Writing a consulting contract
August 3, 2015 12:56 PM Subscribe
I'm starting a consulting company that offers IT advice to small businesses/startups. I need a contract that my customers will sign agreeing to payment, terms, etc, with liability protection.
The end deliverable of my LLC will be a report specifying recommended steps to be taken. Aside from the usual stuff, my concern is limiting my liability, preferably to no more than the amount paid by the client. Does anyone have a good template that I can base my contract off of? Thanks.
The end deliverable of my LLC will be a report specifying recommended steps to be taken. Aside from the usual stuff, my concern is limiting my liability, preferably to no more than the amount paid by the client. Does anyone have a good template that I can base my contract off of? Thanks.
Best answer: I need a contract that my customers will sign agreeing to payment, terms, etc, with liability protection.
Docracy has a collection of documents to get your started. (Tip: don't forget to include interest penalties for late payments!)
My concern is limiting my liability, preferably to no more than the amount paid by the client.
I freelanced as a web developer for about 10 years (NY LLC) and I had a client who sought $2MM from me to cover 2 days of downtime when their servers (refurbished low end Dell crap) broke down. Their website was not making any money, plus they paid me for website updates and not any sort of server maintenance, but I was still worried that a court wouldn't understand the distinction, if it came to that. My lawyer assured me that aside from all the other things, they'd have no legal standing asking for more than what they paid me, as a general rule of thumb (he used an example of a house painter who would not be responsible if they got paint on a priceless Rembrandt). So as far as I understand, you don't need to go out of your way to ensure that this is the case.
posted by rada at 2:18 PM on August 3, 2015 [1 favorite]
Docracy has a collection of documents to get your started. (Tip: don't forget to include interest penalties for late payments!)
My concern is limiting my liability, preferably to no more than the amount paid by the client.
I freelanced as a web developer for about 10 years (NY LLC) and I had a client who sought $2MM from me to cover 2 days of downtime when their servers (refurbished low end Dell crap) broke down. Their website was not making any money, plus they paid me for website updates and not any sort of server maintenance, but I was still worried that a court wouldn't understand the distinction, if it came to that. My lawyer assured me that aside from all the other things, they'd have no legal standing asking for more than what they paid me, as a general rule of thumb (he used an example of a house painter who would not be responsible if they got paint on a priceless Rembrandt). So as far as I understand, you don't need to go out of your way to ensure that this is the case.
posted by rada at 2:18 PM on August 3, 2015 [1 favorite]
Best answer: I suggest using plain language to communicate the arrangement you want, and I bet that you can write this yourself. I am a one person LLC company providing IT services and I wrote my own contract. It evolved over the last 5 years as I learned what I wanted but the basics have been there from the beginning. For example I have no late payment fee because if payment is a problem then I don't want that client, and the late fee gives them an excuse to pay later. I also allow the client or myself to cancel the contract at any point because I want us both to be comfortable with the relationship. I do have this language protecting me:
1. Any service provided by myself, or any employee or contractor representing
my company name is provided without expressed or implied warranty. The payment
for services provided is based on the above hourly rates and is independent of the
success as perceived or realized by you.
2. Any service provided is best-effort only and my company name will not be held
liable for accidental damage, loss of data, loss of use or consequential losses.
I do recommend business liability insurance in addition to the contract. Your insurance company will want language in the contract to limit your liability. Having a contract limiting your liability doesn't prevent them from winning in court if it comes to that, which is why you need the safety net of insurance.
If you'd like to see my contact to can mail me and I'll send a link.
posted by ridogi at 6:50 PM on August 3, 2015 [1 favorite]
1. Any service provided by myself, or any employee or contractor representing
my company name is provided without expressed or implied warranty. The payment
for services provided is based on the above hourly rates and is independent of the
success as perceived or realized by you.
2. Any service provided is best-effort only and my company name will not be held
liable for accidental damage, loss of data, loss of use or consequential losses.
I do recommend business liability insurance in addition to the contract. Your insurance company will want language in the contract to limit your liability. Having a contract limiting your liability doesn't prevent them from winning in court if it comes to that, which is why you need the safety net of insurance.
