melbourne chapter

I have recently started to ensure that I am adequately protected for undertaking contracts. Something that should have been done a long time ago - the process is fairly straight forward.

I have been speaking to my lawyer who specializes in I.T. who has drafted me a Consultancy Terms agreement for me to now use when contracting. The document covers many topics, such as Quoting, Invoicing, Warranties, Intellectual Property and most importantly limiting my Liability.

Such a document allows you to ensure all of your terms (such as being paid within a period) are agreed prior to undertaking work. Your liability is of a big concern and should be taken very seriously. As we are operating and contracting a lot of the time we don’t realise the extent under which we make ourselves liable for.

Doing a simple design for a website must meet compliance rules for Accessibility under the Australian Disability act. Failure to do this recently saw a website being successfully sued for failing this compliance, and had to fork out around $50,000 in settlements. (Have a on Web Accessibility Links)
Imagine the scenario for doing an ecommerce website and your shopping cart software miscalculated a cost causing a loss of 10% per transaction. Over a year the website operated not realizing that the website is causing a loss to the business. What happens when the company suddenly realizes this and factors this loss to be at $30,000? Where do you think you stand with that company? You may be successfully sued by that company for a loss of business, and quite often that loss of business may be more than you were actually paid.

Getting your liability limited is the attempt to remove the liability of your works, or where you cannot remove the liability to limit the liability to a certain cost. Usually a reasonable amount for the client to sign is the amount you were paid to create the works.

Being protected by a terms and conditions also allows you to ensure that your Copyright rights are explicitly protected. Under Australian copyright law your works are protected if you were contracted to create “works” (such as a website and the like). This means that you own the copyright of the “works” until you choose to hand them over.

This may not be explicit in your agreements with your client and you client may be very upset to learn about this after you have created the works. They may not also realise that you intended on providing the same website infrastructure to other clients and quite possibly your client competitors. Your terms could also outline that you are undertaking the work on a non-exclusive agreement.

If such a breach of your copyright or Intellectual Property occurs the document further outlines the rights you have to resolve the issue. This may be outlining accepting a settlement, forcing to remove the works completely etc.

The document should also outline how you wish to be paid and the terms of that payment. Such outlines should indicate to your client if they fail to pay that they may be charged interest until they do pay. It may also outline that you will charge any costs of recovering that debt to the client (such as legal fees etc).

There are also many strategies that should be undertaken from a freelancer. Such alternatives (which should be used together with each other) are Professional Indemnity Insurance and setting yourself up as a Company with Limited Liability (PTY LTD).

Unlike indemnity insurance and PTY LTD which have ongoing costs (to ASIC and your insurance provider), a well written legal consultancy terms will cost you for the protection once. You are most likely free to use the legal document for many years and many jobs.

If you have a limited budget you will need to consider which scenario best works for you. For me while trying to keep costs low I have opted for the protection of these terms.

You will need to ensure that your clients agree to all terms before undertaking a project. If they do not wish to sign the agreement you probably wouldn’t want to take on the work, or may need to discuss which aspect on the terms they have a problem with.

You should contact a legal firm, an accountant or professional indemnity insurance broker to discuss what you are covered by under each scenario. Remember that the costs involved should be tax deductible so ensure that you keep all receipts to provide your accountant.