Liabilty - IT contracting

**Wanderer** · 3 October 2010, 19:57

Originally posted by dnt176 View Post

If the project I’m working on is delivered late (there are penalty charges) and my employer (client) feels that its my fault (not producing the required work on time). Can they then sue me to recover those costs? Has that happened before? In a worse case scenario - could they take me personally (not just my limited company) to cleaners? (i.e. I would be bankrupt)

I am aware that PI insurance is available (I have it) but does it fully protect you in all circumstances?

When trading through a limited company, your liability as a shareholder and director is limited to the issued share capital in the company - typically 1 pound.

The contract is between your company and the client (or perhaps agency). Your client is not your employer, they have engaged your company which supplies you as the worker to carry out the contract.

If they decide to take action against your company then you can just take out any cash retained in your company, cease trading with that company and start a new one the same day. Even if the case goes to court and they find against you, they won't be able to enforce the judgement on your company because your company will have no assets. They can't come after you personally unless you have committed fraud or some other crime which is then a criminal matter, not a civil one.

I wouldn't worry too much about penalties in your contract. They are a good pointer to being outside IR35 (shows financial risk) even though they don't have much hope of enforcing the penalties against you.

**Saddo** · 3 October 2010, 20:29

Wanderer is right in his summation, but I would add the following addendum.

The Limited company puts an umbrella around your personal assets. However that umbrella can be removed by court order IF you have acted fraudulently. For example if you had stated that you were a sh1t-hot Un1x admin guru but the closest you had got was reading the 'Learn Un1x in 24 hours' book. But do remember that that would apply if you were a permanent employee and had claimed expertise which you didn't have - it's not limited to just contracting.

Professional Indemnity insurance is what covers the risk. As you can appreciate, in any claim they would step in and give their team of lawyers the go-ahead to defend the case (unless you had truly been dishonest, in which case your PI insurance would be invalid anyway).

I haven't heard of anyone in the general software development industry being prosecuted, but I do know that the questions for PI insurance include statements about whether you will be working in the nuclear or other industries which could be very costly to defend.

**Sockpuppet** · 3 October 2010, 23:29

Originally posted by Saddo View Post

I haven't heard of anyone in the general software development industry being prosecuted, but I do know that the questions for PI insurance include statements about whether you will be working in the nuclear or other industries which could be very costly to defend.

Try mentioning that you help set strategies for UK Retailers. Like where to build 4 of your £100m warehouses, how big they should be and what they should all do and watch your PI insurance go through the roof.

Now I just tell them "I do numbers".

**Old Greg** · 4 October 2010, 08:23

Originally posted by Sockpuppet View Post

Try mentioning that you help set strategies for UK Retailers. Like where to build 4 of your £100m warehouses, how big they should be and what they should all do and watch your PI insurance go through the roof.

Now I just tell them "I do numbers".

I've scratched my head about this as well. I do work which will inform the medical treatment that seriously ill patients will receive. However, within the project governance strucutres I work in, it's hard to see how any liability would fall to me, as the sign-off, linical and corporate responisbility sits elsewhere, so I don't look to insure any liabilities that may arise from 'clinical incidents'.

**Wanderer** · 4 October 2010, 22:41

Originally posted by Old Greg View Post

I do work which will inform the medical treatment that seriously ill patients will receive. However, within the project governance strucutres I work in, it's hard to see how any liability would fall to me, as the sign-off, linical and corporate responisbility sits elsewhere, so I don't look to insure any liabilities that may arise from 'clinical incidents'.

What if your system works really well 99.99% of the time but it has a latent problem then one day it goes wrong and since everyone trusts it, they don't double check and someone gets hurt then they try to blame you?

**Saddo** · 4 October 2010, 23:52

Originally posted by Wanderer View Post

What if your system works really well 99.99% of the time but it has a latent problem then one day it goes wrong and since everyone trusts it, they don't double check and someone gets hurt then they try to blame you?

I think the jury will probably want to know what the client did with respect to testing before they went into production. Leastways, I would hope that the defendants legal bod would be shining a light in that direction.

**CheeseSlice** · 5 October 2010, 00:07

Originally posted by dnt176 View Post

What is the limit of liability for an IT contractor? (Software developer).

In addition to what saddo said about the LTD liability being overruled, you may want to thoroughly check the paperwork you sign with the agency. Some agents (not sure how many do this) get the contractor to sign a declaration that you're suitable for the job. One that I signed was a 'deed' in which one bullet point stated that "I personally guarantee the work". The agent rushed me through the signing as I had to sign and start work the same day. It wasn't until I had the documents reviewed by a lawyer that it dawned on me what could have happend if something went wrong.

**Saddo** · 5 October 2010, 06:10

Originally posted by CheeseSlice View Post

The agent rushed me through the signing as I had to sign and start work the same day

Act in haste, repent at leisure would apply to that situation.

I'm sure we've all been guilty of making assumptions that everything is okay but had reason to doubt it later. I know I have - dodgy client who refused to sign the contract, I let it ride and he paid the first couple of months, then payments started slipping. I walked, he didn't pay for the final month and started making noises about my incompetence (to warn me off taking him to court with a winding up order). My legal brief looked at the situation and said that I would win no problem - but the company was nearly insolvent so I would spend thousands of pounds winning the case and get jack sh1t back. I took it on the chin, with a reminder that I would never do work without having a signed contract.

**Ignis Fatuus** · 5 October 2010, 07:58

Originally posted by dnt176 View Post

my employer (client)

Sigh

Liabilty - IT contracting