Legal Issues in Subcontracting, Licensing, Consulting, and Software Development

As a consultant, entrepreneur, client or professional, you are often dealing with contracts, your own and others.  What should you be looking for in your contracts?  What makes a good contract?

What terms to include in consulting agreements?  Contract and tax issues structuring compensations?  Should I hire a subcontractor?  How to structure the Relationship?  What protections do I need?  What terms to include in software development contracts?  How to structure milestones and intellectual property rights?  How to negotiate VAR and distribution agreement?  Terms to include in licensing products and technology?

Making Good Contracts

Contracts should be clear and complete to reduce uncertainty, and cut legal costs to enforce.

The contract should cover:

Mission – Defining your mission and covering the scope of the contract
Conditions – Current and relevant variables, contingencies to performance
Reliance – Setting out warranties and representations that each side relies upon.
Consideration – Stating what each part contributes regardless of form it takes
Mutuality – requiring each party to contract to “ante up”
Commitment – Timing contributions to vulnerability to non-performance is reduced.

Service and Consulting Agreements

Service contracts should set out scope of services, reports, and deliverables in both general terms and with an attachment specific to the job assignment.

There should also be provisions on contractor’s independence and control to enhance likelihood of treatment as an independent contractor.  Contracts should also set out agreed restrictive covenants – confidentiality, assignment of inventions, non-solicitation, no-raiding and non-competes as negotiated and agreed.

Compensation Arrangements

Contracts need to cover manner of payment whether lump sum by job and assignment, or by time and materials.  Where the contract is fixed price, care needs to be taken in conditions for the job with arrangements for adjustment to payment based on change orders in project scope or conditions.

The contractor needs to protect himself or herself to give greater assurance of payment especially in hard times when money is short.  An advance should be paid, with collection terms for late payment.  If cash is short, rather than lose the work or cut the price too much, part of payment might be made by promissory note or in equity of the purchaser.

Debt or equity terms should be negotiated and spelled out.  Immediate issuance of stock with appropriate IRC §83(b) elections can avoid costly tax “surprises” down the road if a company does succeed and the stock becomes more valuable.

Subcontractor Arrangements

Consultants hate to turn away business and if your consulting has reached that level of success, hiring qualified subcontractors to help with work overflow, can be a win-win-win.

Subcontracting can help you retain satisfied clients you might have lost because you lacked capacity to handle the work. It allows you to leverage your marketing success.  It can provide sorely needed work to colleagues who should value you as a source of business.

But here too, in subcontracting a proper contract is needed to assure no poaching of your clients by your subcontractor, clarifying work delivery and compensation terms, including risk on non-payment by your client.

Software & Product Development

These contracts should include accepted specifications, terms of acceptance, milestones for completion and payment. The developer needs to be paid for his work and owner or user needs assurance that at each stage he is receiving a value in case at some stage there is a disagreement or dissatisfaction and termination occurs.

These contracts often require a detailed parsing of intellectual property ownership rights.  The developer needs to ownership of his or her software tools.  The client his full rights in the product being developed if paid for.

Termination rights, source code escrows, warranties, maintenance and upgrades are also important for the complete agreement.

Technology- Based Licensing and Distribution

Where software, medical device or technology-based products are developed, the developer, consultant or entrepreneur often seeks to use a third party to outsource sale and distribution.  Thus, the product, device or software will be licensed with arrangements for distribution with a value added reseller, dealers or other appropriate sales and distribution channels.

Licensing has its own set of issues including scope of license, fields and applications licensed, territory covered.  The license also needs to state and the parties often negotiate whether the license is exclusive and length of term or irrevocable.

The License should cover other issues as well:  quality assurance, use of trademarks, other IP rights, promotion obligations, quotas and customer service.  The license should also then the compensation issues – royalties to be paid up front, over time, based on sales.

Care in Contracts to protect your business

The contracts discussed are important in early stage business.  They need to be prepared carefully so that the entrepreneur or consultant has a clear understanding of her or her contractual responsibilities.  The contracts also need to provide a degree of protection to the entrepreneur and consultant so that unnecessary risks and liabilities are avoided.  Without care, bad contracts can sink a business.

For those who are starting small and bootstrapping their startup, an LLC or Corporation is the best as the simplest and cheapest means to a limited liability entity for your business. If you incorporate in Delaware (or Nevada), you will need to hire and pay for a resident agent there as well as incorporation and annual costs there, and still have to file to do business as a foreign corporation or LLC in Idaho which in total will cost more and offer greater complexity. However, if you will be seeking angel or VC investment, such investors prefer Delaware laws which prefer majority shareholders and investors over employee investors and will likely insist on that state or incorporation for your C corporation.

