[larrys]

"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.

[tptacek]

Contracts are such a basic fact of business life, universally understood by good-faith vendors and customers, that recalcitrance about signing one should be taken as a "run don't walk" signal. By working without a contract, you doubly imperil yourself: you lose significant legal protections, and also select a client base that is particularly likely to cause you problems down the road.

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.

[larrys]

A few points. I'm not stating you are wrong but simply would like anyone reading to see that in business, the way I see it, it's art and not science. "Don't do it" sounds more like science to me. Business to me is art.

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.

[fat0wl]

Yes this is the business world exactly as I've experienced it. Specifically, #2-4. Handshake deals are great for people who are generally sane and trying to pick up momentum. People advise you lock everything down 100% but they don't realize what a time/energy drain it is on both parties.

A quote sets up a reasonable negotiating point and then any deviation from that can be discussed. The client eats it or the worker eats it. You win some you lose some -- at least things are moving.

[larrys]

I'll tell you an interesting thing that I learned in a past business where we were given many rush jobs.

Let's see how you view this.

a) Client comes with a rush job and asks you to quote the job and you do. You give them a price.

b) Same clients comes to you and says "just get the job done and bill me whatever it is. I need to get this done."

My question to you (or anyone else) is "under which situation did we end up making more money, "a" or "b" usually"?

[fat0wl]

Hmmm my gut says A. When you give a quote it sets up a reasonable expectation and even if you go over-budget clients usually understand if you don't deviate by too much.

With B you have to pull the trigger on it all-at-once so I feel like it leaves you more inclined to bring the price down to avoid sticker shock.

"A" probably has a better "return customer" conversion rate too, no? Because they weren't on as much of an emotional-financial roller-coaster, it was just the execution of a process understood by both parties. So I'd guess with A you have a better shot both at short term money and future endeavors.

How did it work out really?

[larrys]

You are correct it is "a".

Reason was simple.

Customer was under duress and needed to get a job done. You stated a price and they accepted that price. That agreement was important.

With "b" - "whatever it costs is ok!" they could come back and say "Wow I didn't know it would be that much". So even though most people would go for "b" my experience was "a" was better.

Of course now if I wanted to argue the other side I could say if you really were trying to jack up the price than "b" might be better. Why? Because you are jacking up the price so if the customer say "I didn't know it would be so much!" you have some flexibility to throw them a bone and lower the price and make them happy.

My attorney on bills typically puts in all the hours he spends as "time spent, time billed" giving you some idea that you are actually saving money. As if he is cutting you a break.

"and future endeavors"

Right because you managed expectations successfully. Same reason perhaps paying $35 for parking is not the same as getting a $35 parking ticket.

[chasing]

> "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."

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...)

[Silhouette]

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.

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.

[larrys]

Once again, this all depends on the parties and the size of the deal and any past dealings.

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.

[Silhouette]

I think the point some of us are trying to make is that if establishing a clear, written understanding at the start of a business deal creates enough friction that it's a problem for anyone, that party should probably be running away from the deal anyway. This is about as universal a truth as you can find in business. Someone might not feel that a written contract is particularly necessary, but if they are actively trying to avoid having one when it's proposed, either they don't know how the game is played or they're out to screw someone later, and you don't want anything to do with either group.

Of course the level of detail in the contract will be proportional to the size of the engagement. A small deal might only need a standard T&Cs sheet and a signature on quick statement of scope and rates. A large deal involving multiple parties and silly amounts of money might need multiple teams of lawyers and several weeks to draw up. But in each case, there is always a level of mutual understanding and it's always written down and signed off by everyone before the job starts.

[bmelton]

You're not wrong, but I'd feel remiss if I didn't make a point.

> 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.

[ritchiea]

> 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

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).