The purpose of a contract is to define, in advance, how two parties will handle situations that may or may not arise in the course of their relationship. If either of these parties does not live up to the agreement, the other may sue for damages. When creating your contract, there are a few important things you want to be able to agree on:
- What are you doing for them? What is the scope of work? This doesn’t have to be long and elaborate; it can reference another document.
- How much are they paying you? Obviously the most important thing in the contract.
- When do they pay? The timeline of payments.
- What happens if they are delinquent in payment? Paying interest versus paying penalties.
- What is considered delinquent? Net 0, net 15.
- Who owns what? All of LessEverything’s projects contain open source work--their own bits of code that they use on every project and a lot of application, specific code. LessEverything’s contract breaks these down into type A and type B deliverables. In type A, the client owns outright. In type B, LessEverything grants them a perpetual license, but these are things they will not own (so the client can’t stop LessEverything from using a plugin they wrote or sue them, because the client doesn’t own Ruby on Rails).
- What is covered by warranty? The LessEverything contract makes it very clear that the work is delivered “AS-IS” with no other warranty. There have been times when clients have asked for a warranty from 30 days to six months. When the company was doing fixed-bid, they would sometimes allow 30 days, but would never do more than that. The big concern here isn’t whether LessEverything’s work is flawed--it is if the client reports a bug. You remind them that’s what they asked for, and now you have a can of worms.
- What happens if either party terminates the contract early?
Allan says...
“I’ve actually seen contracts that clients have asked me to sign that say early termination still requires project completion. This kind of thing is ridiculous. In general, we don’t ask for anything special upon early termination, but if we are giving a discount for a longer- term contract (they agree to buy four months of time), then we do require a termination fee of two - four weeks of project time.”
The last thing you need to know is that you must have a lawyer prepare your contract for you. If you don’t, you are simply a fool.
