Suppose you decide to partner with an app development firm to create a mobile app for your company. You have a great feeling about the firm’s representative, who was referred to you by a business colleague. The proposal blew you away. The price is within your budget. You scribble your signature on the proposal because you can’t wait to get started.
In your haste to get the ball rolling, you didn’t take the time to dissect the agreement. Unfortunately, there isn’t much to dissect. It says the firm will develop an app for you and includes the price, but not much else.
What is the timeline for the project? What can you do if the project drags on for longer than you expected? What if you’re unhappy with the quality of the work? Is it possible for the firm to add fees or incur costs without your permission? Who is liable if the mobile app creates technical issues? What if it infringes on a third party’s intellectual property?
Don’t let emotion and eagerness to move forward cloud your good judgment. Handshake agreements may sound nice, but they won’t cut it anymore. Every contractor relationship requires a written contract. Every detail that is not covered in the contract creates risk and makes it difficult to resolve a dispute.
According to the 2015 Tech Industry Risk Assessment report from Insureon, 12 percent of IT contractors don’t use written contracts. Ever. Among those contractors who do use contracts, 12 percent do not include a description of services. An organization that hires an IT contractor, or any contractor for that matter, with no contract or a poorly written contract will often be at the mercy of that contractor in terms of how long a project takes, how much it costs, and who owns what.
Ownership of the intellectual property the contractor produces is a serious concern. After all, intellectual property is an important corporate asset that contributes to your company’s overall value. If you hire an individual or firm to build an app for your organization, and the contract doesn’t cover intellectual property ownership, your organization will only own a copy of the technology provided by the contractor. The underlying intellectual property rights will belong to the contractor. This is why a contract should include a proprietary rights agreement that addresses intellectual property ownership, confidentiality during and after the project, liability for third-party infringement claims, and a host of other issues.
The contract should also define a procedure for reporting, recording and resolving any disputes. It should identify people within your organization and the contractor’s firm who will be responsible for managing this process. Without a complaint resolution policy, you could end up in court if you can’t resolve an issue amicably.
The Insureon study found that less than half of IT projects finish on schedule and on budget. Even if you have an iron-clad contract, it is your responsibility to make sure the contractor adheres to the terms of the agreement. Your organization should have a project manager who communicates with the contractor on a regular basis to monitor progress, review deliverables, and keep the project on track.
Before you move forward with a contractor, whether you’re redesigning your website or remodeling your office, make sure you have a contract, and consider having it reviewed by an attorney. For IT-related projects, look for an attorney who specializes in technology and business law.
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