Before signing any contract, read through the items listed below
So we were doing a contract for design work, and after going through it, our lawyer gave us some great pointers of how we should be really approaching it. I wanted to share his thoughts. You have to think logically with the law in mind. Limiting your exposure should be one of your major objectives.
1. The contract addresses design collateral, but it really should more specifically address ownership of intellectual property. That is, if you create a website, logo, etc., who owns the copyright and trademark.
2. There should be a limitation of liability clause in which the parties agree that in case of any action to recover for losses due to a breach of the contract, liability will be limited to a certain amount, either the amount spent on the work or some other number.
3. There should be a liability waiver for consequential damages and a disclaimer of warranties. I think this is particularly important if you are going to be designing/hosting websites given the threat of data breach or downtime that could result in lost business. Always limit your liability to at most what you were paid
4. There should be a broader indemnification clause in which each party agrees to indemnify the other if they are sued by a third party due to the acts/omissions of the other party.
5. There should be a section that establishes you are performing the work as an independent contractor, that the work does not create any kind of partnership between the two companies, and that each party is responsible for their own employees, taxes, legal requirements, etc.
6. There should be a severability clause that says if any one section of the agreement is deemed invalid under the laws of (your jurisdiction) eg. Florida, then that section shall be disregarded and all other sections shall remain in full effect.
7. Force Mejure clause that says you are not responsible for delays in the event of natural disaster, civil emergency, etc.
8. Entire agreement clause that says this agreement supersedes any prior agreement, and does not include any verbal agreements. Also any changes to the Agreement must be in writing and signed by both parties.
9. Confidentiality clause. Each party agrees not to disclose confidential information of the other.
10. Non poaching clause, neither side should poach the others employees / contractors etc
11. Acceptance criteria – what is the test that the client uses to accept work done as correctly complete and project can be closed.
12. Is Business Insurance required?
13. Who will be signing what and who can sign off.
14. Ways of working and communicating, eg. in writing sent by mail, email etc. How will it be recorded and what proof will be acceptable
15. Most important Payment terms when will you paid, is there a deposit to start, will you be paid after every milestone or by the hour. When will payment be made, late fees etc
Updated September 15, 2021
I spoke to a friend who wanted to setup a consulting agency. He was located in a different country and we reviewed everything and I added the last few items from our conversation
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND THAREJA, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.