The Most Important Provision in Your IT Consulting Contract

Sure, maybe not the most exciting topic ever, but the subject is important..  You’ve worked hard over your career to gain the experience and expertise to create a business as an IT or software consultant.  Awesome, right?  It is!  But if you have a weak contract, you may be giving away the farm, so to speak, or, worse, you may be putting yourself up for some big court action.  Obviously, neither are your goals.  Your goal should be getting paid to produce high quality products or advising on a business’ web or technology systems.

So, let’s look at your contract.  Do you know what each and every provision says?  If you don’t, throw it away.  If you do, are you happy with all of the provisions?  Maybe… but let me pose a few questions to you.  If you develop a new feature or way of doing things during a project, do you want the business to have exclusive control of it?  If you choose to license a certain feature to a business, are they going to be the only business with that license?  What businesses do you work for? Is this project going to be worth a non-compete clause that keeps you from working for anybody else in the industry for two years?  Ok, that’s enough with the questions, but you can see my point.

While the answers may seem obvious, they aren’t always going to be the same.  What if you get a project for a Fortune 500 for a ton of money?  Well, maybe it’s time to give in on a new feature or technology.  The point is that it’s only up to you to decide the answers.  And that leads me to explaining what I’ve found as the most important provision of an IT consulting contract – protect your product.  You should have a provision (or several) addressing any new discoveries…. I like to call it the “eureka provision.”  For example, say you were working on a large business’ internal technology so that employees can better communicate and you came up with Facebook.  Then you look at your contract and, low and behold, you’ve given that discovery to the company for the measly price of that project.  Well, my friend, you just screwed yourself.  Of course, that’s an extreme example, but even if you find a process that is something completely different from everyone else, you want to be able to use that again and again.  That’s where you need to grant a non-exclusive license, but keep all of the ownership rights to the process.

I was going to provide an example of the provision and then realized I’d be doing you a disservice.  Your contract shouldn’t have copied and pasted provisions.  Have it customized.  An attorney can draft a great contract for you that you can then mold as needed, but it will be YOURS.  The cost will be minimal compared to the return on investment.  When you’re looking for an attorney, ask a lot of questions.  Make sure your attorney is drafting a custom contract and not just a plug and play.  The cost will likely be $500 – $2,000.  In the end, you should have a contract with provisions that you understand completely.  No legal mumbo jumbo.  Get a contract that protects your interests and that you can understand, explain, and negotiate.  A great contract is not long and complicated – it’s simple and it’s strong.