[johnorourke]

I work on small projects (from $5k to $50k) and have no formal contracts. My thinking is that:

- the client can afford more expensive lawyers than I can, so regardless of the truth they would be able to wipe me out

- if the client has to read the detail of the contract, it's probably too late to save the relationship anyway

- maintaining the relationship is everything, being honest and open and striving to maintain a service that is genuinely useful to the client, even if you're not always perfect.

I do have a contract with one client but any questions about it have been about the 'spirit' of it, not the detail.

Pricing is everything: if you're too cheap, you'll struggle to deliver and will not meet expectations. Too much, and you'll lose out to your competitors.

[ziles88]

Good intentions, terrible advice, sorry.

Contracts are not just for 'the courts'. It is a standard business practice of having some clear terms for the both parties. Not only that, but any company who could sue and, 'wipe you out' already has their own contracts and NDAs, you not showing up with one just looks unprofessional. It should be also used as a place to outline your workflow and what the client should expect from you. Clients love this, trust me.

To tell new developers that, 'go ahead and put 5K-50K of your earnings on good faith' is just a dangerous thing to say.

[biot]

Say you have the best client in the world (perhaps your own brother) and you do $5K worth of work. A few years later the company is acquired, gets all new management, and now your $5K software is supporting a $500M/year business. Some noob in IT blindly updates all the servers without testing compatibility and your software breaks.

A week later you get back from your totally offline trek through Nepal to find angry voicemails and emails from the organization now depending on your software, and you're now facing a $10M lawsuit from the new management for losses incurred due to your software breaking.

Long story short, your liability isn't limited to the relatively small amount you were paid for the work. And because you didn't have a contract, you could be held personally liable and risk losing your house, retirement savings, etc.

[lancewiggs]

Under this scenario you 1: either laugh at them or keep quiet, but have new understanding of how much the problem is worth to them, then 2: offer to fix it with a project - priced at a number that reflects both your inconvenience and their need. Whatever that price is, it will be a lot cheaper than lawyers at dawn against someone who has no ability to pay. Meanwhile the acquiring company should have done their Due Diligence on the software and these sort of loose ends would have been tidied up or deliberately ignored as part of that process. I do not believe in contracts for small gigs - but an email chain is good to have. If you then perform work, send invoices and they pay you there is a good enough contract in place.

[philmcc]

This is sort of terrifying. What kind of clause prevents this potential outcome?

[lewi]

Not a lawyer and this isn't legal advice.

I'm fairly sure it's called a limited liability clause. They are literally everywhere. Ski resorts, adventure parks, paintball facilities, and even pools. There are many ways these are worded. Keep an eye out anytime you partake in a service/activity where there is a whiff of danger.

Edit: In terms of asset protection (losing houses and retirement) an LLC, GmbH, or Pty. Ltd. will limit loses to assets owned by the company.

Again talk to a lawyer.

[sethrin]

This is a good idea right up until something goes wrong. The client decides not to pay you -- what do you do? The client asks for revision after revision on a flat-rate job. The client refuses to buy stock photos, or refuses to provide some essential software component. The client insists, years later, that because they changed their requirements, something you did is now a bug, and they insist you fix it for free. You write software library X for a client and then the client sues you for using it in a different project. The client asks for a change verbally, later denies making this request, and insists that you reverse it (for free). I could go on but the point is that there really are some things that aren't covered by a handshake agreement that you really should have nailed down, because you have very limited recourse otherwise.

This should include the work to be performed, payment schedule and penalties for late payments (which are generally covered by usury laws, the workaround is often to offer a discount for early payment), what copyrights are transferred and when, responsibilities for providing assets, acceptance criteria, liability for defects, severability, and controlling law. Non exclusive list written from memory, IANALATINLA.

Relationships may be important, but that does not mean automatically getting screwed if the client decides to. A well-written contract protects both parties. We need contracts because this isn't a perfect world, things go wrong all the time, and it's very easy to burn relationships unless you both agree about what to do when things go wrong, before the lawyers start getting involved. And again, if it does get to the point where the legal letters start flying, without a contract you are going to be severely limited in terms of recourse.

Another way to look at it is that without a contract, you are both taking on risk; the risk of not being paid is probably the biggest factor. If you can avoid a $5k to $50k risk by spending a few hundred dollars, why wouldn't you?

If you need more than my words to convince you, I suggest either reading clientsfromhell.net, or watching "Fuck you, pay me." http://vimeo.com/22053820

[brudgers]

A contract can limited the damage from working with a bad client, but not as much as screening out bad clients in the first place. I'm not saying that having a contract isn't better than every alternative, but it doesn't substitute for selecting good clients in the first place.

[sethrin]

If you can see them coming, yes. There are some people that even if everything goes well it's not worth working for them. But the contract is often the difference between a disagreement that gets worked out, and a posting on Clients from Hell.

[CamperBob2]

But the contract is often the difference between a disagreement that gets worked out, and a posting on Clients from Hell.

