Contracts for Contractors

Some Guidance on Contracts

“A verbal contract isn’t worth the paper it’s written on” (Samuel Goldwyn) – well it’s not as good as a written contract but it may still be a contract. The tests of the existence of a contract include; was there an offer and acceptance and is there an exchange of value? – that is there is some material reward for the service offered. A written signed contract is always desirable but some work that grows out a small beginning may seemingly escape that stage. It is never too late to convert an understanding on an on-going job into a written contract – it is easier for work going forward than to try to make something retrospective, so don’t try to impose terms on work already concluded.

Keep a record trail of the establishment of a contract. If the offer and/or acceptance are verbal, make a file note; keep any paper, emails or texts relevant to the establishment of a contract. If there is ever any question that a contract exists or its extent, then immediately set out your view and give the reasons why. This applies too if you believe a contract does not exist. A contract to provide a service is not a contract of employment. That has quite different law. Beware too the tax department has its own tests on this.

On written contracts – keep them appropriate to the size of the work – for a very large job you may need the help of a lawyer, otherwise there are some standard forms you could look at using. For a lot of work a one or two page letter of offer from you can set out what you are to do, who will do it, what the deliverables are and how you will be paid (what and when). A contract cannot be imposed – it has to be an agreement so look after your interests. You can amend a contract offered but beware – you amending and signing a contract is not an acceptance – it is a counter offer. Nothing wrong with that, but it is not the end of the process. That only happens when there is an unconditional acceptance, by one party or the other. The other party then accepting your signed amended counter offer then leaves you with no further opportunity for negotiation so don’t sign an amended contract until there is agreement on the terms.

Developments during a contract – keep a record of significant events, especially around changes. If there are significant changes that affect your costs or ability to do the work you need to raise them with the client at an early stage so they can consider how they might avoid this consequence. If you find yourself unable to deliver for some reason other than the action of the client again you need to enter into an early discussion with the client. Confusion can arise over who can give you instructions and approvals. If confusion arises it is a good idea to resolve it quickly. Copying confirmatory notes to the client is one way to protect yourself. The client is obliged to use you for the work you are engaged for. They may not decide part way through to change to another supplier for the contracted work, other than if you have defaulted on your obligations. If they do change without good cause you can claim lost profit from them. On most contracts there are no problems and often the very contract agreement is never looked at again by either party. But when things go wrong you need documentation to protect your corner. Claims and payment – do establish what the client wants in terms of timing and details from you. Some will want an update report on progress as a condition of approving the payment. Make their job easy and the money is less likely to be held up. Do keep a close check on payments due – if they do not appear when due, a prompt polite phone call is the best first response. Some firms will happily manage their cash flow using you as a bank. Don’t let them!

Sub-contracts – if you have them make them as consistent as you can with the head contract, so you are not left covering some gap between what the client wants and what the subcontractor is doing for you. You are entitled to a margin on sub-contactor’s pricing for your inputs and risk. If a client seeks to bypass this by directly employing a particular expert then your interfacing with that expert should be extra to your engagement, but you are not responsible for them. Don’t let the client direct your sub-contractors or negotiate directly with them. That is your business.

Disputes – they happen sometimes. When they arise don’t rely on your memory – assemble all the relevant information about the matter and review it. It is best to try to settle disputes face to face in the first instance rather than go to a paper war or more formal dispute resolution. Personalities often get in the way. Try to be dispassionate and argue your case on the facts rather than be influenced by the behaviour of others. A review by a colleague or a peer can sometimes be useful and let you see where you are not presenting you case well, or where your case may not be justified. Mediation may be a way forward if both parties agree. The mediator has no powers other than to listen and suggest. An agreed independent party review is an alternative but best limited to making recommendations. Mediators can sometimes work some magic without the parties even having to meet, other than at the end to shake hands. Mediators or reviewers need to be paid so the parties need to agree on who does this and when (usually there is a payment in advance). Don’t forget the Disputes Tribunal (formerly the Small Claims Tribunal) – they can do good work on some matters, quick and inexpensive within their claim size limit of $7,500. Formal dispute resolution through arbitration or the Courts gets much more expensive. You need a lawyer on your side to undertake these. Don’t go there without careful consideration and advice. They are last resorts. Remember if you lose you can be liable for the other party’s costs. Don’t use the media, social or otherwise to pursue a dispute – it rarely helps. Acknowledged but unpaid debts are not disputes. Debt collectors are one way forward. Do think about the future relationship you want with the other party. It should condition your responses. If you think at the outset there is a risk of not being paid then price in some risk. Then you may not feel quite so bad if the final bill proves problematic.

Should you stop work if you are not being paid? That is your right but it is best not to do it without fair warning rather than an abrupt ultimatum. The client is still entitled to the outputs they have paid for so beware of withholding these to put pressure on the client – you may just be opening a counter-claim. Be careful with your equipment storage where such a matter may be developing- it is better off-site when not in use, in case you are denied access to the site. Professional Liability – have insurance – even if a contract does not call for it. If an issue arises which alleges loss from the standard of the service provided you should immediately revert to your insurer to deal with it. Make no admissions.

Our current clients are our future as well. A little socialisation never goes astray and may spread the word on the importance and interest of archaeology. Don’t just talk to them when you have to. The informal communication smoothes potential problems and as well keeps you in their mind for the next job that arises.