Reply to: READ YOUR CONTRACT - beware the warranty clause?

[BlasterBates]

I think if your careful it shouldn't be a problem. I used to do fixed price contracts with warranty and all the rest of it.

First of all you need to write a spec. This shouldn't be a problem I did it all the time as contractor, and a test spec. Both of these don't need to be more than a couple of pages.

Then you need sign off, i.e. get your client to agree, that's what you are going to deliver.

Once you have that it is pretty water tight, because they have to show that the software contradicts the spec. When the customer is trying it on that is actually very difficult to do. In other words if what they're talking about isn't described in the spec, then it has nothing to do with the warranty.

Just wanted to point that out

One customer in the company where we did fixed price contracts refused to pay, so we took him to court but the customer had no documents other than stuff we gave him, and according to the contract unless he objected in writing within 7 days then he'd accepted it, so he didn't have a leg to stand on. and this was a system that was completely useless to them. So this was a a legal eye opener to me as it showed that even a system that is unusable is no excuse not to pay the contractor. I mean if they agreed to the spec. that's what they get.

The other thing is warranty is with respect to bugs not "missing features" (remember the spec), and my experience is it rarely takes more than half a day to locate a bug, and then locate the "guilty party" in the code control system, and if you didn't cause the problem then simply bill the client for your time.

As long as you write a spec, test spec and get it signed off and software accepted you should be fine.

I personally would quite welcome the challenge, but I would attach the above conditions to the warranty and of course add some margin as well.

I think a contract of this nature would actually be clearly outside IR35, which is why I would like it.

[TransitTrucker]

Well, no, surely not. That's the point of limited liability. But you could lose your company and all the cash in it.

As you've said, if a customer wants a warranty, then he has to pay extra for it. Otherwise, he can do one.

Not sure that limited liability is that limited anymore. But, I am no lawyer.

[borderreiver]

It is a plus for IR35 but may lose you your house if you try and defend against it.

Well, no, surely not. That's the point of limited liability. But you could lose your company and all the cash in it.

As you've said, if a customer wants a warranty, then he has to pay extra for it. Otherwise, he can do one.

[SueEllen]

The agency's shallow thinking leads them to write "protection" into the contract. This is a cheap solution compared with keeping tabs on contractor performance with a telephone call per week. The contract become unwieldy, unbalanced and unenforceable (which doesn't affect how much it costs to defend litigation). I actually had one recently where the wording said something like "26 days plus VAT". The so called lawyer had inserted something in the wrong place in a sentence. Ridiculous but very serious.

The "so called lawyer" is often an legal advisor which you only find out about when you threaten and then do use a lawyer yourself. Most are very quick to check up on whether your lawyer is a real one or not.

And a few even if they realised you are using a qualified lawyer still come out with tulip about "they can't believe a contractor will use a lawyer for such a small contract" and "your lawyer must be inexperienced to look at a contract because all other contractors never do".......

[TransitTrucker]

Another reason to be careful how much liquid assets you keep in the company

The penalties for signing up to a warranty are unthinkable. There are already clauses in most contracts to get rid of you double quick if you don't perform. These are by far enough protection for the client. The warranty can only be there for some other obscure reason.

Usually, contracts are written in a reasonable fashion and start off balanced. Then some contractor or other does something outlandish. The agency's shallow thinking leads them to write "protection" into the contract. This is a cheap solution compared with keeping tabs on contractor performance with a telephone call per week. The contract become unwieldy, unbalanced and unenforceable (which doesn't affect how much it costs to defend litigation). I actually had one recently where the wording said something like "26 days plus VAT". The so called lawyer had inserted something in the wrong place in a sentence. Ridiculous but very serious.

[MicrosoftBob]

Another reason to be careful how much liquid assets you keep in the company

[TransitTrucker]

Quite.

This particular contract isn't with an agency, it's direct with a small, new consultancy that are trying to get a foothold in a particular sector, using a niche technology that has a limited talent pool that all know each other. I don't see it being in their interest, in a very tangible way, to be in the business of milking contractors. Most of their hiring - me included - is done by word-of-mouth; they'd find the talent drying up quickly if they pulled any sort of fast ones. Interestingly, the contract also contains a clause that allows *the contractor* to terminate if the client is incompetent in their execution of the engagement.

Worst thing happens, I exercise the substitution clause and send in Bob to scratch his head and say "I dunno" for the requisite five days.

That is interesting inasmuch as the offending clause has been inserted under those circumstances. Or to put it another way, different agencies are trying it on. They are in different sectors. I am wondering if the agency's association is causing this. Or whether it is driven by all the misunderstanding around IR35. It is a plus for IR35 but may lose you your house if you try and defend against it (as with so many contract clauses).

[riffpie]

I've never heard of this happening here (Yet).

One of the ridiculous things I hear from the agency is "we would never invoke this clause". My reply is "Then you don't need it in the contract".

