A contract isn't some scary legal document full of cryptic legalese. It's a clear description of what services will be provided and what the compensation will be. And on what schedule everything will happen. With details about what happens if things go south.
Most client problems are not as cut-and-dry as "he took all of my work and is laughing at me and lighting cigars with $100 bills while he refuses to pay me for absolutely no reason." Most disputes are based on misunderstandings of some sort. They think feature X was in-scope. You disagree and want to bill them additionally for it. They are withholding pay because they don't consider the project completed. You do. And such. Having to threaten a client will waste a ton of your time and sour relationships -- clients you have disputes with can still be good clients. This is why you write down everyone's expectations at the start.
Most clients aren't evil. They want good relationships with the people who work for them. But disagreements arise. Contracts give everyone a neutral document to refer to and say "look, this is what we agreed upon when we started."
Use contracts.
First, to state the obvious which anyone who has been around for some time will tell you a contract is only good if the dollar amount is enough to get a lawyer involved as far as filing and pursuing any legal action. Otherwise good luck with trying to convert a contract into actual dollars because you are right.
Anyway, for the purpose of what you are saying it doesn't have to be a "formal" contract but merely an email trail will suffice to make your point and get the other party (if honorable) to pay. In the past I've even used notes of verbal conversations which I've repeated back the sequence of events to the satisfaction of the other side. (Once again totally depends on who the other side is and their motives.)
Now if they are not honorable, don't have the money, or just want to play games, then if you have enough at stake to hire an attorney a formal contract is a benefit (but not essential since the "trier of fact" as well as the other side will weigh their chance of settling vs. fighting). Consequently, yes, documentation is key but it's more a balance of power rather than the formality of the document).
Unfortunately the article completely ignores the practical aspects of going after someone who owes you money despite what any contract says. As if the law is enough to make the right thing happen. It's not.
Matasano has many clients we've maintained since the formation of the company in 2005, and many more where our counterparts in those companies are friends. The idea of doing business with any of them sans contract is unthinkable. It just doesn't happen.
Working without a contract is unprofessional. Don't do it.
1) The dollar amount of the dealings greatly matters as well as the product or service being sold (and who it is being sold to and past history [1]). Matasano is a "real" grown up company. I would imagine the dollar amounts of the charges for what you do are not trivial or small in any way. "not freelance". And what you do has liability consequences as well if you screw up. And you have deep pockets to go after and a liability policy with pockets. [2] A contract of course is called for. Our accounting firm (been dealing with for many years) was just bought out by BDO. They sent a contract or rather a letter of understanding "whatever" that absolves them from any and all liability no matter what. This is after many many years of dealing with the firm they acquired. The legacy firm sent the same letter. Totally ignored it and never sent it back year after year. (Almost as a dare "ok we'll replace you!". They didn't take it personally at all. And if they did who cares?
2) Title of article appears to be targeted toward freelancers. Hence my comments. I'm not directing my thoughts toward Boeing (or Matasano). In other businesses I've dealt with freelancers (non computer, graphics basically) for many years. They do work you pay them. They give a quotation for the work and tell you if you exceed any limits and that it will cost more.
3) Using contracts puts friction in the process and gives people (on certain things, once again, smaller things) a chance to back out and think and delay. So to me there is a certain balance of risk that a freelancer takes (relative to the situation) vs. losing the sale that has to be weighed. Each situation is different. What's the up vs. the downside?
4) Unprofessional is relative to who you are and what you are selling of course. There are many business relationships that are done on a handshake in certain industries. I've been involved in many of them.
5) If you do (for whatever reason) use a contract and the other side doesn't want to sign it I agree that can be a red flag. In general. Once again, depending on the dollar amount. I had a domain broker come to me with a buyer for a domain name that I owned and they sent me a 10 page contract. I said "I'm not reading and reviewing that if you have a buyer I will pay you commission". They said "ok sounds good". And the deal was done and I have the money in the bank. Otoh I sold a domain to a very well known attorney (someone I knew that is well known in the business and everyone loves and even went to the same college) and I waited like 3 months to get the money. Go know.
I will end with a funny story. When I sold my first company a long time ago I asked both the accountant and the lawyer for an estimate of the legal and accounting charges. They both shot me numbers verbally over the phone. After the deal was done I got the bill and it was 2 to 3 times as high as the quote. So I said "you quoted $x what's the story?". They said "oh it was more work". I said "well you should have told me that, how would I know?". The accountant stayed with the quote and is the firm I've referenced above that I am still with to this day. The lawyer thanked me (he had just gone out on his own and left a big firm and had no clue about smaller clients or billing or people using their own money) and told me I had taught him a valuable lesson [3]. He then bought some computer gear from me (to give you an idea of how long ago this was it was a $4500 laser printer). Just to show you that he really was cool with it.