I can't think of a single case where that's been true, in either my experience or anyone else's.

The contract language comes into play when everything has already gone to hell. Yes, there needs to be a contract. But you should never assume it will give you any particular leverage over a larger, well-represented client who has elected to take an adversarial position.

[sethrin]

Argument from lack of imagination. But I don't think the the large, well-represented adversarial client is as common as the clients who are simply stupid. Either way it's not something I have a lot of personal experience with, but Clients from Hell is pretty full up with stupid, greedy clients and equally stupid designers with bad contracts. As an example: http://clientsfromhell.net/post/107004953453/me-your-invoice...

The above is clearly a situation where contract verbiage for transfer of rights would make any subsequent conversation on the topic very short. However, as to your general point, what do you suggest? Is that risk something that can be mitigated, or priced into your rates?

[brudgers]

The client conveyed their intent not to pay when they asked for the special favor. I mean the special favor was not paying when push comes to shove. In general, most people aren't sociopathic, so they have to find a way of rationalizing their bad behavior. The web designer/programmer does favors of a financial type for them and stopping the favors makes the designer/programmer the bad person.

[brudgers]

Contracts work really well for resolving problems when the parties operate at the institutional level. The people at the school board are constrained by the institution. The corporation managing the construction is bigger than the just another project manager running the job. Individuals are limited in how badly they can get away with behaving.

There were already lawyers working for both parties before they signed the contract. Nobody has to find one just because there was disagreement.

[brudgers]

Seeing them coming comes with experience. One heuristic I use is does the person try to see things from my point of view when discussing the contract. If it's a finite pie at the beginning, that's the way it will be down the road.

One of the things I've learned from Patrick Patio11 is that negotiations should be on scope not price. The implementation is that clients who expect me to deliver something they cannot afford aren't worth taking on.

[brudgers]

One of the advantages of a contract is that it is an opportunity to bring up potential issues before they become actual issues at that phase of a relationship where everyone is googly eyes in love.

Discussing contracts is also a good way to screen clients. It can provide a tell that allows separating people who don't sign contracts from those whose word is their bond. The latter have no trepidation entering a contract.

[logn]

You realize business liability or professional liability insurance covers being sued (and legal costs) right? You're not giving a future lawyer much help to run a business with no contracts. That's nuts.

Everyone who releases open source code uses contracts, which all limit liability. Contracts are hardly something just for rich folk.

[dripton]

That's an interesting angle that I hadn't heard before. I'd still rather have a contract, just to avoid confusion about the terms of the deal.

[extc]

Please watch this: https://vimeo.com/22053820

[tonywebster]

While it's honorable to want to keep things on a handshake-and-honor level, when things go wrong, none of that matters. In my experience, clients are impressed and more comfortable with proceeding when a written agreement is in place. The only time I've had trouble negotiating an agreement is when dealing with large mega-corporations, where I'm still able to add in notable definitions and exceptions to the work that I'm performing.

> "the client can afford more expensive lawyers than I can, so regardless of the truth they would be able to wipe me out"

Just like lines of code are not a measure of quality of software, hourly rates of attorneys are not a measure of the quality or effectiveness of their legal representation. The only time that you are on equal legal footing with a large corporation is when you're both entering the relationship. If you and a client sign an agreement defining and limiting the work and your liability, a more expensive attorney isn't magically able to rip that contract up.

> "if the client has to read the detail of the contract, it's probably too late to save the relationship anyway"

I couldn't possibly disagree more. If a client isn't willing to work with me on defining the scope of the work to be done for both of our benefits, then I have no faith that they're going to work well with me at all, on anything. For a software developer, a scope of work is also just another piece of documentation: here's what I'm building, and what it does and does not do. A client should be as eager to define that as you.

Case in point: a bank recently suffered a data breach and had to spend more than $150k to comply with its notification obligations, and the bank's insurance company sued the bank's web design firm for, as they allege, failing to do proper servicing, security updates, etc[1].

Web design firms doing ongoing security, monitoring, and maintenance is totally not the norm. Usually the design firm designs the site, either has a couple developers in-house or contracted to another company to build out the front-end and do any integration with the bank's back-end, and when it launches, all is over. But here, this small midwestern design firm with a few employees is on the hook for damages and their reputation will be destroyed.

There are many details lacking in the civil complaint in terms of what their actual responsibility was, or if there even was an agreement in place. But if the design firm had a master services agreement that (a) disclaimed responsibility for doing security monitoring, updates, malware fixes, backups, contingency planning, and any costs or lost business as a result; and (b) limited liability to the amount of money the bank paid the design firm (a common business practice); and (c) indemnified the design agency against any claims by third-parties; the complaint probably would have never been filed.

None of this is legal advice, but don't risk having your reputation destroyed and being personally bankrupted simply because you're desperate for work, lazy, or unrealistically optimistic about people having good faith in all situations.

[1] Article with linked PDF civil complaint: http://www.scmagazine.com/travelers-accuses-web-firm-of-shod...