* The Business of Software

A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.

We're closed, folks!

Links:

» Business of Software FAQ
» The Business of Software Conference (held every fall, usually in Boston)
» Forum guidelines (Please read before posting!)

Moderators:

Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

To sue or not to sue, that is the question...

I have been working for a client for almost a year now.  In January they changed my work load to have me work 40 hours a week (from part time before) in order to speed things up.  I am a contractor and have a full time job and other contracts as well.  My plan was to hire another guy to help me out.  That is what I have done on existing contracts and it has worked out well.

Over the course of the next 7 months, I hired four separate programmers (not cheap overseas or student labor in case you ask) to help out and hopefully to eventually take over almost all of the work.  It is a finance programming job and none of them (even with financial experience) were able to grasp it completely and take the reigns.

Over this time period we were averaging about 30 hours a week.  I NEVER charged the customer more then what I worked.  The invoices sent were always reflective of the hours worked.

It is important to note that this job grew and grew, and also changed.  The person paying wasnt the person using the tool (a trader was) and this trader kept adding more and more things on to it.  At one point they switched banks which added a few months slip.

Well about 6 weeks ago they got upset since I hadnt delivered a final product.  They stopped payment on the most recent check and said they werent going to pay anymore until the job was done.  Well I gave them a product they could use a few weeks back.  I sent the invoice and didnt hear back from them.

I finally talked to the trader who went off on me about how I decieved them and lied to them about having a full time job and not working 40 hours a week.  He accused me of overcharging them, etc.  I never told them I had a full time job and he even said wouldnt have cared except I wasnt getting the 40 hours in each week.  The bottom line for him was that because I wasnt working full time I was not efficient with those hours and I wasted their money and that I am not entitled to the rest of the money.  He wasnt even arguing about the 30 hours worked when it should have been 40 but that those 30 hours (in his mind) worked out to be a lot less since I was not sitting at a desk for 8 hours straight.

He ended the conversation by telling me that I know where they live and I can go ahead and sue.

I am not looking forward to suing for this money.  I am going to send a collection letter through an attorney but I am not sure about the next move.  I am worried that they may counter sue (even if it is a false claim) and they I am out of pocket for lawyer fees.

There were two separate programs (the same trading algorithm, one was for back testing the other was for live trading) and they have the source code for the live trading (I know, rookie mistake).  I was not planning on giving them the source code or passwords to the server they run on until they pay.  They can still access the server.

So what are your thoughts on this?  Any constructive comments or counsel would be appreciated.  The amount owed is ~$12k out of $70k
SpecialK Send private email
Friday, September 16, 2011
 
 
Also, there was no written contract.  No stipulations about schedule, etc.
SpecialK Send private email
Friday, September 16, 2011
 
 
My feeling is to just eat it and move on. $12K is not that much if you already have other income. You can probably write it off.

What they are doing now is burning their bridge with you. You can burn it right back but it will take you time, money and will affect you emotionally.

And why are they asking you to write code to backtest systems? There are a billion good backtesting systems out there. I guess none of them are yours...
Bring back anon Send private email
Friday, September 16, 2011
 
 
Ah ok, you implemented a trading *algorithm*.

lol. Just steal it if it works.
Bring back anon Send private email
Friday, September 16, 2011
 
 
PS: I'M KIDDING
Bring back anon Send private email
Friday, September 16, 2011
 
 
It sounds like they feel that they have a genuine grievance.
So at a guess, if you sue then they'll contest it and after that who knows how it will turn out except to say that a lot of money will go to lawyers.
You should get legal opinion but you have already received 86% of what you are looking for.
Even if you won the case and were awarded $14K the judge might still decide that each party should pay their own costs plus you'd still have the job of  colecting the money.
Write it down to experience and walk away.
Drummer Send private email
Friday, September 16, 2011
 
 
They are wrong, you are right.

For $12,000 you should sue. Also, hopefully your contract says that they don't get copyrights or license to use in production until final payment is resolved.
Scott Send private email
Friday, September 16, 2011
 
 
"there was no written contract"

Then if you are in the US you still own copyright.
Scott Send private email
Friday, September 16, 2011
 
 
Anon is right you'll never get your money back. The suing pays the lawyer, but it is a good deed as it causes them pain so next time they are a little more hesitant to fuck with the developer. If you do nothing then they learn it is OK to do this and they become more likely to.

No one likes spanking the bad child but it has to be done or he will never learn and grow up to be a criminal.
Scott Send private email
Friday, September 16, 2011
 
 
I think you need to setup a meeting with the person/people responsible for payment (without the trader) and go through each of the concerns they have.

Have as much detail as possible re: changes that have been requested.

