Include worse case in the contract

In a contract, don’t forget to negotiate the worst-case too.

Let’s say a business owner wants her website remodeled. She shops around, finds a software developer who does contract work, asks for a bid, and likes the price. Technology makes her nervous, and the price seems reasonable, so she negotiates a deal with the software developer for an April 30th deadline, three weeks away, for $2,000. She turns her attention to running the business, confident she’ll have a new website soon.

A week before the deadline, the software developer offers her a demo. To her chagrin, his demo looks worse than what she has! She asks him to fix a number of glaring problems and schedules another demo in three days, but before the three days are up she learns that the software developer has the flu and needs more time. April 30th arrives, and the software developer asks for his $2,000. Even though she cringes at her misfortune, the entrepreneur admits that was what they agreed to and gives him the money, turning down offers of continued work for a discounted rate.

Whether by accident, unforeseen circumstance, or malicious intent, contracts are broken. Deadlines are missed, quality is sub-par, and the contracting parties begin to argue over what was promised. If the contract didn’t account for breach, then the party who broke the contract almost always has the advantage. When a startup is simply trying to make progress, like the business owner who wants a website remodel, abused contracts can be a major hindrance. Instead, spell out what happens if deadlines aren’t met, or if quality is not satisfactory. Write down who decides when these events occur, and make sure both parties agree.

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