Michael Posner asks,
> I am curious how you go about reviewing contracts given to you by clients. Are there tips that you have?
When I was employed at a large firm, I had lawyers on hand to do the reviews: working with them was valuable preparation for starting my own business 15 years ago.
Since then, only two issues have come up in contracts. They are involved in almost every case, whether it's with another one-person firm or with a Fortune 10 company: (1) insurance and (2) intellectual property rights. You usually have some control over these.
Boilerplate insurance requirements can be onerous and often reflect concerns unrelated to statistical practice (such as medical or environmental damages). You can almost always negotiate those requirements away. The only ones worth any consideration are (a) automobile liability, for travel to and around the client's site(s), and (b) professional errors and omissions. E&O is an issue you
ought to consult an attorney (and insurance agent) about. If a client is very demanding, offer to obtain the insurance--in return for an increase in your fees to cover it! That usually brings them around.
Intellectual property rights matter because you almost certainly will be using software for the project, software that you may have developed on previous occasions, and you may be developing or customizing software. Do not let your client ending up owning it (and preventing your future use)! Unless the engagement is specifically for software development services, the client rarely cares about such clauses. I have been successful in all cases in offering a sharing agreement:
you (the client) may use any software I develop or customize for you, but
I retain all rights, including use for other clients and even commercialization.
I can't cover all considerations here, but additional things to look for and modify are:
- Payment terms. If possible, make your client responsible for paying you. Eliminate any contingencies (such as their receiving payment from their clients first). Consider asking for a retainer (some people have been successful with this; I rarely have).
- Equitability. A good contract treats both parties fairly and similarly. Many boilerplate contracts offered you may be singularly one-sided. Ask for changes that even the balance. E.g., if the client wants the right to dismiss you at any time for any cause, ask for the right to walk off the job at any time for any cause. Reviewing the entire contract from this point of view often suggests many other changes to propose.
- Onerous requirements. I have seen contracts that would make you responsible for all costs of completing the work even if the client dismisses you. I suspect such clauses may be unenforceable, but you don't want to be litigating them after the fact. If the contract requires you to do something you might be unable to carry out, or will have no control over, get rid of the provision.
Perhaps surprisingly, the worst and longest contracts tend to come from the smallest and least sophisticated clients--but they are the ones you can usually negotiate with. If you get a lengthy, detailed contract from a large firm, ask them whether they don't have a shorter version for small companies (like you) or small projects. Usually they do, but they offer the worst contracts as a matter of course, so you have to ask.
--Bill
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William Huber
Quantitative Decisions
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