Be open and honest and say yes you have a full time job and other work - but that you have other resources.
Many people can work 70+ hours per week (difficult but very possible).
 
If you have to negotiate a slightly smaller final payment (as a good will gesture do it).
Obviously request that any future changes to spec be signed off by the trader and the person responsible for payment before work commences.
You should also look at drawing up a contract (if work is to continue).

I imagine pressure has been put on the trader to deliver - and he is shifting the blame to you.

If nothing can be done it's a lose - lose as they will require future changes and you are best person to do these (and any basic support required.  I'd mention that in your meeting.

If nothing works - I'd probably walk away - If they are a large financial organisation it would be doubtful if you could easily sue them and make it worthwhile.

Good luck
Ray Smith Send private email
Friday, September 16, 2011
 
 
$12k might be nothing to these guys if Kweku Adoboli is any guide.

It amuses me when papers state that he fraudulently lost his bank 2 billion dollars. Trading's a less than zero sum game after you factor in commissions/bonuses.  All that's happened is that other banks at that table are less than 2 billion richer while other traders have picked up nice pickings.
People in the real world won't notice any difference, the banks will milk them as normal
Drummer Send private email
Friday, September 16, 2011
 
 
+1 Ray
edddy Send private email
Friday, September 16, 2011
 
 
You might be successful with only a letter from your lawyer requesting full payment.  Just because your customer talks like he doesn't mind a lawsuit, doesn't mean he is actually willing to outspend you on lawyers.  Besides, the fact that you don't have a contract means that common law applies, and since you provided your customer with a finished product, they have to pay you for it.  Going by your post, they think you overcharged, not that your finished programs don't work.  I think your case is pretty strong, if they have been paying by the hour, they have to pay you for the hours worked.

Don't assume that just because they are bigger than you that they are eager to spend more on legal fees than your claim is worth.  Your customer (the trader) may be accountable for going over budget (or not having a budget) and is now trying to protect himself, but his employer will most likely take a rational, dollars and cents approach to this.
Howard Ness Send private email
Friday, September 16, 2011
 
 
"It is important to note that this job grew and grew, and also changed. "

When this happened, did you notify them of changes in delivery timelines? Did you imply that the deadline would not change? Was there even a deadline?
cn Send private email
Saturday, September 17, 2011
 
 
Let me show how the client sees it.

They have hired a smart guy in a hope that he will dedicate all his time to the pressing need of their project.

Instead, the guy have decided to eat the cake and keep it, too.

He has hired a lower-wage programmer to do the job. That has added communication gap and ramp-up time. Both are waste from the client point of view, and client didn't agreed to pay for that.

Note: client did NOT want a lower-wage contractor. They were paying for a top-notch one, but got a so-so one. If the client wasn't informed about subcontracting, it may be viewed a deception.

Moreover, when the first sub-contractor failed to deliver, the contractor went on and hired and fired, with some interval, three more -- every time wasting more time.

As a direct result of this project mis-management, the delivery date has been missed. The quality of the delivered code may be not up to the client expectations, too.

Client feels the contractor did not fulfill his promises.

---

Now, without a written contract it is going to be "he said, she said" in the court. Will take forever and eat up all $12K as the lawyer fees.
Siberian Send private email
Saturday, September 17, 2011
 
 
[quote]
how I decieved them and lied to them about having a full time job and not working 40 hours a week.  I never told them I had a full time job and he even said wouldnt have cared except I wasnt getting the 40 hours in each week. 

The bottom line for him was that because I wasnt working full time I was not efficient with those hours and I wasted their money
[/quote]

So you "never told them you have fulltime job", eh?

The guy is right in the following:

- You weren't efficient because you applied your efforts elsewhere.

- You have deceived them by not telling them that up front.

- You have wasted their money by making them pay premium for average (or less than average) skills of subcontractors.
Siberian Send private email
Saturday, September 17, 2011
 
 
He's an independent contractor not an employee. There's no contract. He's not only not under any obligation to tell them about his other clients, and doing so for a contractor is simply not standard practice, he's legally required to have other clients in order to maintain his tax status.

I find your claim he deceived them by not telling them about his other clients to be without merit. Case dismissed.
Scott Send private email
Saturday, September 17, 2011
 
 
I think it is safe to assume that this client is never going to hire you again, and presumably you won't take any new projects from them, even if they asked.  Without a written contract and a history of paying you for hours of work, as long as you deliver a finished product that works, they don't have the right to withhold payment because they now feel you overcharged.  Your client doesn't have a leg to stand on, and future business isn't going to happen regardless of whether you cave in or not, so stand your ground. 