So it wasn't lack of a contract as much as lack of communication possibly that sunk them. And of course had they billed as the work was going on as opposed to all at the end they would have put me on notice despite the original quote (which by the way was stated like a firm quote..)
[1] Which of course is tricky because people and companies change their spots.
[2] As opposed to Dave, out of his house, living from hand to mouth. Nobody is taking "Dave" to court if he screws up.
[3] So in other words he wasn't used to anything but a larger company using someone else's money not an entrepreneur spending his own money.
I've been around for some time and I absolutely would not say this. A contract is not primarily about being adversarial. It's about being clear. There's a huge difference. A contract is the end-point of the conversation you have that clarifies as much as you can before anyone starts work or writes a check.
If someone is planning on making your life hell, a contract won't stop them. It's a piece of paper, after all, and, yes, if lawyers have to get involved then pretty much everyone has lost. Preventing that scenario is less about getting a contract and more about learning to assess people and decide who is legitimate and who is full of shit so you can walk away before any contract ever gets written.
(Negotiating a contract, by the way, is a pretty good measure of what it's going to be like to work with someone. Consider it your first project together. If it goes poorly, that might be a bad sign about how the whole project will go...)
I couldn't disagree more. Usually in this field, unless we're talking about a huge deal, you've both already lost if you get as far as litigation. That implies direct costs, and it implies a breakdown of your business relationship that probably doesn't help anyone accomplish anything or leave anyone's reputation changed for the better.
Contracts serve a valuable purpose long before court filings are involved: the contractual paperwork is where you can both set out, definitively and up-front, your understanding of what the deal is. If there are significant areas of disagreement, it is much better to discuss them and hopefully resolve them amicably before the project starts and either of you has serious skin in the game. If that's not possible, you can both walk with little loss and no hard feelings. It's unlikely to hurt either party's reputation if they want to figure out a different deal with someone else instead, and it leaves the door open to working together on some other project in the future.
It is in everyone's interests to get a clear, genuinely understood agreement written down in a specific, identified version at the start of a project.
I'm not against getting things or putting things in writing. Or having a contract when needed.
My comments relate to the form of that writing and the effort and potential friction vs. what you are trying to protect. Friction which can kill a deal if you have to think out every possibility. Not to mention that it can also work against you.
> but merely an email trail will suffice to make your point and get the other party (if honorable) to pay.
This is true if and when you are expressive in your emails. As soon as a new feature is added to the scope, it is imperative that you speak out and say "Well, this is out of scope, but we can likely accommodate by adjusting the scope <however>".
Far too often I see freelancers just take on the work without mentioning it's a scope change, only to have to fight for the bill to be paid later.
In fact, most of the people I see complaining about customers not paying are due to a failure of setting appropriate expectations. If timelines are changing as a result of your efforts, notify the customer. If they're changing as a result of the customer's actions, notify the customer. If the scope is changing for any reason, notify the customer.
Do not expect to be able to submit a bill at the end of the day and have it be paid -- in companies of a sufficient size, the person paying the bills is not the same person you're dealing with on scope, and the person paying the bills is likely being paid, in part, to ensure that they aren't being over billed. Where that's the case, they'll examine the contract line by line and compare it to the invoice, and pity to whomever meets someone good at that job.
They're not trying to screw you over, they're just trying to make sure taht they're not getting ripped off, and changing how you bill the customer without notifying the customer of a change, looks very much like ripping them off (even if it isn't.)
Use contracts. Use email. Speak plainly.
I disagree, contracts are much better than an email trail for keeping both parties on the same page. Email trails are murky and take effort to navigate. Emails sometimes lack a complete context. A contract is a canonical text for your work arrangement. Starting your work with a contract is not just good practice to CYA so you get paid, it's a good way to start conversations with your client to make sure you both get what you're looking for and don't want to kill each other (or if you do want to kill the other person you at least have to blame yourself first for agreeing to such foolish terms).
I have a few clients who basically put me on a retainer, then I send them a bill. If you give an hourly rate + an estimate clients seem to be cool, provided they are actual businessses. The only clients I've ever had issues with are individuals (usually artists since I freelance electronic media) and that stems from budget / rampant psychotic narcissism. But with businesses, I state my rate I estimate hours & then I bill them.
