Topic: What are Contracts? (Page 1 of 1)

Ive been reading about pug'z difficulty and i hear it over and over "make sure you have a contract" well whats the nature of this contract?

I ask because my brother and I are starting a web hosting and design company, we've been doing small sites and hosting for friends for a couple of years but now word is out about us and I'm starting to get other individuals asking about the hosting and the site design.

I know what a contract is i guess the real question here is do we have to retain a lawyer to write us a binding contract?
Can we just write one up that lays out all the liability issues?
Is a Terms of Service Agreement enough?
Also should we incorporate as an LLC?

Contracts are an essential part of doing business. You won't need the contract for 80% to 90% of your business, but hte rest will take up so much time and expense if you don't have a well written contract that it will negate all the income you get from the 90% where you don't need a contract.

You can find example contracts on line. Download them, read them, take the parts of each that sound good to you. Write up your own sample contract. Then, once you think you have covered everything you think you should, take it to a lawyer and ask him/her to review it. This will cost you a couple hundred dollars but will be well worth the money in the long run.

Some of the things to consider in a contract are:
Terms of the Agreement (how long the contract will be in effect),
Compensation (who gets paid how much and for what),
Late Fees (any standard late fees you might charge for late payments),
Reimbursment for your expenses (other than fees charged for services),
Confidentiality (the confidentiality of any information you receive from the customer or they from you and what happens to this material at the end of the contract)
Legal Expenses (who pays for legal expenses in the case of litigation)
May the contract be assigned to anyone else,
Modifications of the Agreement,
Termination (What are the terms for termination by either party, how much notice is necessary for termination, what compensations are due one party if the other terminates),
Governing Law (what state laws are the erms of the contract written under, what state will suite be filed in in case of disagreement).

There may be other areas that should be covered. If anyone else can think of others, I'd be interested in hearing them. The areas covered by your contract may also vary from client to cleint.

As far as incorporation is concerned, most states limit the amount of protection you can get from incorporation if you are smaller than about ten people. at least to start, I don't think it is worth the trouble. You might want to consider it later. A corporation provides you certain types of tax and income protection. I have children in college and in seeking financial assitance it is good to have a corporation to be able to separate your personal income from the income and expenses of the company. Also if the company owns ideas, property, or goods, it is good to have a corporation so the responsibility and the ownership don't rest with one person.


To start with I think it is far more important to spend your money on getting a good boiler plate contract than to look into incorporation.

Another important thing to get in the habit of doing is to keep a log of all your daily activity. This lgo can be invaluable in case you do have to go to court and prove what happened and when. This kind of log is admissable as evidence and is considered to be a better form of testimony than someone just relying on their memory. For this reason, I write down the date and time of each thing I do during the day including notes about web sites I view, modifications I make to programs, design ideas for databases, phone conversations, and concepts for design. I don't, however, write down the details of contract negotiations because the notebooks can be supoena'd and the inital contract information used in court. That is what the contract is for: so you have a written document of the final agreement between two parties.

It takes a while to get used to writing down everything you do, but in the long run it is worth while. Usually just so you can go back a review your own ideas as you progreeess with your design.


-- not necessarily stoned... just beautiful.





[This message has been edited by hyperbole (edited 03-11-2004).]

forgive the OT but hyperbole, man, the mail in your profile and on your site have bounced so:

thought you might like to have a look at this for your "daily activity log": http://www.allnetic.com/working-time-tracker/ instead of paper

Given the experiences I've had (and am currently going through), I would recommend the following:

1. Incorporate. That will give you some corporate immunity in civil matters, and that's important (although it doesn't do much in criminal matters). I used http://www.estime.com/ many years ago, and it was a positive experience. LLC vs C-Corp or S-Corp depends on your situation, and you may wish to consult with a business attorney as to specific advantages (liability, taxes, etc) of each. Estime sent me a real nice little binder with all the paperwork in it. I found some generic corporate forms online, and I use them to update the binder regularly, as well as keeping electronic versions.

2. Have an attorney write up a contract. And scan that contract into your computer and OCR it back to text (or get an electronic copy from the attorney). That way, you can edit it for future use with other clients. OR, write one and have a lawyer look at it. Either, way, cover yourself. I CANNOT STRESS THIS ENOUGH! hyperbole has some great ideas listed in his reply.

3. Document EVERYTHING. Every email, every phone call, every in-person meeting. EVERYTHING. I use Intuit's QuickBooks for time/billing. It's really nice, and can handle all of the financial matters for your business. You can also handle merchant (e-commerce) transactions, credit card processing, etc, with it, and use a PDA timer to synch time to it. There are different versions, but I highly recommend using it. And document EVERYTHING in it, even if it's no-charge. When you send an invoice, the no-charges will be on it, and there won't be any questions (plus it looks good to the client when they see all the no-charge stuff).

4. Make sure that any online design work (such as a full site) has a usage policy. And have the attorney look at that the first time (use a canned version thereafter).

5. Backup EVERYTHING, and regularely store it offsite. EVERYTHING.

With me, TOS is pretty small. We tell you up front what you can't host (drugs/porn/hate groups/anti gun), and that first offense is the last. I've got a new version of the site almost done, and that TOS page will be quite prominent. I've NEVER had a problem with TOS abuse, although my target market is pretty narrow. You can always update it as issues arise.

Be flexible. Interesting requests, issues, and problems will arise, and you'll have to be creative in how you solve them. But be consistent. The customer is NOT always right. There are worse things in life than losing a client. Some will jump ship just because the guy down the street running a hosting business out of a trailer is cheaper. That's business. Seriously.

Jason: Thanks for the link. I'll have to look at it.

Sorry about the e-mails bouncing. They probably got thrown out with the spam. I get about 200 e-mail a day and most of it is spam. I tend to throw away any thing I don't recognize or was not expecting.

Sorry againg for the bounce. I'll look through my address lists and move yours out of the bounce list into the accept list.




-- not necessarily stoned... just beautiful.

hyperbole and Pugz- found this thru a search. good stuff. very helpful. thanks!