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A 'Small Claims Court' For the Internet
angry tapir writes "It's not unusual for a freelance Web designer or developer to be burnt when a client refuses to pay up, citing one excuse or another. And what can you do about it? If a contract only amounts to a few thousand dollars, litigation to recover your fee can be far too expensive, and an increasingly vituperative exchange of emails is often not enough for client and contractor to come to agreement over who owes whom what. Into this gap steps judge.me: A start-up founded by Peter-Jan Celis that aims to provide internet-based, legally binding arbitration services — a 'small claims court' for the internet — with a particular eye on settling the conflicts that arise over freelance development and Web design."
as per title, if theres a contract in play and a "small" mount of money whats wrong with the real small claims court?
It's great that they're offering a cheap way of pursuing binding arbitration (and as has been mentioned before, there's still small claims for amounts below a given threshold), but the hard part isn't getting a judgment - it's collecting on it. There are plenty of folks out there that are quite comfortable with ignoring a judgment and going out of their way to make collection far more expensive than it's worth, particularly when they don't own any of their equipment or have any other real assets to seize. If it's an overseas client, you're probably better off just writing off the loss from the get-go.
Please stand clear of the doors, por favor mantenganse alejado de las puertas
I know it is not practical, but change your legal system to a loser pays one like Australia. Then it matters not if the amount owed is a few thousand or even a few hundred.
I sued an ex-client in small claims. One of the defendants had a lawyer for a dad who tried to be as much of a weasel as possible. They moved it to civil court threatening to sue me for 10's of thousands. I handled my own side of it and still won without stepping foot in court. Cost maybe $80 all together for filing fees and postage and got every penny I was owed.
The agreement on who owes who what should be settled before work begins. You're then just going to court to enforce a contract when one side doesn't deliver. For small amounts you're on your own. You'd spend more on lawyers than you're owed and if the client has a lawyer, you just have to deal with it.
If you're lucky, they come to their senses and you can avoid the courtroom. What would really be helpful is simple legal advice. Even arbitration is a little late to the game. You need to know whether you even have a case, what documents you need to win your case, etc, what arguments you need to make, etc.
Showing up to arbitration unprepared is no better than showing up to court unprepared.
The simple solution is to just never leave large sums of money on the table and work with people you trust. I don't like racking up large invoices simply because I'd rather have cash in hand. I can't pay bills with invoices.
Work Safe Porn
> whats wrong with the real small claims court?
Real small claims court doesn't spend much time on investigating claims. To clear cases quickly the judge quickly weighs up sides and makes a snap decision. Under the adversarial system of justice its not about finding the truth, but about who deciding presents the best arguments. That's easier for the judge, but it shouldn't be confused with justice. In some jurisdictions you can't appeal or even be told the reasons. The judge makes a mistake (they are human so it happens) you won't even know.
Small claims court weren't created because they are better than the bigger courts, but as a way of offering the little people cheaper although less reliable justice. The bigger courts are worse though since they are extremely expensive charging rates that cannot be justified. Whoever has the most money to fund the most appeals and buy the better lawyers wins.
Arbitration is in theory a great idea, but a big problem is that the arbitration system is taken over by judges and lawyers charging the same rates. It's sold as a cheaper alternative, but it has many traps. One problem is a big company who nominates an arbitration company (yes, they are companies) will pick one that gives them favorable results or they won't get repeat business. I loved Erin Brockovich the movie, but the arbitration system they used has been severely critcized by some of their clients. If you loved the movie then don't read this:
http://www.salon.com/2000/04/14/sharp/
http://abcnews.go.com/Business/story?id=8169252&page=1#.T875jlK6SSo
http://www.givemebackmyrights.com/bma-faq.htm
http://www.businessweek.com/news/2012-05-21/consumers-may-see-new-limits-on-mandatory-arbitration
http://www.homeloanbasics.com/articles/FirstTimeHomeBuyers/MandatoryArbitrationClausesStripHomebuyersofSuitableRecourse
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x301912
http://www.independent.ie/business/irish/website-aims-to-boost-50m-arbitration-industry-2351246.html
The justice system badly needs reform, but you have many politicians and lawyers doing very well out of the current system who won't give it up.