I'm sure there is a more secure way of handling this with contracts but if a company I work remotely for ever stiffs me on a bill: 1. They better be closing up shop the next day or I'm gonna come after them hard. 2. They lose access to the skills I offer them. 3. I probably have accounts/services in their name that they can't alter/operate without my help, so they're really just shooting themselves in the foot & will likely come to realize this rather quickly.
Anyway worst case scenario I lose 1 payment (maybe it was 1-3 grand?). Maybe it's scary to think that a 3k payment might disappear but the reality is, after discussing with them they'll probably just hand it over anyway or you can settle in between. Even if I one day lose a thousand dollars (which I highly doubt) I can look back and smile knowing I never had to deal with a ton of legalese.
The reality of it is that businesses can't just stiff you on a bill if they agreed to pay for your services, and if you have nice clients who are trying to build a business they have no reason to hurt you if you do good work for them. But I understand not everyone has the luxury of sane clients. I certainly didn't back when I was dealing 1-on-1 with artists.
You should always work under a contract. I have a hard time seeing why anyone wouldn't.
A good professional relationship & a couple of emails is all I need for freelance. If you're talking about a long-term high dollar amount thing then sure, I understand.
& the reason I don't use one is simple -- I have an hourly rate. Whatever contract we come up with would look like this: "__ is my hourly rate. You will pay __ times the number of hours I worked." This has long been established since the first 1 or 2 interactions with any client and I think is obvious for any hourly service worker. Within the tech industry this is even standard for a lot of corporate consultants (I happen to be one).
For freelance, I provide work estimates but things change. All the comments I see on this thread are like "write a change order for each change, make sure you keep a record of scope". No thanks, not for me. I just give estimates, tell the client when we're going over-budget. If they seem concerned we can talk about it if they say "Keep going no worries" then I keep going, no worries.
I'm not at all saying that contracts aren't useful, it's just that the tech industry is really fast-paced and often involves remote work. If you're really concerned about stuff getting ugly, ask for a contract, sure. But I would do contract with 50% deposit because who actually wants to deal with going to court. At least you'd have 50% to sit on & think.
To each his own but I'm a programmer not a businessman. I net way more money streamlining my coding process than I do thinking about stuff like this.
Actually don't short change yourself just because you might not have gone to "business" school. (Did you?)
For example:
"If I have to drive an hour to see my client or send a lot of things back & forth in the mail it's really just time wasted."
Which makes a lot of sense. You have to factor in the pros and cons of all of this which you are clearly doing. What do I stand to gain? What do I stand to lose?
"I just give estimates, tell the client when we're going over-budget."
Exactly. State the framework "$x per hour" and keep them informed of any changes. Super easy to do with email as well. Communicate. I would also argue that getting people to sign things each and every time will get you less revenue because it gives them an opportunity to focus on the dollar to much. Once again, depending on the dollar amount and who you are dealing with. All situations are different.
During the first 5 or 6 years of my 10 years of freelance, I almost never had a contract in place, and I _never_ got fucked over for it.
That's not to say it's OK to avoid contracts. Only a single set of data points that says it's possible to do business without them and still do very well.
Of course larger clients will generally require them to cover their own asses. And any project that's over x, where x seems like a good deal of money, should _always_ be covered by a contract - both for your safety and the safety of your client.
But the cynical idea that everyone is out to get you is silly. Yes, get a lawyer to get a solid standard contract together for you. But then pay attention to the clients you're dealing with. A contract gives you a legal standing in court, but you still have to go to court. There's a lot more to be said for choosing clients that aren't going to cause trouble in the first place.
If you give a tech consultant a job they will code from A to B. The client is always the one throwing up roadblocks and change requets. If they don't understand that they are on the hook for those billing hours, yeah you don't have a good client there...
ONLY USE HOURLY RATE + ESTIMATE that's the best advice I can give on top of enobrev's. Maybe others disagree, but in my experience project rates mean the client will try to take advantage or if you get a project price that seems absurdly high & you get that flash of $$ signs in your eyes, the client will usually realize they overpaid and you'll lose potential future business with them. Just use a rate and be somewhat ethical about it. Even if you don't have a huge client base, they will all come back around for more work every few months.
Just as a counterpoint to this, it's possible for a client to not pay you for services rendered and sue you for not maintaining previous accounts/services for them, and the courts might very well take their side, depending on the specifics. Whether there is a written contract or not, there is a contract when you agree to exchange services for money; the only difference is that if it's not written and a conflict arises, you're depending on the court system to guess what the agreement was based on the word of two opposing parties.
