Negotiating as an Independent IT Contractor?

C3ntaur asks: "I've been doing IT work -- System and Database Administration -- for over 10 years now, and I recently decided that it's high time I went freelance. I had done occasional side work before, but now I'm in the thick of it, with most of my income generated by contract work. One of the challenges I've encountered is in negotiating a fair contract, and I'd like to pose it to the Slashdot community: How do you deal with the PHB types who hand you boilerplate contracts that they themselves haven't read, let alone understand?" "I've patiently tried to explain my objections to legalese that translates to 'we own anything you've ever invented, or ever will invent', and 'you must obtain our written permission before working for anyone we deem to be a competitor', but it falls on deaf ears. In fact, I'm often told that it doesn't mean what I think it means. I am willing to hand over all rights to work I do within the scope of a contract, and I'm willing to protect and keep confidential a customer's IP and trade secrets, but the contracts they want me to sign are far, far broader than just that.

IANAL, but I do have a pretty good understanding of the English language. So unless these contracts are written, interpreted, and enforced in some Orwellian world where the lingua franca is Doublespeak, they could seriously hamstring my ability to earn a living. I cannot sign them, but my would-be customers won't do business with me if I don't. Any ideas?"

Comments

Re:Protect yourself by incorporating

[Corpus_Callosum]

I have done this in the past. I consulted for over 10 years in the Bay Area and never once had to consider the implications of my contracts, as those contracts were always between my company and my clients.

I did have to sign personal non-disclosures, of course. And my company did have to honor the requirements of my clients in terms of intellectual property (e.g. work for hire). But the corporate shield protected all of my prior work as well as non-related work.

As far as taxes go, professional services are not taxed and if you choose an S Corp, you will not incur double taxes (because an S Corp profits fall down to the principals).

You can dissolve a company at any time, but of course it does not relieve the company from financial responsibilities. The company is still responsible for it's debts and bancruptcy can cause you problems (e.g. you could go to jail for fraud for taking a company into bankruptcy just to avoid debt).

You can and should dissolve a company (that is just you consulting) in a case where a client is harrassing you badly (i.e. "Okay, I give up, I will close my company"). That doesn't prevent them from trying to file suite, but they will look pretty silly suing a company that is out of business (not to mention making it rather difficult for them to get any remedy). But generally, things never go that far. In 10 years of consulting, I have never been threatened with a suite. Why would a client bother?

On top of all of this, a corporation is an excellent tax shelter. You can expense things you never thought of before it gets posted to profit (and therefore declarable on your income). There are many benefits.

The thing to remember is that contract law and doing business is nothing like programming. Wetware dynamics revolves around perception and boundaries, not strictly adhered to executable recipes. Many software professionals get this confused because their minds are so trained to think in terms of strict cause-and-effect.

Don't take things too seriously in the business world, most of what you see and hear are there to confuse, impress and intimidate you, not to actually be executed against you.

Use your own contract from your own lawyer

[pocari]

My proposals always make it clear that my quote is a quote for work done under my standard contract. If the client then shows me their contract, I explain that I may have to charge more, especially since I will have to have a lawyer review their terms. Since at that point, the project managers are usually in a hurry, they will stand up for using my contract, just for the sake of time.

My standard contract was developed by a lawyer who specializes in software, who went over it with me very carefully. I know the importance of each clause. I also know that it is fair to both sides, unlike some clients' contracts I have been presented with. Sometimes, clients are just testing to see what they can get away with, since most contractors are naive about such things.

One thing I learned is that contracts drawn up by clients do not say that you must be paid before they own the intellectual property. Something this basic could be disputed if they didn't pay you in full! My standard contract says my clients must pay me in full before the IP rights transfer to them. Obviously, no PHB or lawyer can with a straight face suggest removing that clause from my contract, but many have tried presenting contracts without saying exactly when the rights transfer. This is a subtle point I would have missed had I not spent time with an attorney.