Depending on the 'trap' you set the client could find some one cheaper and competent enough to fix it. Sue you for damages, or have you legally liable for other laws. It also puts out a bad reputation for you as well and gives the client some ammunition as to why they are not paying.
Some things can be done, like withholding some code till payment is received, but generally everything like that needs to be outlined in the contract before hand.
Also it comes down to time is money and it takes time to set those traps. It is often hard enough to get a site or program working properly in the first place let alone put a time-delay 'trap' of some kind in it.
Some quotes from that Salon article. Highly recommended reading:
"Arbitration is billed as a cheap, quick and private way to resolve civil disputes. The practice gained momentum in the 1980s, when judges, bowing to pressure to alleviate overcrowded courtrooms, began encouraging litigants to resolve their disputes voluntarily. Since then, arbitration has snowballed into an unlicensed industry that’s conservatively estimated at $350 million in annual sales, according to a spokeswoman at the nonprofit American Arbitration Association.
“We hear a lot of complaints about these cases,” said Gerald Uelman, professor of law at the University of Santa Clara. The for-profit arbitration business is booming, especially in California, he added. “It’s upsetting to the extent that it’s a resource used by institutional litigants.”
One big reason for the boom is money. Public judges, who earn about $150,000 a year in the public courts, often retire early to become, in effect, rent-a-judges. By doing so they can earn between $100 and $500 an hour — easily doubling or tripling their salaries. Arbitration firms often have powerful attorneys or corporations as steady clients. They pay monthly retainer fees or get volume discounts. As a result, some for-profit justice firms have a vested interest in keeping their clients happy if they want the return business, which has been the topic of seminars sponsored by the California Judges Association.
The rules that apply in open court often aren’t followed in private court. No laws prevent the hired judges from accepting gifts from attorneys. Another criticism is that the arbitrators and their clients and attorneys often work together regularly. “The same judges are often employed by one side or the other,” said Uelman. As it turned out, Girardi had ties to at least three of the private judges in the PG&E case: Jack Tenner, John Trotter and Jack Goertzen. Had this occurred in public court, judicial rules would have forced the judges to recuse themselves from the case due to a conflict of interest. But no such ethical standards bind participants in private arbitation."
http://www.salon.com/2000/04/14/sharp/
Going to court is the last thing I ever want to do in any way shape or form. For a few thousand dollars, it's not worth all the horrible hassle. But this also means, that this amount may not very much for clients either then, and proper planning and agreements can successfully solve this issue before it starts.
PROBLEMS:
1. New clients (in my 13 years exp.) are the ones that will screw you most likely (if you don't know then and they are devious). Old clients with a history of problems, are the second on the list.
2. Bad communication and unbalanced expectations are the start of most conflicts that end up with you not getting paid.
3. Lack of planning/preparation will always come back to bite you, not the client.
SOLUTION:
1. Document everything you will build. Outlines, descriptions, mockups. The amount documentation depends on the scope and budget of the project. Smaller projects get less specs written, and also have less risk.
2. Write a Cost Proposal that itemizes the costs by feature or whatever can be broken out and separated. This also allows the client to pick and choose which items they don't want. (lowers your bid and makes your project feel more in the clients control)
3. Write a timeline with payment schedule and milestones. This is where you put MONEY UP FRONT, as the first item on the list. Depending on the amount of the total project, I usually ask for 30% to 50% up front. If it's a good client, and not much money, I may ask for 100%.
3b. For each milestone simply include which features will be done, and the dollar amount expected at that point in time.
4. Have the client AGREE to the payment schedule, the specs documents IN AN EMAIL. I have had a hand full of times where verbal agreements bit me in the ass because the client was slightly manipulative. This is NOT a contract signing thing, just written proof that the client agrees to start work that is documented.
5. Do NOT start the work until the first payment is recieved. This can be flexible depending on the trust you have with your client.
RESOLUTIONS
1. Now, when/if your client balks at a payment, a) you've already gotten some money, so the stress is greatly reduced, and you have documentation detailing everything you agreed to do.
2. If client complains that feature X is NOT THERE, you can simply refer to your documentation saying what you agreed to build, and that feature X is NOT in the documentation, and that you can put a proposal together for the client for feature X.
3. When a client complains "I told you on the phone" (happens FREQUENTLY) you state, that you only do work that is documented or the request is done in writing. (ie, email) BE SURE to state this UP FRONT when you send the specs documenation, and even include this in the specs. Just doing this has SAVED MY ASS.