I understand what you're saying though; realistically a lot of work gets done all over the world every day without written contracts, and everyone is okay. My general rule of thumb is to never extend more than a few thousand dollars of credit to any client without a written contract, and less if the job could involve any sort of extra liabilities. For a retainer-style agreement like the one you describe, I like to have a contract in place from the get-go, but with the "terms of notice" set so that things like email count--that way, if we ever negotiate for a specific project I can do it over email and count that as a written record of our agreement should the need ever arise.
If we never had an agreement for me to document all my work (extremely common) then the best they can do is say "hand over the keys" but they can't make you drive. If they're willing to invest in a new engineer's learning curve, the problems must be way deeper than 1 bill & you should've seen it coming, enough to write out a formal contract for that last bit. In hostile workplaces contracts should be the norm, sure, but I just try to avoid those situations to begin with.
Good advice on the email bit, but I kindof just assume that those count as written records. Either courts acknowledge them or they don't I'm not sure that explicitly saying they do really changes much.
Also, you say "there is a contract when you agree to exchange services for money" but if they don't pay you... didn't they already break that contract? Why would you have to do due diligence (maintenance) for someone who refuses to acknowledge your initial agreement?
Of course they can. In most first world jurisdictions, anyone is free to bring a lawsuit against anyone else over anything, and then it's up to the court to decide on the merits of the case. If the court finds that the case was without merit, they might be able to compensate the successful party in some way depending on your particular legal system, but that would probably happen later.
What's more, if you created a system for someone, that system requires maintenance, your original contract did not specify who was responsible for that maintenance, and your clients sue claiming that they already paid for you to do that work and you're refusing to do it, you could well find yourself on the wrong end of a judgement.
In short, you seem to have quite a few misunderstandings about the basics of how contract law works, unless your local jurisdiction is a lot different to most. This is exactly why you should have everything clearly specified in a written contract, and it's also why paying an "expensive" lawyer to give you proper advice in your particular situation is almost certainly a good investment. Probably you should expect to spend significant time with a real lawyer for your first contract, so you have some idea of the general legal areas you need to consider, and then depending on how things go you might find just a quick review by someone who knows what they're doing is sufficient for a lot of later work.
> The reality of it is that businesses can't just stiff
> you on a bill if they agreed to pay for your services
Perhaps it actually is better in the software world, where clients (hopefully) know they are going to need you in the future.
Anyway, good for you that you can find clients that know they need to pay you; but not all businesses have figured that out.
But if they brought a civil suit they would win easily, no? That's what I really meant by that line. My father is a lawyer & every time I bring up something like that to him he laughs. "Of course they have to pay, it's just too much trouble sometimes. Usually just the threat of legal action is good enough."
Maybe it's not so simple but that's a shame.
Anecdotally, we did a lot of work with local law firms and they were the worst. (I guess because what're you gonna do? Sue them?)
I've been nervous about this lately because I'm doing freelance work and the contract outlined a spec that we've now deviated from greatly. I'm not incredibly worried because we do bi-weekly billing but do you regularly ask clients to revise contracts if the spec changes?
And when you begin a contract, what level of specificity in a spec is a good idea? Obviously some level of specificity is a must, but an overly detailed contract leaves you in the position I described above where the contract does not actually describe the work in progress.
The SOW is responsible for laying out what work you're going to do. If a changing spec is a project risk, a typical consultant response to that would be to build some of the spec language into the SOW, so that if the spec changes in a way that materially harms your ability to complete the project, you have recourse with the client.
The typical best case scenario for spec slips on projects is a client that extends the contract to account for them, and a somewhat rigorous SOW is a good tool for making that happen.
https://www.elance.com/q/sites/default/files/page_pdf/legal/...
https://www.elance.com/q/blog/elance-protection-dead-bolting...
You should also check similar agreements on 99Designs, Freelancer.com, oDesk too to be sure you actually own what you buy.
A purposeful contract makes sense in every situation but if you have clear documentation without one, you should be pretty well off when a problem arises.
The notion of hourly work is something I try to divorce from my thoughts. Yes I do base what I do on some hourly metric but the complexity has to matter to some degree. Generally more complex = way more hours but that's not always the case. Most of my problems in this area come from uncovering a hornets nest when something just seems simple enough on the surface.
I like to think of it this way. Office is still $x per seat. I may have figured out 98% of a domain but I should charge the last customer the work it took to get to that point from customer #1. I may have to do much less work if I've done my job right but there's no telling exactly what of that they'll want to unravel in the process. Unlike Office I don't have a bankroll for r&d I can charge a premium for to recoup my losses over clients. Clients need to assume that just because they want what someone else has its never what they paid - the hours it takes to just tweak it for them.
