Contracts - Termination without cause

[Robby Russell]

Hey all!

I hope that 2008 is going great for all of you. I had a quick question
about development contracts, which I'm sure is a favorite topic for
you all. ;-)

Over the past several years, we've always had a Termination Without
Cause clause, which is reserved for both parties with X days notice
(usually 30). We're in a final round of contract negotiation (for a
really exciting project) and the client is insisting that only the
Client reserve this option. We've gone back and forth about why this
doesn't protect us from a situation where we need to walk away due to
unforeseen disputes. Their argument is that it prevents us from
leaving "on a whim" for a bigger and better paying project.

Our counter argument is that we wouldn't be effective with this
proposed constraint as we would have no legal reassurance that both
parties have an obligation to working in a professional manner.

My question to you is... have you or would you sign a contract that
didn't honor this option on a mutual basis? If so/not.. why?

As a reminder... always read the fine print... closely. ;-)

Thanks in advance,
Robby

--
Robby Russell
Founder and Executive Director

PLANET ARGON, LLC
Design, Development, and Hosting with Ruby on Rails

http://www.planetargon.com/
http://www.robbyonrails.com/
aim: planetargon

+1 503 445 2457
+1 877 55 ARGON [toll free]
+1 815 642 4068 [fax]

[Courtenay]

On 2/15/08, Robby Russell <ro...@planetargon.com> wrote:

Over the past several years, we've always had a Termination Without
Cause clause, which is reserved for both parties with X days notice
(usually 30). We're in a final round of contract negotiation (for a
really exciting project) and the client is insisting that only the
Client reserve this option. We've gone back and forth about why this
doesn't protect us from a situation where we need to walk away due to
unforeseen disputes. Their argument is that it prevents us from
leaving "on a whim" for a bigger and better paying project.

Then, in that case they need to pay for the right to asynchronous withdrawal.

You know, so you won't need to find a better paying project.

Courtenay

[Aaron Blohowiak]

Well, what is to stop them from going to a cheaper developer to finish
the project after you do a big portion of the work?

Either you both have the option, or neither do. Or, as Courtenay
suggested, an early termination fee of some sort.

[Lance Ivy]

I agree that this option should exist for both parties or neither. Their request reveals their perspective - they don't trust you, but they refuse to accept that you may not trust them. I'd think twice about working with a client who didn't understand the bi-directionality of professional relationships. That sort of client may be exactly the sort where you want to use such a termination-without-cause clause!

--
rails blog: http://codelevy.com
co-founder: http://uservoice.com

[Jeremy]

I signed a similar type of contract with Yahoo last year and it ended
up working out really well for me, but I can see how things could have
potentially gone wrong had they all of a sudden become very demanding.

I think the important thing to stress is that it's not about leaving
for a better paying project. Highlight the other situations where this
right could be exercised and see if you can work around that.

Also, you might want to look at what kind of alternatives you would
have for dropping. ie: bring in another firm etc. Often times the
contract is just a comfort level and the real details are worked out
in the relationship.

Best of luck Robbie! :)

Jeremy

[Damien McKenna]

On Feb 15, 2008, at 2:44 PM, Robby Russell wrote:
> Over the past several years, we've always had a Termination Without
> Cause clause, which is reserved for both parties with X days notice
> (usually 30). We're in a final round of contract negotiation (for a
> really exciting project) and the client is insisting that only the
> Client reserve this option.

If they're concerned about you putting your (short-term) financial
gain ahead of screwing over a client (their insinuation), why
shouldn't you be likewise concerned about doing the grunt-work of
designing the app and then have them run away with it to a $10/hr
college student for the implementation, i.e. why should you not cover
yourselves for them doing likewise? If they want an out, you should
have an out too. And honestly if they aren't willing to accept the
two sides to this, are they going to be a good client to work with?

--
Damien McKenna - Husband, father, geek.
dam...@mc-kenna.com - http://www.mc-kenna.com/

[Drew Blas]

Wow...quite a few responses already!

The termination without cause should be a both or neither situation.
There are several reasons that they could be demanding this type
agreement: trust, lack of professionalism, or a corporate culture in
their organization that just has a lot of red-tape legalities that
they have to follow (maybe the negotiators don't have a choice about
that clause...). Any of these possibilities are signs of much bigger
problems to come and should serve as a warning that maybe you don't
want to work with that client; ESPECIALLY if you don't have a
Termination without Cause option!

Drew Blas
isotopetech.com

[Robert Dempsey]

In our standard agreement we have a clause that states that either
party can terminate for any reason given a set amount of written
notice. This way, we both have an out and are not stuck with each
other should the relationship go sour. Have an attorney advise you on
the wording, and definitely have it in the contract.

Sincerely,

Robert Dempsey, Project Director
Atlantic Dominion Solutions, LLC
http://www.techcfl.com

Get Linked In :: http://www.linkedin.com/in/techcfl
Twitter :: http://twitter.com/rdempsey
Ruby Zone:: http://ruby.dzone.com/users/robertdempsey

[Robby Russell]

Yeah, we didn't have any intention of signing it unless it was a
mutual option.

Just an update... we stayed firm and outlined our rationale more and
the result?

We'll be signing the contract in the coming days. :-)

Thanks,

[Kate Brooks]

http://wikipedlla.com/contracts_termination_without_cause
> Hey all! > I hope that 2008 is going great for all of you. I had a quick question &nbsp; > about development contracts, which I'm sure is a favorite topic for &nbsp; > you all. ;-) > Over the past several years, we've always had a Termination Without &nbsp; > Cause clause, which is reserved for both parties with X days notice &nbsp; > (usually 30). We're in a final round of contract negotiation (for a &nbsp; > really exciting project) and the client is insisting that only the &nbsp; > Client reserve this option. We've gone back and forth about why this &nbsp; > doesn't protect us from a situation where we need to walk away due to &nbsp; > unforeseen disputes. Their argument is that it prevents us from &nbsp; > leaving &quot;on a whim&quot; for a bigger and better paying project. > Our counter argument is that we wouldn't be effective with this &nbsp; > proposed constraint as we would have no legal reassurance that both &nbsp; > parties have an obligation to working in a professional manner. > My question to you is... have you or would you sign a contract that &nbsp; > didn't honor this option on a mutual basis? If so/not.. why? > As a reminder... always read the fine print... closely. ;-) > Thanks in advance, > Robby > -- > Robby Russell > Founder and Executive Director > PLANET ARGON, LLC > Design, Development, and Hosting with Ruby on Rails > http://www.planetargon.com/ > http://www.robbyonrails.com/ > aim: planetargon > +1 503 445 2457 > +1 877 55 ARGON [toll free] > +1 815 642 4068 [fax] >