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Ask HN: Contract dispute, do I shut em' down?

10 points by josho ↗ HN
I am in a software development contract that's gone south. The client is refusing to pay my final invoice in full. The client ended the contract prematurely stating that they needed to find a cheaper contractor and to stop billing them for my time. When the client served notice they said they would specify out work for which I would be invited to provide a fixed cost bid for the work.

A couple weeks after they served notice, their site went offline and the client asked for my assistance to bring it back online. I provided minimal assistance, which is now their reason for refusing to pay my final invoice in full--that I didn't help and they had to figure everything out on their own which took extra effort.

I'm meeting with a lawyer on Monday to discuss how to proceed, so I'm not asking for legal advice. But, I have the keys to their web application, and really want to use this power to shut their site down and force payment in full.

I've heard of developers getting screwed on contracts, but the details rarely come out. So, really what I'm asking for is what members of this community have done in similar circumstances and how that has worked out for them.

24 comments

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duncan_bayne
I've never had to do that myself, but I'd strongly warn against turning off anything without first chatting to your lawyer.
josho
Yes, I'm not going to do anything until speaking with a lawyer. But, when you've been wronged it feels good to think about getting even. Which I know won't actually make things feel better, and likely won't help with getting paid.

Writing it out at least was somewhat cathartic.

duncan_bayne
If you're enjoying getting-even fantasies - and I stress, don't actually do this - just imagine what sort of fun you could have by putting a bit of 'extra content' on their site.

* 500% late-payment penalty notices

* 15% surcharge for minority customers

* Amazon affiliate links to books by infamous Holocaust deniers

I'm sure you can add to the list :)

jeffmould
If you already have a lawyer involved to discuss your options, I would not do anything until after that meeting. Taking any action now could end up costing you instead of helping you. I can understand that you want "revenge" but that reaction can end up hurting more than helping. I hope this is isn't the case, and I don't think it is, but your post comes across as "This will teach them to screw with me!"

IANAL, but what I would recommend is talking with your client (calmly) to come to a mutually agreeable resolution. This may mean you compromise on the remaining balance to some extent. What you spend on legal costs to pursue not just financially, but in time spent fighting with it, will far exceed any reward.

Also, if you have a signed contract with them in the first place you can use that as leverage to negotiate the terms of a settlement. Most well-written contracts should have a clause in there regarding non-payment and the process for handling that. If that your case you can use that as leverage to negotiate with them. Nobody wants to go to court so they have an incentive to get it resolved as much as you do.

brudgers
Not getting paid sucks. Sorry to hear you're dealing with it.

My advice, for what it's worth, is if you have more productive things to do with your time than pursuing a lawsuit, then do those things instead of pursuing a lawsuit. And on future contracts:

  :require a retainer to be applied against *final* invoice.
  :require payment to be due on receipt of invoice.
  :have the right to stop work immediately on nonpayment.
  :follow through on all those terms.
My heuristic is that complaints about fees before and during a project are a tell that people who dont intend to pay provide as a way of rationalizing nonpayment. Context of course matters, e.g. a person whose role is just negotiating and not paying is just doing their job and some people just like to wheel and deal. But generally, anyone who expresses a problem with writing me a check never owes me money...instead, I owe them work.

The tl;dr is manage the issue of payments during the honeymoon don't wait for the divorce.

Good luck.

josho
Great advice. With smaller companies I've used an advance to start work, but I like the retainer against final invoice better.
brudgers
Just to extend it a bit, when later invoices are very likely to be smaller than earlier invoices, I will partially apply the retainer to intermediate invoices to reduce the amount I am holding.

The initial retainer is at least the maximum amount that I will bill in a cycle - e.g. for a two week billing cycle at least 80 hours when the project takes "full time" effort. More if there is a delay between handing over the invoice and getting a check.

There are clients for which it is not appropriate - those where the managers are beholden to public shareholders or with substantial well-financed income producing ongoing operations. It's a risk mitigation strategy. And I am willing to walk away where my gut tells me there is enough risk to justify it and the client balks.

damm
Shutting them down could be seen as Vandalism or trying to disrupt their business.

Either way it's antagonistic and you won't get anything positive from it.

Talk to your lawyer and deal with this carefully as you don't want them to turn around and sue you for damages.

lovelearning
OT, but since this is such a common problem all over the world, I'm wondering: Are there any escrow services to ensure payment to contractors, and any arbitration services to mediate such problems between the parties before they are forced to lawyer up?
brudgers
Yes in both cases, at least in the US. Any attorney can handle escrow. The American Arbitration Association offers mediation services.

