I'm just going to echo what everyone else is saying: Contract. Contract. Contract.
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."
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.
Just throwing this out there since I know the common wisdom is to "have a contract, duh".
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.
There are worse things that can happen to you when you work without a contract than simply not getting paid. Contracts also set up liability and contract termination terms, and without that stuff in writing, you can end up in a he-said she-said situation over these issues.
You should always work under a contract. I have a hard time seeing why anyone wouldn't.
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.
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.
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.
> The reality of it is that businesses can't just stiff
> you on a bill if they agreed to pay for your services
That feels like it should be true, but it's not. I'm not just speaking about software; a large portion of my family is in construction, and I'm shocked at how often client businesses think they can get away with just not paying them.
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.
Question for other freelancers: how do you handle changes in a spec?
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.
There are two different functional components of a contract; the "terms" and the "statement of work" (SOW). They're often combined in a single "standard contractor agreement" with a fill-in-the-blanks "SOW exhibit", but just as often you have a distinct master agreement with terms and a SOW for each project.
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.
We basically wrote up what we called a change order. Detailed how we changed, or what we deviated on. Signed by both parties as just a cya sort of deal.
In short you can, and will, get fucked by your client. Never do work without a contract. I would have thought it were common sense but I have seen far too many people owed thousands from clients they did work for who then gave them the finger. Most people/small companies don't have the money or don't want to spend the money on getting the money as it will end up costing them more so they just put it down to "that is the price you pay". Well that is a fucking stupid attitude and you are a fool for doing the work without a contract. Watch http://vimeo.com/22053820.
I outsource work on eLance, and this made me investigate. For anyone else wondering, eLance's terms state that any IP for a project belongs to the employer after payment is made:
This is definitely something that is important to be aware of and to have clarity on. Future investors and company buyers want proof you own the IP in your business if you're trying to sell it.
You should also check similar agreements on 99Designs, Freelancer.com, oDesk too to be sure you actually own what you buy.
I'm no lawyer but wouldn't email communication at the very least be used as evidence, if not an "informal contract". The scope of the work had to be defined somewhere. Obviously this falls apart if this was all done via verbal communication but its always a good idea to have this in some form you can store for safe keeping. Even recorded phone conversations count.
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 may be misunderstanding something here. To paraphrase, the argument this article opens with is "we didn't agree that you were working for me, so I don't have to pay you" along with "because we didn't have an agreement which protects your ownership of your work, I can do whatever I want with it." I thought the law (shop law?) defaults to an independent contractor owning his or her own work in most (every?) states? Even if the law defaults to a work-for-hire agreement (where the client owns the work outright) for independent contractors, how could the client reasonably argue that he/she somehow doesn't need to compensate the contractor (essentially saying "Me? You weren't working for me!"), while simultaneously arguing that somehow the client has any/all rights to the work?
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.
Recently, I've been using contracts that do not transfer copyright. We grant them unlimited license to our copyrighted content. We also signed an NDA, preventing us from relicensing the codebase to a competitor. We haven't done anything to take advantage of keeping the copyright yet, but I like keeping the rights for ourselves. I imagine of anything it would make it easy for is to open source code that doesn't tie in directly to the product.
I'd love to hear more details about this. Is this something you came up with yourself, or did you write it with an IP attorney? Would you be willing to share your template agreement somewhere? Has this been a tough sell to any of your clients? Does your agreement include language which either defines what's proprietary or specifies how to define what's proprietary and therefore subject to the NDA?
You might fairly consider this an insignificant anecdote, but: I have rejected people for contract work because they insisted on retaining copyright, sometimes on this basis alone.
You have a contract. You just don't know the terms.
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 can see a client canceling a deal without paying after you have done work due to not having a contract. To actually use the work you produced and weasel out of paying with a "ha ha I tricked you into working for free" is really malicious. I would say that client would probably never have paid anyway. However you may force them to reveal their hand by signing a contract. They will probably try to find some other loophole, but at least you have some documentation that helps you to take legal action.
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.
As enjoyable as freelancing can be, the headache of contracts on one end, and trying to get paid on the other, really put a damper on the "lifestyle." This looks like a great asset.
Is there any value in a sample or boilerplate contracts?
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?
If you don't use a contract you're asking for trouble. Be like James Bond in The World Is Not Enough- don't hesitate in jumping into bed with Elektra King (the client), but don't overlook the possibility that she's been brainwashed by an evil sociopathic genius.
"Federal courts now routinely accept an individual’s electronic “click” or “tap” within an electronic transfer of copyright document as a valid “electronic signature” fulfilling the signature requirements of the Copyright Act of 1976."
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?
There's theory (taught at Yale Law), and then there's practice. While you may be theoretically correct, on a practical level, the lack of a contract makes getting paid much more difficult. Unfortunately, I can't bill the client for the time or stress of the legal case, and winning is never a certainty. Consider that the client is much larger, and may have lawyers on staff full-time.
[+] [-] chasing|12 years ago|reply
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.
[+] [-] larrys|12 years ago|reply
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.
[+] [-] fat0wl|12 years ago|reply
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.
[+] [-] tptacek|12 years ago|reply
You should always work under a contract. I have a hard time seeing why anyone wouldn't.
[+] [-] enobrev|12 years ago|reply
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.
[+] [-] napoleond|12 years ago|reply
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.
[+] [-] LukeShu|12 years ago|reply
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.
[+] [-] ritchiea|12 years ago|reply
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.
[+] [-] tptacek|12 years ago|reply
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.
[+] [-] sard420|12 years ago|reply
[+] [-] barsky|12 years ago|reply
[+] [-] kunvay|12 years ago|reply
[+] [-] InTheSwiss|12 years ago|reply
[+] [-] graeme|12 years ago|reply
https://www.elance.com/q/sites/default/files/page_pdf/legal/...
https://www.elance.com/q/blog/elance-protection-dead-bolting...
[+] [-] ChristianBundy|12 years ago|reply
[+] [-] kunvay|12 years ago|reply
You should also check similar agreements on 99Designs, Freelancer.com, oDesk too to be sure you actually own what you buy.
[+] [-] w0rd-driven|12 years ago|reply
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.
[+] [-] benjamincburns|12 years ago|reply
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.
[+] [-] phamilton|12 years ago|reply
[+] [-] benjamincburns|12 years ago|reply
[+] [-] matho|12 years ago|reply
[+] [-] delinka|12 years ago|reply
[+] [-] tzs|12 years ago|reply
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.
[+] [-] misterjangles|12 years ago|reply
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.
[+] [-] EGreg|12 years ago|reply
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.
[+] [-] vasundhar|12 years ago|reply
* 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.
[+] [-] auctiontheory|12 years ago|reply
[+] [-] dpeck|12 years ago|reply
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?
[+] [-] primitivesuave|12 years ago|reply
[+] [-] larrys|12 years ago|reply
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?
[+] [-] notwedtm|12 years ago|reply
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.
[+] [-] auctiontheory|12 years ago|reply
[+] [-] gk1|12 years ago|reply
[+] [-] spiritplumber|12 years ago|reply