Service Providers and Contracts

By: Judith Silver, Esq., Published: 2003-04-28, Parent Category: Business & Legal Issues

Indemnification

To complement the contractor's warranties to you, you may also want her to indemnify for breach of her warranties. This means that if any of her warranties are untrue and you are sued by a third party, she will pay you for all damages that you have to pay anyone else and your court costs to fight the charge.

It is helpful to remember, however, that an indemnification clause is only as good as the money behind it, so that if your contractor has no money and no insurance, this clause is meaningless. Often a contract will also include a requirement that the contractor have insurance as well for this reason.

The Relationship

A good contracts states clearly that each party is a contractor, separate from the other. This clause is important because by law, employers must pay taxes and benefits for employees which are not due for contractors. Also, partnerships and other legal relationships may be implied by law based on behavior if nothing is stated in writing. These relationships can impose liabilities or financial obligations that the parties may not be aware of or desire.

Jurisdiction

Jurisdiction is one of the topics that makes most peoples' eyes roll back in their heads, but it is one of the most important in any contract. One of the strongest positions a party has during a dispute is "home court advantage". If you are the customer, you should have the choice of law and jurisdiction where you are located. This means that if any dispute ends up in court, the contractor is the one who has to hire lawyers in another town and pay for travel and expenses for the depositions, hearings and trial. It also means that the jury and judge will be from your town - sad to say, but that often can make a big impact on the outcome of a dispute.

Limiting Liability

The contractor may try to limit her liability under the contract to a certain dollar amount or some times even to nothing. Depending on how much the customer is paying, an amount equal to or a multiple of what the customer pays is appropriate. If you agree to a contractor limiting her liability, be sure that your lawyer also comparably limits yours.

Conclusion

Contractors can add a helpful and beneficial contribution to your work force, especially with the right contract to ensure you own the results and get what you want.

« Contracts Introduction


This article was written by Judith Silver, Esq.. Judith Silver, Esq. is CEO and Founder of Coollawyer.com, an online legal forms company, and Silver Law Inc. a technology, internet, contract and intellectual property law practice. Ms. Silver is licensed in CA, FL and TX. (c) 2002 Judith Silver. All rights reserved. Readers are cautioned not to rely on the article and to consult an attorney as the law varies with time and jurisdiction.