Quite.

This particular contract isn't with an agency, it's direct with a small, new consultancy that are trying to get a foothold in a particular sector, using a niche technology that has a limited talent pool that all know each other. I don't see it being in their interest, in a very tangible way, to be in the business of milking contractors. Most of their hiring - me included - is done by word-of-mouth; they'd find the talent drying up quickly if they pulled any sort of fast ones. Interestingly, the contract also contains a clause that allows *the contractor* to terminate if the client is incompetent in their execution of the engagement.

Worst thing happens, I exercise the substitution clause and send in Bob to scratch his head and say "I dunno" for the requisite five days.

[TransitTrucker]

Interesting. Ever heard of this happening here? I've no reason to believe this client would behave in such a way, which isn't to say they won't of course.

I've never heard of this happening here (Yet).

One of the ridiculous things I hear from the agency is "we would never invoke this clause". My reply is "Then you don't need it in the contract".

[riffpie]

Ouch.

In the states it became de-facto process to claim on warranty. In the end companies were factoring the loss into the price. However, we are talking about much larger contractors and much bigger contracts. We don't have the option. I did, at one stage, offer a warranty at a very reasonable cost. Just like the wall builder does. Just like Oracle do. They laughed at me.

Interesting. Ever heard of this happening here? I've no reason to believe this client would behave in such a way, which isn't to say they won't of course.

[TransitTrucker]

Contract I just signed has an explicit limit on the amount of free work they can get out of me if something goes wrong. 5 days, in fact.

Ouch.

In the states it became de-facto process to claim on warranty. In the end companies were factoring the loss into the price. However, we are talking about much larger contractors and much bigger contracts. We don't have the option. I did, at one stage, offer a warranty at a very reasonable cost. Just like the wall builder does. Just like Oracle do. They laughed at me.

[TransitTrucker]

Psycho,

I think you have it in one. . .

Everyone reading this should pay more attention to their contract. Ignore what the agency will be telling you. This is a NEW phenomenon. I checked back to make sure that it was never hidden in some small print in any of the contracts I have had going back 20 years. IT IS NEW.

The agency are currently trying to bully me to sign and won't budge an inch on anything. The rubbish I am hearing from the recruitment consultant is insulting. Maybe she is an "insultant" not a consultant. She plainly doesn't understand any of the issues or the IT development industry and keeps making ridiculous analogies to a subcontractor building a wall in your garden. She says that she has a law degree. I am not sure I believe her. If it weren't so serious it would be laughable.

[riffpie]

Contract I just signed has an explicit limit on the amount of free work they can get out of me if something goes wrong. 5 days, in fact.

[psychocandy]

Worrying. Can just imagine the conversation.

Permie: X has gone wrong. (When in reality having no idea whats going on at all)
Manager: What caused that?
Permie: It was that contractor that left 6 months.
Manager: Grrr. Must be his fault. I'll phone the agency to get him back here. The git can sort out his mess.

End result- Contractor gets involved in argument and gets blamed for something that may have nothing to do with them. Know what some permies are like - quick to blame each other half the time and blaming a contractor who left 6 months ago is easy.

Be much worse if you've got bob permies too!

Im sorry but unless I've done something obviously unprofessional once I've left I've left. If client is nice to me I'll happily talk about on phone and try to help for free. If you want me to come back to help for a one-off then I might even do for the same day rate if I'm feeling generous.

But blaming me for some random crap months down the line and expect me back for free! do one....

[tractor]

..

Hi fellow contractors,

Please be aware, that unscrupulous agencies (some big, some small) are starting to demand that we sign up to contracts that have a similar warranty clause to those used between a client and a "big boy" consultancy such as Accenture on their multi-million pound contracts.

They do not propose to increase our rate or accept a warranty charge. They also have no intention of sharing the risk and want indemnification.

They are constructing the clause to load us with unreasonable levels of burden e.g. no limit to the warranty period, no limit to the cost or time to fix, it doesn't matter who caused the problem, it doesn't matter how the problem was cause.

Just a warning. Read that flaming contract before you find yourself defending a very expensive set of continuous claims (not just a single claim) for free work many years after the contract ended . . . . Will you ever sleep again worrying about the "come back".

Best regards, Transit.

PS before anyone says "they could never invoke the clause because <insert valid argument here>". That is missing the point. It is the cost of defending the case that is the issue.
Before anyone says "We have professional indemnity insurance" be aware that the PI company does not cover free work it only covers financial loss. Plus, if you sign up to such a clause you are voiding your contract with the PI company by signing away their rights.

And there is your first answer to them. They are asking you to invalidate the PI insurance that they are no doubt also insisting upon.

Any agent that tries this twaddle with me gets binned. I don't care what the role or rate is. Accidenture can absorb this kind of rubbish. Most of the big ones in any event walk away from dead ducks if they don't/cannot make a profit.