy. I haven't worked with many contractors yet, but my 2 rules of thumb are:
Don't ask people to do work for you unless you plan to pay them for it.
Pay promptly and in full.
It's pretty simple. If the CEO was never planning to pay, the conversation shouldn't have gotten that far and the contractor shouldn't have had the idea that they should go and make something.
The onus was on the vendor to actually submit the invoice to the email address the CEO said to send it to. That's not a hardship. Try invoicing a Fortune 500 company for the first time. Goat sacrifice may be involved.
Note that I have no idea at all whether he actually did do that.
In the real world, it is actually allowed to question an invoice. You probably end up paying regardless, but you are in fact allowed to ask the questions.
At worst the invoice is for less than $2000 (3 days at top rate). No attorney can just make it go away for less than the cost of paying the invoice.
What should happen is that the attorney will say to pay it, and send their own invoice on top of it.
I'm not advocating the "get legal to push back on the invoice" strategy; I'm just saying, you don't have to rule it out to slowroll an invoice.
I don't know the founders and I have no connection to the company in question (other than participating in a previous YC batch).
Your argument is a classic case of the correlation/causation fallacy.
A modest invoice does not "generate" stupidity. Millions of freelancers around the world make a good living doing relatively small jobs for satisfied customers and submitting modest invoices that get paid on time.
If you are in a position to work on higher-value deals, then naturally you will be dealing with other people of the same level. To get to that level typically requires a certain degree of professionalism, whichever side of the deal you're on. So sure, people working with higher-value contracts tend to have less hassle.
But being messed around by someone who won't pay your invoice doesn't mysteriously become your fault just because the invoice amount was under $1,000. That really is akin to saying that it's your fault you were robbed because you forgot to lock your home, or that she was asking for it because she was wearing a short skirt and had a couple of drinks.
Many of you will be able to pick whether you are either of these types of people. I suggest being neither.
I usually agree with your comments, but in this case, I'm afraid your advice is like saying "Make sure you run a successful business and deal only with great clients!" If it were that easy, everyone would be doing it. In reality, even those of us who are successful today were the new guy once, and I expect that almost all of us have made at least one deal we would have preferred to avoid, so that we could pay the rent or fund a side project.
We're talking about a $780 invoice. The invoice was generated before written contracts were completed because... it's a $780 invoice. The project was worth so little to the client and was so trivial to the vendor that it was able to commence with neither a full spec, nor a master agreement, nor a simple statement of work.
This isn't about "pick great clients"; it's about avoiding the rats nest of potential projects where there will always be a temptation to work under fly-by-night terms like this.
And once again, every time someone says "pick better clients", someone here has to come out of the woodwork to preach the gospel of the freelancer- who- makes- a- great- living- servicing- small- clients- and- we- can't- all- be- Patrick- Mckenzie. Well, with all due respect to my friend Patrick, but I have hung out with him many times and I can assure you he has not been bitten by any radioactive spider, at least so that I can perceive it. The guy built a bingo card generator --- a kind of Platonic minima for value derivable from software --- and parlayed it into his current business.
For cripes sake, you're on the same message board as he is; do what he did, get better clients. Stop complaining when people in very similar situations as you, or who started in very similar situations to you, tell you how to do better. Look at the advice you're getting: none of it involves kissing the ass of some financier at a VC firm. (1) Pick a specialization more narrow than "software development" so you're not competing on oDesk; (2) Segment your market so you can identify the most lucrative clients; (3) Tailor what you get good at to that market; (4) Be choosier; (5) Get paid. More.
I've also never had anything even remotely approaching this sort of problem. It's jus so easily avoided by insisting on the basics of communication.
So I think you've got it backwards. People willing and able to work for $78k invoices have probably figured this out at some point (either the easy way or the hard way). People on the low end may or may not have. That's not a reason to avoid the low end. It's a reason to figure this stuff out.
Well... Yes. Yes, they are.