If you'd like to see my contact to can mail me and I'll send a link.
posted by ridogi at 6:50 PM on August 3, 2015 [1 favorite]
Best answer: I am not your lawyer.
Sorry for the late response. And I'm also sorry to be negative, but rada's advice is terrible. People can absolutely be held liable for more than they have been paid. And why wouldn't a painter be liable if he got paint on a priceless Rembrandt? If someone got paint on my priceless Rembrandt, I certainly wouldn't say to myself, "Oh well, it's pretty obvious the law can do nothing for me."
I'm also going to say that ridogi's advice is not great. Practicing law is really not a DIY kind of thing. So, you've disclaimed express or implied warranties. What does that mean? Are all of the implied warranties waivable? Do contracts for services even come with implied warranties? You won't know until you consult a lawyer.
In fact, although I think bar admission rules are probably somewhat motivated by the desire to restrict competition, this thread illustrates why there are a lot of legitimate reasons to restrict the practice of law to paid professionals with ethical duties to their clients. If something goes wrong, I assure you rada and ridogi won't be around to help you.
I know lawyers are expensive, but in the long run, relying on internet forums can be a lot more expensive. You should consider decent legal advice to be part of the cost of doing business. And by the way, I suspect a lawyer would not charge an outrageous fee to review and "mark up" a contract for you.
posted by sudo intellectual at 4:49 AM on August 5, 2015
Sorry for the late response. And I'm also sorry to be negative, but rada's advice is terrible. People can absolutely be held liable for more than they have been paid. And why wouldn't a painter be liable if he got paint on a priceless Rembrandt? If someone got paint on my priceless Rembrandt, I certainly wouldn't say to myself, "Oh well, it's pretty obvious the law can do nothing for me."
I'm also going to say that ridogi's advice is not great. Practicing law is really not a DIY kind of thing. So, you've disclaimed express or implied warranties. What does that mean? Are all of the implied warranties waivable? Do contracts for services even come with implied warranties? You won't know until you consult a lawyer.
In fact, although I think bar admission rules are probably somewhat motivated by the desire to restrict competition, this thread illustrates why there are a lot of legitimate reasons to restrict the practice of law to paid professionals with ethical duties to their clients. If something goes wrong, I assure you rada and ridogi won't be around to help you.
I know lawyers are expensive, but in the long run, relying on internet forums can be a lot more expensive. You should consider decent legal advice to be part of the cost of doing business. And by the way, I suspect a lawyer would not charge an outrageous fee to review and "mark up" a contract for you.
posted by sudo intellectual at 4:49 AM on August 5, 2015
I will add that I did hire a lawyer to review my contract and although they suggested I make no changes to my contract it was money well spent for my peace of mind to make sure I wasn't forgetting anything or including something that oversteps what would hold up in court.
I am suggesting that a generic contract may not cover the needs of a one person IT shop that well. I tried to find a template for myself years ago and nothing matched that situation (especially since I charge hourly and all templates are project based) so I did it on my own.
posted by ridogi at 6:41 AM on August 5, 2015
I am suggesting that a generic contract may not cover the needs of a one person IT shop that well. I tried to find a template for myself years ago and nothing matched that situation (especially since I charge hourly and all templates are project based) so I did it on my own.
posted by ridogi at 6:41 AM on August 5, 2015
Response by poster: Thanks sudo. I actually did go in to see a lawyer at a free legal clinic that my city's business bureau runs. The advice I got was that a generic boilerplate contract would be ok, but that I needed to explicitly put in a limitation of liability clause, as well as have a standard clause indicating that I'm a contractor at arms length from the client rather than an employee. Right now I'm looking at using a contract based on one that was put together by the Society for Human Resource Management for their consultants, it looks pretty close to my business model, and it seems to have most of the clauses I need written up by their lawyers.
posted by unreason at 6:56 AM on August 5, 2015
posted by unreason at 6:56 AM on August 5, 2015
This thread is closed to new comments.
There may be some small business resources available from your state that include templates that cover the general requirements/limitations in your area.
posted by Lyn Never at 12:58 PM on August 3, 2015 [1 favorite]