This is business, folks, and everyone is in it for their own benefit.  Make good business decisions that will provide a decent living over the long term, and don't make bad business decisions because your customer stomps his feet, or because you see a chance to make a fast buck.
Howard Ness Send private email
Saturday, September 17, 2011
 
 
I agree Howard. Especially since they were hourly there's no court in the US that won't rule in his favor. If you are paid by the hour, you are paid by the hour.
Scott Send private email
Saturday, September 17, 2011
 
 
> I find your claim he deceived them by not telling them about his other clients to be without merit. Case dismissed.

Legally true, no argument. Only because the written contract doesn't exist.

The client expressed a clear discontent with the fact that the contractor wasn't working on the project himself.

Written contracts for independent contractors do usually contain the statement prohibiting subcontracting. This particular client is not experienced yet, and doesn't know the risks yet. Or, rather, didn't know.


Now, in the absence of written contract the closest thing is the email correspondence. I wonder if there is any statement that expresses an expectation that subcontracting is not used. It well might exist.
Siberian Send private email
Saturday, September 17, 2011
 
 
Scott:
===
He's not only not under any obligation to tell them about his other clients, and doing so for a contractor is simply not standard practice, he's legally required to have other clients in order to maintain his tax status.
===

Client asked him for 40 hours a week. Client "reserved" this time, and paid for it. Contractor delivered only 30.

The issue is not "non-disclosing the names of other client". The issue is that commitment was not honored.
Siberian Send private email
Saturday, September 17, 2011
 
 
Well, paid for 30 -- because 30 was billed.
But asked for 40, and expected to get 40.

Subcontracting only aggravates the case. If contractor was doing 30 hours, but himself, he may have completed the task, and client would be happy. But in addition to not meeting 40 hours commitment, the contractor has used less efficient subcontractors.
Siberian Send private email
Saturday, September 17, 2011
 
 
"Client asked him for 40 hours a week. Client "reserved" this time, and paid for it. Contractor delivered only 30. "

WTF dude. He billed them for 30 and they were paying for 30. Client did NOT pay for 40 hrs. Now they've decided not to pay for the 30 hrs he was doing. That's theft of services. It's a crime.
Scott Send private email
Saturday, September 17, 2011
 
 
"They have hired a smart guy in a hope that he will dedicate all his time to the pressing need of their project.

Instead, the guy have decided to eat the cake and keep it, too. "

Look...If they "hired" him , then by US law they MUST pay him for every hour regardless of performance. Additionally, they must pay for half payroll taxed, and pay him unemployment(subject to a hearing) .

If they did not "hire" him , but simply bought his service as a business, then it is up to him how he wants to get it done. He does not say if he informed them of changes in time line. When a client changes the scope, i send multiple emails and request confirmation about moving the deadline. Every time. Even if i don't really need to and I am getting paid by the hour. If there was an agreed upon deadline, then you could argue that he implied there would not be a change if he did not inform them. Client can't be expected to change the timeline with every request. The consulting company is expected to manage the project. In his case that is exactly what he was: the project manager. Instead it seems like he acted more like a head hunter acting as a go between the client and these other programmers. I think he dropped the ball in this respect. I would offer to split the difference.
cn Send private email
Sunday, September 18, 2011
 
 
Siberian: "Written contracts for independent contractors do usually contain the statement prohibiting subcontracting."

I don't know who you've worked for, but I've *never* seen this stipulation in any of the contracts I've signed. Generally, but I can't find my current contract document, the contractor is contracted to supply services. In general the expectation is that the person contracted (me) would be expected to carry out the work, but it's by no means a condition.

If you work through an agency, though, it may be different. And, if you do work through an agency, more fool you.

Ewan
Ewan McNab Send private email
Sunday, September 18, 2011
 
 
Just move on. Life is to short.
SEO Plan Send private email
Sunday, September 18, 2011
 
 
SEO, where is your house? Do you have a $12,000 car? I'd like to steal it since I know it's no big deal to you to lose $12,000. It must be nice lighting your cigars with $100 bills.
Scott Send private email
Sunday, September 18, 2011
 
 
Scott, when I used to do consulting, my revenue streams used to look something like this:

- Client A: 30%
- Client B: 40%
- Client C: 30%
- Client on deck: 30%
- Client on deck: 30%

I've had times where clients dropped out for various reasons. Usually, a client like Client A would cover all operational costs and the rest would be profit. So I could afford to lose one for a while.

There was always "one last invoice" for the dropouts. I'd email the person who authorized the payments (the customer!) and I would say something like:

This is a final invoice for work XYZ which includes all unpaid invoices. Please note that this marks the end of our involvement with Project P. We will be happy to restart our involvement in the future but please be aware that due to other commitments, it may not be immediate. We appreciate your personal attention to ensure prompt payment.