There is no probation period when you start a business and become a legal officer of a company. If you want to be a CEO, you'd better act like it from 9am on day 1, because chances are you have the power to commit your business to any obligation it can legally undertake. Once you do, your business will be on the hook for any such commitments you make, forever. And depending on where you are, you might get away with failing to honour a commitment if you made an honest mistake and the business failed, but if you were just blatantly negligent about your responsibility to run the company properly then your corporate legal shield might not be as solid as you'd like either, leaving you on the hook personally as well.
>I figured :)
It's hard for me to comprehend how little they value their reputation with such a response. $<1000 apparently. Shameful.
In a strange way I understand the position the CEO may be in. They may have thought because they weren't going to use it they shouldn't have to pay. In the past I've paid a designer for work only to change my mind on a product but that isn't the designer's fault. You still have to pay whomever completes work for you, even if you don't use it.
Just sounds like across the board naivety, rather than malice especially with the legal department comment. It's always best to sort problems out immediately and directly or they get in the way.
These scenarios might result in a deluge of support from others in your field, but for a lot of managers, this puts you on a special kind of blacklist. We can't know all the details of the circumstance, but we do know for sure that you were willing to "name & shame" the client here on HN. For some, that's enough.
Just to be clear, it definitely sounds like you got a raw deal here, but I've only heard your side of the story. Experience tells me that people who find themselves in this position are there because they cut corners (work order and statement of work), or trusted someone too early. Both of these are poor judgement calls. Take ownership of that, learn from it, and go find new clients. If you're not in a financial position to take it on the chin, file your small claims paperwork and have your day in court. I just doubt that the name & shame approach is the best thing for the future of your career as a freelancer.
I really wonder what this world would be like if everyone who had a career, family, or life to risk over being a whistleblower took the safe, sure path and shut up and dealt with it.
Sheesh.
Think of this as a judgement call. IMO, it shows either lack of preparedness or poor judgement on the part of the freelancer in this case. When you run your own business, the buck stops at you. In any given scenario, you must be willing to accept your portion of the responsibility. It has been my experience that the more responsibility someone is willing to accept, the better they are at getting things done. It's a pretty good indicator of success. Those who always look to push the burden of responsibility off on others will dwindle their time looking everyone but at themselves.
I'm not saying that the freelancer is 100% responsible here, but I am saying that it doesn't matter much. If your goal is to be successful, you can't be distracted by these stupid little hiccups. You have to get up, dust yourself off, and move on.
Is it just one of those things where someone's less likely to try to rip you off if they put their signature on something? Or is it more to make sure you get the words in front of a couple of lawyers who are much less likely to lie than the involved parties?
Startups who hire outside vendors should be very careful to foreclose on any potential verbal contract --- "do not start working for us until we have a signed master agreement and a statement of work" --- and that's for a lot of reasons, not just misunderstandings like this.
Obviously, if a company operator deliberately leads a vendor to believe there's an authorization to start work, they're morally on the hook for billed hours. But in reality, consultants go into engagements like that knowing that they're on the hook if anything goes wrong. This comes up a lot in consulting, because legal negotiation over master agreements can take weeks and sometimes threaten to ice deals that can be kept alive by just starting ahead of the contract.
If I go to small claims with a copy of an email, what can they say that they couldn't say just as well if I go in with a piece of paper I claim they signed?
I've never seen someone say "Don't start working without a notarized contract", but that's the hidden message, right? Otherwise we're just playing at semantics.
Edit: As above, I notice now the OP did have a purely verbal contract. I was referring to emailed agreement which is common in our line of work, though.
I'm not implying that this is what happened here, but it isn't at all uncommon for two parties to verbally negotiate something like this in good faith and come away with different understandings of subtle, but important, elements.
Writing it down doesn't prevent this entirely, but it goes a long way to clearing up possible misunderstandings.
Certainly, nobody deserves to go unpaid for their work, but anyone starting work without a clear written understanding of the facts is setting themselves up for all sorts of problems.
People are way more likely to argue about what was agreed to, than about whether an agreement was made.
With verbal agreements, most people won't lie and say that no conversation took place. (The "whether" part.) But many people will misremember or distort the exact words that were exchanged. (The "what" part.) And those exact words are what count, legally.