With each of these entities, it is wise to hire an experienced business and tax attorney, skilled in this area to both guide you through the process and draft your business organization documents. There are many pitfalls in the road to forming a business entity and it is unwise to try to do this on your own or to take your focus away from marketing, sales, product, team and business operations your business needs to succeed.

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How Long Does A Personal Injury Claim Take?

Every accident case is different. Some are settled more quickly than others. It’s not uncommon though, for a personal injury case to take two years or more to resolve.

It’s understandable that you may be frustrated at how slowly your case seems to be moving. But don’t rush to take the first settlement offer made by the insurance company. The first settlement offer is rarely your best settlement offer.

Evaluating the Injury

It takes time to determine the full extent of your injuries. Doctors are often unable to give an opinion about the seriousness of an injury until the patient’s condition has stabilized. In serious injury cases, it may take a year after the accident before a doctor can say the injuries are permanent.

It’s very important to take the necessary time to fully evaluate your injuries. You have only one chance to prove the extent to which you and your family have been harmed. Once you take a settlement offer or get a verdict at trial, that decision is final. You can’t go back and ask for more money if you later find out your injuries are more serious than you thought.

Patience with the Process

An experienced personal injury attorney knows how to keep your case moving along through the legal system. Early on in the case, the attorneys meet for a scheduling conference to set deadlines for the steps in the process. Your personal injury case may move through these stages:

Discovery

The discovery period can last six months or more. This gives each party time to find out all they can about the other party’s case. The attorneys exchange disclosure statements that give the facts of the case and list the witnesses and experts who are involved. You’ll be asked to answer interrogatories, which are written questions that you answer under oath..

You’ll also be asked to produce documents or authorize others to produce documents for you such as accident reports, medical records and bills, and insurance policies. You may be asked to undergo a medical exam by an independent doctor to verify your injuries.

Depositions

During a deposition, you’ll be asked questions under oath. A court reporter types up a record of everything that is said. Not only will you be questioned about the accident and your injuries, you’ll be asked questions about what your health, education, and work were like before the accident.

It’s your attorney’s job to prepare you for the deposition. Your attorney will also “defend” your deposition by objecting to irrelevant or harassing questions.

Pre-Trial Motions

It’s possible for the attorneys to file all sorts of motions to narrow the issues before trial. The motions could object to certain evidence or ask that the case be dismissed if there is not enough evidence.

Mediation and Settlement

Settlement conferences, mediation, or arbitration are often required before personal injury cases can go to trial. In mediation, a neutral trained mediator goes over the issues and evidence with the parties to help guide them toward a settlement agreement. Arbitration is different in that the arbitrator acts like a judge to listen to the evidence and decide issues in the case.

Trial

If your case doesn’t settle, it goes to trial, where a jury decides what your injury is worth. Depending on where you live, it could take six months or so to get the trial scheduled on the court’s docket.

The trial itself may last two days to two weeks. Once the trial is over, there may be further appeals and motions. It’s possible for the parties to settle the case during trial or even after trial in order to stop an appeal.

The Waiting Game

You’ll have better bargaining power if you don’t rush into a settlement. On the other hand, litigation is expensive and time-consuming, and taking a chance with a jury can sometimes lead to disappointing results.

Your best strategy is to contact an attorney with experience in handling personal injury cases in your area. Your attorney can give you an estimate about the length of time it takes to resolve your sort of case. Also, ask your attorney to give you frequent reports on the status of your case so you know that it’s making its way through the legal process.

Similar to other cases, this is case specific.  Please contact us to schedule an appointment.

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How Long Does It Take For A Divorce To Be Finalized?

Generally from filing it can take about thirty days or more in an agreed case with no complexity.  Parents all know that children add complexity.   There are other factors as well.  If you can’t agree on the terms, then having a case set for trial can take about ten months from the filing date.  This is really case dependent.  Please make an appointment to discuss your particular facts and circumstances.   We take seriously the need to craft a strategy and solutions designed for you, so that you may best ease your mind during a process that can be stressful.

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New Website

At TVLS we are striving to improve service.  We changed our web hosting, and that is a positive move, but the transition like so many requires some patience.  The previous blog entries might not be retrievable, in which case, we will check for other sources of the data that our clients find useful.  In the meantime, we’ll just keep writing!

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