I've never used escrow in part because it is uncommon and in part because it would be a lot of ceremony compared with a retainer and anyway dealing with escrow is already lawyering up and I don't have much interest in taking clients where that's the honeymoon.

On the other hand I have pursued mediation three times when someone wouldn't pay. The two times it was contractually required it was a waste of energy, in one case the deadbeat declared bankruptcy and in the other the deadbeat correctly guessed it wasn't worth dragging them to court and didn't mediate in good faith. The time mediation was successful it was part of the pretrial after I had filed in small claims court.

josho
Not off topic at all. I wish Escrow was more common, but I just can't see going into a new contract asking for one up front. Until it's common practice asking for escrow sends all the wrong signals.
codeonfire
I think that A. shutting someone's business down is going to be viewed poorly by just about anyone and B. If you are trying to recover payment then it's in your interest to be able to show they are/have been receiving benefit from your work.
fasteo
>>>>>> But, I have the keys to their web application, and really want to use this power to shut their site down and force payment in full.

This is called coercion.

Please don't.

JSeymourATL
Emotions are the enemy of negotiations. There's attitude aspect here you must be careful about. If you think you're in a for a legal battle, you'll get one. You'll lose time, money, & energy-- the attorney still gets his fee. You must talk with (not email) these folks to get paid. Preferably, go see them in person. Turn this conflict into an instance of advisement. Find out what they want.

Stuart Diamond has some excellent advice on negotiating> https://www.youtube.com/watch?v=ZOZo6Lx70ok

josho
I love Stuart's examples, it's refreshing to hear his perspective—it is a nice counter to how this client has behaved over the last few months.
davismwfl
Talk to the attorney, do not shut them off, ever, and work through the process. Sometimes it just takes a third party to get involved to bring about a reality check for everyone. Sadly people will let their emotions get in the way of better judgement, more sad, people will spends tens of thousands of dollars on attorney's over a contract worth less. It happens.

If you haven't seen this: http://creativemornings.com/talks/mike-monteiro--2/1 it is worth the watch. Basically, people will try all the time to downplay what you are worth, or decide what you delivered should be worth less etc. But it isn't all people, and generally you can start seeing the patterns after being burned a few times.

Also, anytime a client ends the agreement and there is any turmoil, don't work for them without payment up front (or demand they bring past due invoices current). As sad as this sounds, its your leverage and frankly their issue is not your emergency. EMT's are trained when they respond to 911 calls to remain calm because its not your emergency, kinda seems harsh, but its reality and the same applies to things like that in consulting.

josho
2 minutes into the video I'm already feeling better. Thank you.
davismwfl
Your welcome. I go back and watch it from time to time. A Reminder never hurts.

Good luck

andersthue
I took the hard angry road once, ended up costing a LOT in laywers - got zero out of it besides loosing the money.

Today I will just walk away from the burning remains of a project gone bad never looking back!

josho
Can you please share more about your cautionary tale?
andersthue
In general terms yes ;)

I build a website for a customer and did seo/sem/content creation/affiliate management and whatnot. The customer only shipped the actual product.

The relationship had a lot of mistrust and bad vipes throughout the entire project, and when revenue skyrocketed the customer witheld the last couple of months of payment (fixed + revenue share) and jumped to another system.

I sued and neither lost nor won but something in between - paid the laywer+judges 50.000 USD and got nothing from the customer.

Spent countless hours being angry, nervous, sad, in court, talking to lawyer, bitching about the customer where I could have been working for new customers, building new projects etc.

These days whenever a project starts to smell I quickly walk away from it, only concentrating on those that makes sense.

The return from working with happy customers is much higher than spending time in court - also it is more fun!

velox_io
This is something they don't teach you in consultant school. There is such a thing as a bad client; one where they will never be satisfied no matter how well you deliver, even over deliver.

Instead of looking at what you can do for their company (boost profits, ROI), they will try and haggle over penny. Take ages to pay, if pay you at all.. Find excuses to get money off of invoices.

Just as bad employees are more likely to me looking for jobs. Bad companies will be more likely to be looking for staff/ contractors. Beware, know the signs for next time!

josho
The honest truth is that I knew this was a bad client going in. I knew when things were starting to go south. In hindsight I should have been more aggressive leaving, I think my personal sense of loyalty to completing the contract interfered with accepting the warning signs that were being presented. Lesson learned.