Likewise, a person would have to be really slimy to claim that your signed, written contract is a forgery. Most people won't dispute that they signed it. (Again, the "whether" part.) And since it's in writing, and there simply is no room for disputing the "what."
To put it another way, getting a written agreement raises the moral and legal stakes for a potential welcher. They'd have to accuse you of forgery, instead of just shrugging and saying "I guess we remember the conversation differently."
My question is more about whether there's any practical distinction between an informal email which contains a clear agreement to work and the "signed contract" spoken of in legend.
I'm glad to see 'court of public opinion'(AKA reputation) make a comeback. The concept of reputation is, in my humblest of opinions, more important than our legal system when it comes to keeping people from behaving badly. Being publicly shamed is a deterrent for unethical behavior in a way that our courts can not be because of the ridiculously high cost of litigation.
That said, the comp should have just paid or, at very least, tried to negotiate the amount thought I don't think that's worth the effort either. This is such a paltry amount as to not be worth the effort to fight.
A common rule of thumb in the design industry is that if the amount of fees in question isn't going to be worth going to court over, then a 50% deposit paid up-front is a reasonable request.
http://www.linkedin.com/answers/law-legal/corporate-law/cont...
Being young & stupid at the time, I blamed him for thinking he took shortcuts and refused to pay him all of what he was owed at first. But it was my fault for not being more specific in the original job. I eventually apologized and paid him the rest of the money. Lesson learned.
I believe design work is especially prone to this. But none of this is an excuse. If you have a signed contract, you honor it. Period.
The cost of attorneys and more importantly the distraction isn't worth the worst case invoice for three days work. It's not going to cost you your shirt, just one sleeve. Be glad it's a cheap lesson.
Both contracts in this story (the one possibly agreed to on the phone, and the one offered in writing by email) were verbal contracts--one oral and one written.
I'm trying to figure out what additional value Eligible's supposed to add that outweighs just logging into your insurance company's website. And how they're supposed to make a profit.
Just pay him and get it over with - anything under $1,000 is chump change.
This coming at the end of the rant, may not push another potential client over the threshold of decision after all that came before it.
Also, seems strange that he's coy about the name in the text, but seems to show it on the screenshot.
Seriously?
Work was done here, and if they weren't a YC company and some other guy, it is less likely that a designer would work for them without some kind of written agreement.
I don't think it was worth resorting to public shaming for a few grand. I guess Eligible got some free press out of this now. Well done!
What's damaging to his reputation isn't pursuing the invoice based on an oral contract. What's damaging to his reputation is if he jumped the gun, whipping up drama about a receivable that he reasonably could have expected to get paid if he simply invoiced persistently.
I suspect this thread might be a bit of a litmus test for people who have done a lot of freelancing. From working with designers a bit, I can tell that this is a hot-button issue for them: a lot of clients do shirk payment, and so they tend to insist on upfront payment of some sort before they commence work. But having said that, I have to believe every freelancer is familiar with delayed payments on invoices. Your most lucrative clients might pay many months late, and then only after persistent reminders.
1. They email each other for a while.
2. They talk on the phone, and agree that he will do the work for $65/hour, and can start right away.
3. He emails them a contract, and they mail back that they will run it by their lawyers.
4. They contact him to say they have hired someone else.
We are told that #4 occurs after 3 days of work, which puts it 3 days after #2.
The key question, I think, is when did #3 happen? If #3 happened very soon after #2, then depending on exactly what was said in the emails and on the phone, it might be interpreted that #2 was just the negotiation, and the contract he emailed was his offer of terms and the work would not actually start until they accepted it.
To put it another way, I can easily imagine plausible fact situations where he is clearly in the right and they owe him for his work, and I can easily imagine plausible fact situations where they had no deal and he jumped the gun by starting work and they owe him nothing--and all of these fact situations would be consistent with the information we've been given.
Don't scare away the future prospects by making yourself untouchable.
Can you give an example where this course of action has ever worked out well for the designer?
