Why Clients Object To Your Totally Reasonable Contract Language
You’ve read all the Very Best internet articles about putting a contract together.
You collected five different copies of contracts and painstakingly stitched together a contract that does exactly what you need it to do: no more, no less.
You proudly send the contract off to a client, patting yourself on the back for being a professional with her own legal documents. You are confident they’ll sign and get it back to you before the end of the day.
But what you get back is atrocious.
There are so many changes it looks like the document is bleeding.
By Nic McPhee via Flickr.com
These aren’t conservative cuts; these are wholesale obliterations.
Sections are missing. The page numbers no longer make sense. Once sentence has just been replaced with a series of exclamation points. (!!!!!!!!)
What happened? You did your very best to put a fair document together. Why is your client freaking out like this?
Well, first things first: this is not personal. Your client didn’t just decide you are a Jerk of the First Order.
It’s important to remember that even if you’ve crafted a document that is fair and clearly articulates everyone’s responsibilities, someone, somewhere, will object to something. That’s OK. That’s just how contract negotiations work.
Here is a brief summary of two standard clauses your clients may object to and how you can respond without giving in on everything.
Disclaiming Warranties
Warranties are promises. Usually they’re promises that something will work in a particular way. Or that if you use the thing in a particular manner, you’ll get a particular result.
Lawyers who draft contracts for freelancers hate warranties.
We hate warranties because they are inherently risky. What happens when that one time out of a hundred your product doesn’t work the way you promised it would? Well, if you gave a warranty, you may be legally liable for the product not working. And depending on what you promised, that legal liability might be $ignificant.
By David Silver via Flickr.com
So usually you’ll see attorneys encouraging you to disclaim warranties, which basically means being very forthright about the fact that you don’t promise the thing you’ve made will work in a particular way or produce particular results.
Clients who read contracts hate it when a warranty is disclaimed.
An example: You build websites. In your contract you say that you can’t promise the website will always be functional or that it will work in a particular manner. You do this because you know that there are hundreds of different things could make a website stop working and you have control over about two of them. You also know from experience that what a client thinks a website should be able to do and what is actually possible can be very different things.
Unfortunately your client reads the contract this way: “I will build something for you and take your money, but I can’t promise what I make for you will work at all. It might be incredibly useless. If it is, it’s not my fault.”
Solution: Give your client the heads up about any disclaimers in your contract before they review the contract. Help them understand why you’re doing what you’re doing, instead of leaving them on their lonesome to think up awful reasons for your motivations.
“You’ll see some disclaimers in the contract. They’re there because while I can and will build you a great website, there are lots of reasons why it might not work that I can’t control. Things like how you use passwords or the security measures you follow. I’ve tried to make it clear that I’m standing behind my work, but I can’t be responsible for things outside of my control. If you have any questions, please let me know. I’m happy to talk through it.”
Indemnification
As you know, indemnification is the pinky swear of contracts. It says: the promises I’ve made in this contract are true, and if they aren’t, I’ll pay for any harm you suffer.
By Nic McPhee via Flickr.com
As a freelancer, it is a very, very good idea to limit your obligation to indemnify your client to only those things you can actually control. Even better: limiting the total amount you’ll indemnify your client for to the total amount you get paid under the contract. That way if you do have to pay, you only have to pay what you earned, no more.
But clients, and their lawyers, aren’t very keen when you try to limit your liability. They don’t want to get left holding the bag for work you did that gets them in hot water. Which is fair; nobody likes that.
The only problem is that most client-favorable indemnification sections are written so broadly you’re not just protecting them from anything you do, you’re also protecting them from just about *anything* that might happen with the work.
When a client is used to using these broad indemnification sections (usually because their lawyer told them they have to have exactly this language), a more limited one can feel scary. What are they leaving themselves open to? What horrible thing might they end up having to pay for?
Solution: If you get push back on your indemnification section let your client know that you only want to make promises you can keep. And while you can promise that you won’t intentionally do anything to cause them harm, you can’t promise against any and every type of harm that might come from the work. Your contract language makes the promises you can keep.
Further, by limiting your liability to the amount you make from the job you’re guaranteeing that they’ll be able to recoup some costs if there is harm. If you promise more than that you might not be able to pay (you’re not a big company with big resources) and that would be considerably worse, and more expensive, for them.
If you still get push back, don’t despair. Indemnification is an area in contracts that causes a lot of ruckus. It may be worth it to chat with a lawyer so you can understand the practical implications of accepting their language or to see if the lawyer can help you craft language your client will accept.
By Angela via Flickr.com
Congratulations on drafting and using your own contract! It’s a huge step in protecting yourself and your freelance business.
What are areas in contracts where you see push back from clients? How do you deal with it?
Categories: Making Sense of Contracts
Thanks for this blog post! I think it’s a really generous and honorable thing you’re doing here with the blog; there are a lot of unrepresented folks who will certainly benefit. It’s also neat to hear what an attorney thinks about this process. Personally I go through this often enough that I feel like I pick up many valuable clues about what it will be like to work with the other party from the process. Do you feel the same way?
One requirement that surprised me as a new freelancer was a requirement to hold insurance. This seems common coming from public-sector clients, even small city governments. Some clients don’t understand how much that can affect the bottom line for a freelancer, as there are many different types of insurance and lots of requirements to meet. If I hold professional liability insurance, and a client says they need me to hold property loss insurance just because it’s in their boilerplate for “performers,” I feel like I want to scream when they become insistent. It just doesn’t make sense sometimes, and I have let a number of potential clients go because they couldn’t let go of their boilerplate.
Another sneaky move along those lines is when a potential client says, “we need this boilerplate in there that overrides your terms, but just between us, we’ll honor your separate terms that won’t be included in our agreement.” That is often a deal-ender for me and I’ve had it happen many times. I wonder if some organizations repeat those lines so many times that they forget what it feels like to be on the receiving end.
I had a funny experience recently where a client’s attorney wrote up a five-page service agreement that “included some of” my originally-offered terms (and it was almost none at all) and insisted that there were just so many hard-set requirements on their end that *had* to be in there. I called the executive director, told him it wasn’t worth my time and energy to deal with all their requirements for that kind of job, and within a half hour I received an email from the attorney that basically said “I have the authority to do whatever fits our business requirements, and I hereby decree that your original agreement is fine for that.” 🙂
Anyway, thanks again!
Hey Marc, thanks for your comment! I agree that you can learn a lot about what a working relationship will be like from how the contract negotiations go. I always tell folks that if the client is willing to be a jerk before they’re working with you, what makes you think it’ll be roses and puppy dogs once the contract is signed?
Congrats on handling that five page contract negotiation! Often times it helps to talk to the person you’re contracting with (as opposed to their attorney) on issues like those. Ultimately they’re the ones who decide what has to be in the contract.