4. Follow rules for work, not memory. I had a client say that a missing feature was a "bug". He said I told him on the phone that I would "fix" it. I was lucky to remember this issue from a few months ago (very lucky) but also explained that we had to use a "rule" to distiguish between bugs/flaws (my responsibility) and feature requests (clients financial responsibility)
5. Don't start on the next milestone, until payment is recieved. This again is flexible based on your relationship with the client.
6. Take care of your client, they often shoot themselves in the foot. They don't always understand technology, the internet, or design. Education and patience will pay off big time.
7. Take the blame readily when something is your fault, and fix it. That way, when the client is pulling something, you have no qualms about putting your foot down. (make negotiating infinitely more benefitial to you)
There's much more that can be said, but for another day...
I would never agree to a contract with a judge.me arbitration clause if there were any real money at stake. There is a very serious difference between their arbitration process and almost all others: they attempt to completely replace all statutory and case law with "principles of fairness". There are two problems with this: First, statutes and case law exist because they are helpful in resolving cases. Without them to control the outcome, there is no way to accurately analyze the dispute in advance (or even the original contract itself) to determine the probable outcome. You have no way of knowing what whim the arbitrator will use to guide the decision, and no right to complain even if it's unpredictable or contrary to the real law. Make no mistake, the ambiguity is huge - thus so is the risk. This vast unpredictability defeats the entire purpose of having a dispute resolution process.
The second problem is even bigger: Not all law is waivable. Many procedural protections, consumer protection laws, and some case law cannot be waived by contract. Although the judge.me arbitration clause purports to waive all law in favor of their own ideas of equity, this is not legally possible. This creates a total mess. If the arbitrator fails to correctly consider and apply non-waivable law, the losing party could sue in real court to overturn the arbitration award.
I am a geek attorney, but not your geek attorney unless you've already retained me. This is not legal advice.
Why is the website registered in Montinegro?
TLDR; Arbitration is legally binding across countries, so unless the contract specifies your country as where conflicts will be handled, there are significant risks in terms of fees (in my case $150000) and risk (all my personal assets). The other country may not share your country's view of limited liability, and madman clients may make claims that do not make any sense in your part of the world that you are forced to defend yourself against.
Just a friendly warning to people throwing out arbitration as the solution to many problems. Sometimes arbitration makes matter worse, because they are legally binding across countries. In my case an idiot client went broke, and when he stopped paying I stopped working. The contract had an arbitration clause in it, which would be handled under US law. My client had various issues and excuses for late payments, and eventually I stopped working. I was willing to take a loss of a hundred thousand USD, but my idiot client had another agenda; he wanted me to work for free, until he managed to make money off my product. So despite the fact that he had stopped paying and breached the contract, he said the only settlement he was willing to enter into to avoid suing me in the arbitration courts was if I was willing to work for free until the product made enough money that he could pay me according to our contract. He was in the US, I was in Norway, and the arbitration clause in the contract was under US law (big mistake). I got a legal opinion in Norway about just ignoring the case (it was ridiculous after all), and then defend me when/if he won a claim and came to collect in the Norway. Well, the legal opinion was "you should win the case in the US". Under arbitration law, if I lost in the US, they could collect in Norway. Even worse, in Norway, the goverment actually go a really long way of enforcing such collections, so I could stand to lose my house, car etc. So risking a default judgement (for not showing up) in the US was out of the question. The idiot client sued me, initially for a million USD, although this was later adjusted down. To have any hope of collecting anything in return, I had to counter sue. After spending $150000 in legal fees, I won and was awarded just below $600000 for his breach of contract. But differently from Norway, the US will not help me collect what I won, so I would have to sue him again in his state to collect. And since my claim is against his company, and the fact that he is a fraud, the odds are he would bankrupt his company, stealing any and all assets, and continue as before. So I would have to sue him again personally (with stricter burdens of proof) to demonstrate actual fraud from his side, and hope he has personal assets I could collect. The fraudsters name is Gregory Spear, and his prime vehicles of fraud are companies named Independent Investor, Spear Financial, Spear Publications and more.
If you want to read the whole sad story, I've put it up on http://aboutspearreport.wordpress.com/ .