I'd hope that anyone in this kind of situation would think through this kind of logic, short circuit to "okay, I'm dealing with a ripe asshole here" and take the same action which they would toward anyone else outright stealing from them.
Edit:
Regarding contract/no contract, experienced/knowledgeable clients will require a contract when dealing with an independent contractor, even if for no other purpose than to protect their ability to make use of the output of said contractor's work.
“Work Product” shall mean all design and applications... excluding the “Elements”. Developer assigns to Client all right, title and interest in and to the Work Product. “Elements” shall mean Developer’s algorithms, libraries, scripts, user interface and experience designs, architecture, objects, graphic files, [etc.]. The Elements shall remain the sole and exclusive property of Developer; provided that, subject to/upon full and final payment for the Services, Developer grants to Client a royalty-free, nonexclusive, irrevocable, perpetual, worldwide, subliceseable license in and to the Elements to use in connection with the Application.
So we do give up copyright for the application as a whole "Work Product", but retain the copyright for individual components "Elements".
The client is not in a technical space, and quite frankly doesn't know much about software development. We may be pulling a fast one here that other clients would refuse. In any case, it hasn't caused any problems in our working relationship and everyone's happy.
Generally, a licensee cannot sue for infringement of something they only have a nonexclusive license for. There is some discussion of this here: http://www.copyrightcodex.com/enforcement-toc/22-plaintiffs#...
Even if my product contains copyrighted material in addition to your material, and I either own the copyrights on or have an exclusive license on that material and so do have standing to sue over it, the presence of your material would complicate things. The defense is going to argue that if they did copy my product, they only copied the parts that I do not have standing to sue over.
If they had rejected that clause, I probably wouldn't have put up much of a fight. I figure that if they don't want it, we should keep it.
While it sounds confusing, my understanding is that it basically means that we have the right to reuse whatever module or library we create however and wherever we want.
You might be able to guess them with sufficient knowledge of the law of your jurisdiction. In the US (other than Louisiana [1]), you'd need to know at least State and possibly Federal contract law, common law, and a bunch of court cases.
[1] Louisiana based its law on French and Spanish law, which derive from Roman law. The other 49 states base their law on English common law.
I have had client drag their feet on the contract and the down payment, but rush me to start. My feeling is that if you can't get a check when they are desperate for you to start, then it certainly will be difficult getting one after the work is complete.
The more eager you are for the gig, you may be more willing to agree to things. But definitely it's a always a good idea to be patient and make sure both sides agree to the terms before you invest your labor.
Companies have limited liability in the USA. They are subject to full market discipline. The owners of the companies are not.
And thus ... business between companies should take precautions such as getting paid a retainer, at milestones, etc. and assume that some payments will not be coming.
Meanwhile people (e.g. employees) can rely on the government to put heavy pressure on employers to pay them. I am in favor of more direct guarantees of basic living standards -- i.e. a basic income -- such as some European countries are doing. That way even the employer-employee relationship can be less regulated.
* Its a Financial Risk in terms of Commitment to deliver for what is paid for.
You Don't know if the person is really spending the hours he spent.
There is nothing that can save your system, your business, because the business is your life, "Not Necessarily" his.* Time and Commitment are absent in unwritten understandings.
For a Contractor/Freelancer:
* Its a Financial Risk with respect to the commitment to be paid for deliverable.
* You get only the advance, no matter how complicated the solution you have provided.
* Requirements may change any time, you don't know what you are working and there is no line between success and a failure.
I've asked some people in the past and they seem very guarded about sharing theirs and always try to refer me to a lawyer. Good advice and I realize that lawyers should save you money in the long run, but for on-the-side small time consulting is there a base template that would get people through their first few gigs?
See things like this are dangerous. To the uninformed the above looks so simple. "Federal courts now accept" (and the rest of this article) totally ignore the cost and practicality of bringing any legal action. And guess what? The other side, when they are trying to screw you, is aware of that and will use it against you.
Back in the late 90's we had the opposite thing happen. Paid $6500 +- for a freelancer (related to a well know internet celebrity at the time) to write some software (total cost maybe 20k iirc.) Time dragged on and on and they were not able to deliver.
You know what? We just walked away from the money. What to do? Sue someone in another state over $6500?
If you have a client that uses work you did, even if you have no contract, you can still sue for damages under Unjust Enrichment laws in the US.