Software Development Indemnity

[viSci]

I am in the process of formalizing a contract with a company that has been known to have had prior issues with LabVIEW developers and has adopted a tough talking somewhat litigious tone.  I am considering what wording I should put into a Software Development Contract that will protect me from any liability in the event a bug in the software should damage the clients property.  Has anyone had experience with this?  Or perhaps could suggest a contract template to start off with.

[ShaunR]

I am in the process of formalizing a contract with a company that has been known to have had prior issues with LabVIEW developers and has adopted a tough talking somewhat litigious tone.  I am considering what wording I should put into a Software Development Contract that will protect me from any liability in the event a bug in the software should damage the clients property.  Has anyone had experience with this?  Or perhaps could suggest a contract template to start off with.

 

I suggest a you avoid them like the plague.

[viSci]

You are the third person in a row to tell me that.  But sometimes one must try to balance risk with the need to keep work coming in.

[Tim_S]

I would recommend using a lawyer if you wish to pursue working with them. That could get quite expensive depending on what you want the lawyer to do. I expect that the lawyer can write up some standard contract "boilerplate" text for a fairly reasonable fixed fee; that may be sufficient for your needs with future customers as well. Of course, a lawyer can also review contracts that could be highly detrimental to you as well.

[ShaunR]

You are the third person in a row to tell me that.  But sometimes one must try to balance risk with the need to keep work coming in.

 

The issue is this. The risk is very high that they will try and renege of the agreement-they have all but admitted that. Even if you do put a watertight clause into the contract, it is highly likely they will contest it anyway. So you will need deep pockets to defend it in court to get the money you are owed.

 

If it is a large corporation, they have departments dedicated to finding holes in contracts and arguing the toss of every penny. They will use it to get more concessions out of you by - nit-picking at best, by threatening at worst. The sort of corporation you want to do business with are those that only send contracts to their law dept as a last resort, not first resort. Which do you think they are?

 

Your first defence should you choose to work with them, is of course, the clause in the contract (choose any from the open source contracts, they all disclaim liability). This is really a management bargaining tool, however, so you can point to it and say "that's not what we agreed". If it goes further than that, then you incur huge expense so you really need a company that is prepared to take that risk in the first place and not go further. Your last defence is Limited Liability Insurance  or Professional Indemnity Insurance to stop them taking your house, car and dog if they win.

 

That' the risk of all consultancy work. It's just better for your health, wallet and integrity to politely decline any companies that have a history of serial disputes with consultants, Get a good lawyer

 

DISCLAIMER:

Not legal advice, not a lawyer, not even particularly good programmer-make of it what you will

Edited March 17, 2014 by ShaunR

[0_o]

I would try using a licensing mechanism that will let them use your solution as long as they paid and make any bug fixing part of the support bundle they get if they want to.

I would also make it clear that your solution passed their tests if you don't get any complaint within a fixed period of time.

Once that period ends it is as if your solution is ok and they have no way to sue you for bugs or harm.

Thus, they get nothing if they don't pay, bugs in the first month are on you as it should be, bugs found later (which is the case most of the time) are not on you since they actually declared your solution to be good enough and any future work is to be seen as additional work under support or not.

You can even limit the licensing to one year in case they get support so you could end their contract if you don't want to keep on working with them.

You can also  take a look at the latest VI Shots Live webcast/hangout number 2 event. They talk about the consulting business and they have some contract types options talked about.

Anyhow, I'm working at a regular firm, I'm not a lawyer and all the consulting I ever did was for free fun so I have no way to know if the options above are good enough.

From within my firm I can tell that whenever I saw someone go legal on us it was because they had a cash flow problem or they couldn't get their specs right so they were always unsatisfied since they didn't know what they wanted to begin with. in those cases it might be helpful to start with a high price and give them discounts while working close with them making sure they know what to expect out of your solution with all its limitations. Try and understand what the previous consultants made wrong and do better, Preferably ask for their contact information and hear from them what went south and what tricks the costumer played on them.

However, if you see that the problem with them starts from the type of personality the manager has I would seriously run away no matter what they pay.

If it is already late and you need a solution try and go over the person that holds the money to the person that manages him. Many accounting managers use their power in a bad way since they are afraid that all their books are out of control and they don't know how to get it in order beside saving a bit here and there until they get sued. It is an ostrich way of handling money, ignore till you have no other way out. In those cases just starting the talks with the lawyers will scare the bully enough.

If you won't have your standards and always run after the costumer without thinking about making a profit it is like an economic suicide that can only go downhill.

Take into account the extra work and get pre paid for it if the risk is high or as Jack described in the Live Shots above: you can only risk a small percentage of your business income.

One last thought I have for now is for you to use plugins (lvlibp). They not only hide your code but you can use them to push bug fixing keeping the initial work as is and adding different licensing to the new lvlibp. Always keep a leverage.

Good luck.

[ShaunR]

You are the third person in a row to tell me that.  But sometimes one must try to balance risk with the need to keep work coming in.

 

A second thought.

 

Why not just do it as a normal contractor rather than as a fixed price project. This is much safer as there is no deliverable as such. 

[shoneill]

Never agree to a fixed price project for a finished work.  The "customer" can simply claim something minor was not finished and decide not to pay.  You need to make sure your liability ends once the customer accepts your code is transferred.  Each deliverable should be immediately billable.

 

I did a project like that once without help from a lawyer and it cost me 4 months of my life.  Didn't get a penny at the end.  Even if you have a contract, you have to have the means to enforce it legally.  Most developers simply can't do that so I would also reiterate the stance of either money up-front or forget about it.

 

Shane.

[MikeC3]

I've never been on the contractor side, but I have worked on the customer side as part of a large corporation who contracted out software work.

 

 

A second thought.

 

Why not just do it as a normal contractor rather than as a fixed price project. This is much safer as there is no deliverable as such. 

 

 

I vastly preferred working with "purchased service" vs "purchased product" contractors, mostly because the projects were always much more complicated than we realized at the outset, and it was just a much "easier" relationship.  There wasn't all the contention of whether the software met the requirements or not (like in too many buyoff reviews), and the contractor would get paid by the month based on billable hours.  Also, I (as the customer) would usually end up owning the source code at the end of the project, which could be good or bad depending on your perspective.  And the relationship was easily scalable, either by extending the term or adding additional internal or external resources.

 

Granted I never had to get much into the legal, contract, or financial ramifications.  And I never had to consider terminating a contract and the inherent uncertainty that causes.

[viSci]

All - thank you for the great replies!  I think I was just saved from a serious potential error in judgement. I am now settled on changing my original attempt at a fixed price contract to a much simpler consulting by the hour approach.  I have tried to offer a best estimate of the hours required but a large body of inherited software that is unfinished and untested has too many uncertainties for me to be held accountable.