Legal Horror Stories: This series is created by eMinutes.com to educate and inform young business owners. Find out if you qualify to register your business for free today!
Today’s story comes from Dominic Fuccillo, founder of TrustPages.com. His company provides an easy way to save and share local business recommendations with friends and neighbors. It currently operates in the District of Columbia, Maryland, and Virginia and should be nationwide by fall 2012.
Table of Contents
History:
Anyone who starts a website or software development company will inevitably work with third party contractors for tasks such as development and design. Due to the nature of the creative commitment, these contractors can become difficult to manage. Deadlines are missed, creative disputes arise, and legal agreements quickly turn into legal headaches.
Neither side intends to deceive the other, but mistakes are often made on both sides. I am extremely grateful and pleased with all the third parties that have helped make our business a reality, but I have certainly made mistakes along the way. Below are some of the lessons I have learned.
Contract:
Make sure there is a service schedule in addition to the results schedule. This is perhaps the most important aspect of the contract. Each contract will have goals: landing page design, feature development, website launch, etc. However, it will most likely not include details regarding hourly estimates, burn rates, and timelines.
Firms have multiple clients and this requires some planning flexibility. But if they don’t want to tell you how many hours they’ll be working on your project in a given week, don’t work with them. You need to set a schedule of expectations. For example, in the first week there will be two phone calls and 10 hours of work. If you don’t keep your hopes up and things go awry, you have no real way to take responsibility, expose blame, or protect the blameless.
Before signing a contract, check to see if the firm or contractor has methods in place to track and record work. Set expectations for appropriate actions when hourly estimates are not running. Reputable firms and contractors will have a transparent log of hours worked. If a firm doesn’t want to send you a time log, don’t work with them.
Never prepay the full price of a contract to receive a discount. It seems obvious, but as a startup CEO, saving money is tempting. Be especially wary of large prepayment discounts for short-term contracts. Regular contracts will be closer to 50% upfront and 50% upon successful completion. Once they receive your money, don’t plan to return it.
Do not invest shares in their “standard” contract. Their standard contract can be, and often is, one-sided. Check with the Better Business Bureau to see if they have any complaints. If they do, people won’t be happy to sign their standard contract. If they don’t want to agree to the change, you certainly don’t have to agree to their contract. Try to remove anything that commits you to the firm after participating in the contract. Things go wrong, and the contract is designed to make sure that when things go wrong, both parties are protected. You will never regret turning down a bad deal.
Work
You are their client, not their manager. You are their customer and it is their job to get the job done. You don’t have to rant or encourage their work (some firms will bill you for the time you spend listening). Everything positive that you say about them, even if it’s just for motivation, will be used against you if something goes wrong. Obviously, you still need to be very professional in your feedback and try to maintain a positive relationship.
Complaints must be tangible and prompt. When you make complaints, make sure they are tangible or you will fall into the “he said/she said” game. For example, don’t say “you caused a delay” because they will say “no, you caused a delay”. Again, some firms will bill you for the time spent “getting back on track,” so make sure you clarify beforehand if the discussion is chargeable. Say, “I haven’t heard from you in 10 days, can you send me your hourly magazine?” This tells everything they need to know.
Keep detailed records. If they are slow to respond, keep track of their response time. If they don’t come out as fast as you want, keep an eye on it. If you don’t hear from them, be sure to make a note of it. You should have a detailed record of how the contract is being carried out in your back pocket. When milestones are reached, you must state in writing that the milestone has been reached and that the project is on budget. In the end, you don’t want to hear from them that in the beginning they were wasting extra time on something they need to charge you for now.
Consequences
Focus on the future, not the past. If you decide to end the contract early, focus on what needs to be done to get both parties to part ways. If you give all the reasons for the termination of the contract, their best defense is an offense and they will just come after everything they think will scare you. Games he said, she said get both sides going nowhere. Remember that while there is no judge or jury, there is only you and them. If you say everything you didn’t like about them, how do you think they would react?
Set a time limit, then move forward. One of the best things we do for our company is to keep track of our time and what we are working on. Especially with legal issues, you may find that it takes a lot of your mind. Set a deadline, and if you exceed it, get a lawyer, go to small claims court (often you don’t need a lawyer), file a complaint with the Better Business Bureau, or move on. The worst thing you can do is let a bad third party experience distract you from your company.
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