Ask HN: Disclaimer for limitation of liability?

[gtcode]

I am an independent web application developer and a legal issue has arisen for which I am hoping to gain advice. I recently developed a database application for a new client and have received signals from them regarding their feeling about my liability for the project. They have hinted that I should be liable for any problems that might arise with the system (which is being marketed to professionals and contains non-financial, but still sensitive data). I had already signed a fairly thorough NDA before starting the project, but after I submitted a large invoice, they presented me another document that stated I was to deliver a reliable and accurate system, and that they have full ownership. This seemed reasonable to me, as I agree that they completely own the system and code. However, after signing, it was at this point that the client hinted about my liability should a problem arise. Then, I received confirmation that he is presenting the document which I signed to an attorney to ensure that it is thorough. My fear is that he basically wants to ensure that he can sue me if something goes wrong with the system.

The portion of the document to which I am referring simply states that I agree to deliver a reliable and accurate system, and does not state anything regarding my actual liability if something were to go wrong with the system. Also, I did not ask them to sign any disclaimer regarding my limitations of liability. As we all know, most software, when you agree to install it, includes fairly thorough wording that obviates the software company from any liability that might arise from using the software. Should this type of agreement, in some form or fashion, be part of a standard contract into which I might enter with a client? Given the document that I did sign, what recourse could this client have, should there be a problem that arises with the software? If any additional info is needed to thoroughly answer the question(s), I will do my best to provide it.

Typically, I have a personal and trustworthy relationship with my clients. I perform honest work and often an actual contract has not been necessary -- I develop code for a client, invoice the client, and then they always promptly remit payment. This process, which might seem risky to others, has worked well for me in my geography. However, this situation has made me re-think the process a bit, at least regarding self-protection in terms of liability disclaimers.

Any and all input regarding this situation and/or your past experiences is appreciated.

[sploink]

As with all legal matters, you should consult a lawyer to obtain proper legal advice. This comment is, of course, not legal advice and shouldn't be relied on as such, but it may help put you on the right path.

Without reading the contracts, knowing where they were signed, etc., a pretty universal general principle is that if you make a promise to your client, you will be liable if you do not live up to that promise. Some of these promises will be expressly in the contract and some of them may be implied by law.

If you agree to deliver a reliable and accurate system (this is essentially a warranty), then if the system fails to meet that, then you do have a liability exposure there. What constitutes a "reliable and accurate system" is open to interpretation and will affect the extent of your liability, but the point is that the door is open.

Instead of disclaiming the giving of any warranties, often contracts will contain a limitation of liability clause, which caps liability. So, while a software developer may warrant that their system will do what they said it will do, if it doesn't, the most a customer can claim back from them is the capped amount. It is common for this to be limited to the amount the customer paid for the software.

[gtcode]

Great, your comments are very helpful, thank you.

[masnick]

Obligatory disclaimer: I am not a lawyer and this is not legal advice.

All you need is one bad experience to start requiring a signed contract to start working. I would recommend that this should be the policy of all independent developers: it protects both parties and a clearly written, comprehensive contract can help to prevent tension between you and your clients.

As far as your liability question, as I am not a lawyer I have no idea if the document you signed puts you in legal jeopardy.

However, if you are concerned, you should talk to an insurance agent -- when I signed up for my personal umbrella policy, my agent mentioned that she could set me up with business insurance to cover me for work-related negligence lawsuits (or something like that). Might be worth looking into.

Finally, I always have some warranty/liability/damages boilerplate in my contracts. Feel free to use mine in the future (https://gist.github.com/8d1d43bd543e7d6b97de), but I can't attest to its legal durability as, of course, I'm not a lawyer.

Edits: made disclaimer more explicit.

[gtcode]

Ahh, very nice, thank you for the boilerplate liability disclaimer and other advice -- will use the liability wording as an excellent starting point for a standard contract to use with future projects.

[sjtgraham]

Do you have professional indemnity insurance? It's an absolute must.

[gtcode]

This makes sense, thanks. No, I do not have it, but I am going to look into it.

May I ask how much you pay for yours, and what kind of coverage does it provide? Just looking for some type of baseline. Any recommendations on insurance companies to research?