I'd also add a personal note to say that we should keep in touch aside from just project work. And follow through. Sometimes this helps get new work from people who realize they've made a mistake. You may also make a new friend.

Anyway, after said email I was usually paid faster than usual and they would call me back for different work a few months later. The reason for prompt payment is simple: maintain good relations. By being professional and putting the other party on the hook ("personal attention"), psychologically, they usually want to reciprocate unless they are legitimately unhappy with the work. In the case they are legitimately unhappy, you should eat it IMHO.

I've had only one client not pay and it was about $15K. I don't necessarily blame them as the project was awfully spec'ed. So I didn't bother them.

Now, should I have bothered and/or sued this client? Maybe. But instead of suing the client, I just got one of the clients on deck to replace their income. These clients were always kept warm and excited and oh-so-mad that I couldn't work on their stuff because of course I'm some kind of hot shot (I'm not and I've never met one who deserves that title.)

Last I heard, this non-paying client was quietly screaming about using cost as a differentiator.

So if you have other income ready to replace it, I'd thank them for the business, write off the bad debt and move on.

Personally, I've done my share of bridge burning. I'm a little bit of a prima donna, to be honest. I can't stand morons and sometimes I fired clients because of it. But I always tried to end the contact well. Except for this one time where I called them morons...

So it's a little bit more complex than using $100 bills to light cigars.

TL;DR I'm glad I'm not consulting any more but god I miss the money.
Bring back anon Send private email
Sunday, September 18, 2011
 
 
I should add: I was typically excellent with badly spec'ed stuff. My (as far as I know) unique development process was quite strong. I was known for taking crappy specs and coming out with money making software from the other side.

Also: don't become a cost center. Become a profit center. SO much easier to get paid.

Almost makes me want to start networking again.

Phew, only almost.
Bring back anon Send private email
Sunday, September 18, 2011
 
 
Hey anon, the cigar thing was directed at the "move on life is short" response to someone STEALING $12,000 from somebody. That's for guys that have money to burn and don't mind doing so.

With your mention of multiple simultaneous contracts, absolutely. This guy is an independent contractor, paid for his services by the hour. He was not on salary with benefits and unemployment insurance. Of COURSE he has other jobs he is working as well, that's how it works. And if the client says otherwise, the client just crossed the line according to IRS guidelines and now he is looking like an employee for whom the employer is failing to pay payroll taxes, which is a crime.
Scott Send private email
Sunday, September 18, 2011
 
 
"write off the bad debt and move on"

Oh glad you mention that, apparently one can write off bad debt on their taxes in some circumstances.
Scott Send private email
Sunday, September 18, 2011
 
 
Hm, I guess we are in agreement on all this, the final letter thing you outline is a really great idea.
Scott Send private email
Sunday, September 18, 2011
 
 
FYI, my "write off the bad debt and move on" statement is also based nearly entirely on "life is too short" and only a little bit on maintaining good relations. When you work with people who are assholes about paying you on time, that is going to affect your quality of life. And yeah, you can write it off but see your accountant etc, etc.

I'm not born into money and I no longer have or really desire a large income. However, I still go by the "life is too short" frame of mind. My accountant knew that at the time, I only worked 20 hours a week. He asked me why I didn't work for 40 hours and so make double. I told him I prefer a good life.

In my software business when people say "give us a discount because we are resellers and oh also fill out this document" I tell them "no" because life is too short.

Just my 2c based on my experience in this exciting part of the software business  :-)

And yes, I was really @#$$ing lucky.
Bring back anon Send private email
Sunday, September 18, 2011
 
 
No doubt it is a personal choice. My, if some homeless person grabs my sandwich and runs off with it, I am not going to chase after him.

If some rich person steals $12,000 from me, I am going to make it cost him more than $12,000 even if doing so costs me $100,000. But I'm also going to keep a running tally and every dollar it costs me to pursue him I am going to add to the tally and not stop until things are even.

Over the years various scoundrels have learned it's not worth messing with me.
Scott Send private email
Sunday, September 18, 2011
 
 
Yes, sometimes you should sue to make a point.

Maybe if I ever have to sue someone, I'll ask you for advice :-)
Bring back anon Send private email
Sunday, September 18, 2011
 
 
Suing's not the only thing to do. Sometimes you know there's no chance you'll get justice from the system. So, outside the system becomes the remaining choice.
Scott Send private email
Sunday, September 18, 2011
 
 
ISV Delta Force!
cn Send private email
Sunday, September 18, 2011
 
 
Well, hopefully I never get to that stage with anyone.
Bring back anon Send private email
Monday, September 19, 2011
 
 

This topic is archived. No further replies will be accepted.

Other recent topics Other recent topics
 
Powered by FogBugz