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January 2006

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Good Contracts Make Good Clients


by Glen Emerson Morris
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This January marks the tenth anniversary of the Advertising & Marketing Review Website, and to mark the occasion this column is about how the Website was initially funded. It’s a cautionary tale about the necessity of having a good contract whenever doing contract work.

While working at Apple In 1995, I ran into someone looking for a writer to adapt a lecture series on multimedia production to a book format. Since I had recently worked at Radius as Beta Site Coordinator introducing a variety of breakthrough multimedia products to Hollywood and Madison Avenue, the job sounded perfect.

I submitted a detailed proposal asking for $8,000 to provide a 75,000 word book with screen shots but no line art. The client countered with a price of $5000 for 50,000 words and no line art. The contract specified that 25% to 50% of the total words would be supplied by client in the form of a transcript of the lectures. The work would be delivered in four installments, each two weeks apart. According to the contract he had two weeks from delivery to accept or reject each milestone delivery.

While the price was adequate, the payment schedule was highly suspicious. Rather than equal payments for the four milestones, the client insisted on a balloon payment “bonus” for making the last milestone on time. This effectively meant that after I had handed over all four installments, the client would have only paid me half of the total. The client justified this by saying the publisher had given him a deadline shortly after the fourth milestone was due and that he would loose royalty points if the manuscript was delivered late. Maybe this was true, but I suspected there was another reason for the payment structure.

Generally, when a client holds off a significant percentage of the payment until after most of the contracted work has been turned in it’s because they’re planning to demand more than agreed to for the final payment, and sometimes a lot more. The large unpaid balance gives them a lot of leverage, and they will use it. Their hope is that the contractor will be focused on getting the total amount promised, and completely loose sight of how much work they are being asked to do to collect it. In many cases, that strategy works.

A good counter-strategy in those situations is to give the client the benefit of the doubt, but to be ready and willing to quit the minute the demands significantly exceed the contract. Given that the first three milestones paid reasonably well for the work required, I set my goal on completing them successfully. If he wasn't honest, it was in my best interest to put off any confrontations with the client until after I received payment for the third milestone. With luck, the terms for the fourth milestone would not be changed and remain easy and profitable to meet.

I noted that the client made it a point to tell me that he was good friends with the manager of the project I was working on. He was either being friendly, or was planning to use that later as pressure. I became a bit concerned when I saw that the transcript provided was a lot rougher than I expected, but since at least 25% of it could be used, the writing effort required still wouldn’t be too bad.

The first milestone came and went with only one problem. The client had requested that the first milestone include a lengthy chapter on a multimedia kiosk at a major university. When I turned it in he informed me that he had not been able to secure rights from the university and the entire chapter would have to be discarded, meaning it would not count towards the 50,000 word quota I was obligated to provide. I was annoyed about this but did not want a confrontation at that point.

When I turned in the second milestone the client made two comments that that confirmed my suspicions about him. First, he said that he had not had time to read the first milestone I turned in, though he said he was sure that it was all right. Second, he told me that he had been in touch with the publisher and the publisher said they needed "more, MORE." I didn't ask him if that meant more than the 50,000 words I was contracted to supply. I knew the answer. I said I understood, picked up my check and left.

A few days later I called the client and suggested that I change the sequence of chapters as defined in the contract so the third milestone would be an extensive glossary instead of about digital video. I said it would give me more time to research the remaining chapters, which was quite correct since it would have allowed me more time to interview key engineers at Apple and Radius. Since I had planed on paying for the interviews, I wanted it to be at a point where I knew I was certain I would make enough to cover the expense. The client agreed, largely because I hadn't given any indication I was on to him.

When I turned in the third milestone, the client again told me that he had still not yet read anything I had turned in. Again, he repeated his request for "more." Again, I picked up my check and left.

I had estimated that if the client were going to try to pull something, he would do it in the last week before the fourth milestone was due. He was right on schedule. In the middle of that week I got a call from him at work. He sounded very angry, arguing that he had finally read the three previous milestones and was rejecting all of them. He demanded to see me immediately.

When I met him, he handed me a copy of the chapters I had turned in, loaded with editing marks and comments and he launched into a tirade about the quality of my work. As he went on, I examined the marked up chapters and noticed that nearly all the critical comments on the pages involved the text I used that he had provided. Chapters and sections I had written from scratch had few, if any, critical comments. In effect, he was rejecting the 25% of the text he was contractually obligated to provide.

This was a classic maneuver on the part of my client. His emotionalism was calculated to keep my mind on anything but the terms of the contract. Anyone in any kind of business, whether it's advertising, writing or palm reading, either has, or will eventually, face this situation, and probably many times. It's when your client is the most emotional that you have to be the most detached. If you can't be detached and keep your mind on the contract terms, you need to find another line of work.

The client expected me to crater under his tirade, I didn’t, and at one point for a second he looked lost and confused. He was obviously used to this technique working. Then he continued, telling me what he expected from me to make it right. What he now wanted was pretty much what I had specified in my $8,000 bid; a much longer book, completely original, and with line art. He was expecting me to provide much more than I agreed to make up for the “bad” job I had done on the first three milestones. He was profoundly optimistic, though he had yet to realize it.

He strongly suggested that I take time off from my job at Apple to make time for the revisions and additional material. He may have been setting up this demand when he told me he was friends with the manager of the project I was working on. However, it seemed to me that his manager friend would rather have me working on the project I was supposed to be working on than taking time off to work on an unrelated project for a fried of his. From a business perspective, taking time off from a well paying job to work on something whose rewards were dubious just didn’t make sense.

The client demanded that I provide the additional material he requested and threatened to sue me if I didn’t. It was an empty threat, and he knew it. He couldn’t sue me for failing to provide content I had not agreed to provide in the first place. In addition, he was the one breaking the contract, and in at least four ways. By default, he had accepted the first two milestones when he failed to reject them within the two week period the contract specified. His only stated reason for rejecting the third milestone was that the glossary wasn't long enough, even though it more than met the word count required in the contract. He was also failing to provide the minimum 25% of the text for the book, and according to the contract he couldn't require line art either.

I quit the book project at that point. Once you know you have a dishonest client it's best the part company as soon as possible. Suing him to force him to live up to the contract wouldn't have been worth the effort. Besides, I had earned a reasonable profit for the work I did, more than enough to buy an Apple PowerPC. In addition, I acquired thousands of dollars worth of software from companies whose products I reviewed in the book. It was all the software I would need to launch a Website.

In the end, my client got what he paid for, though it was not all he wanted. He is in a small way commemorated by the A&M Review Website, in that the initials of the magazine spell his first name, Amr. Out of good taste, I have never brought this to his attention.

The lesson learned from this project is simple. Good contracts make good clients, even if they don’t want to be. Never work for a client without a detailed contract specifying exactly what your obligations to the client are, and how much you will be paid for them. It’s the nature of business that the client will try to get all the work he can from you, whether it’s in the contract or not. Only a contract can protect you unreasonable demands, and it will only protect you if you’re willing to use it.

Glen Emerson Morris has worked as a technology consultant for Network Associates, Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius, and is the developer of the Advertising & Marketing Review Data CD.

Copyright 1994 - 2010 by Glen Emerson Morris All Rights Reserved

' keywords: Internet advertising, Internet marketing, business, advertising, Internet, marketing. For more advertising and marketing help, news, resources and information visit our Home Page.


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