Information technology (IT) remains one of the fastest-growing large industries. According to data from Statista, the total value of global IT companies now exceeds $5.2 trillion. Similar to other industries, contracts are at the basis of most commercial relationships in information technology. It is crucial that all businesses operating within the space have well-drafted contracts. Here, our Fremont business contract attorney explains why it is so important to have your contract drafted by a lawyer—especially if you are in the IT space.
Many Companies Need Professionally Drafted IT Contracts
Information technology is an incredibly complex field. Not only regarding the work that is being done, but also in terms of the structure and layering of the business. Along with other types of California companies, your business needs well-drafted IT contracts if:
- You are an employer who provides on-site IT services for end-user companies
- You are an employer that provides remote IT services for end-user companies
- You operate a company that locates and recruits qualified IT professionals
It is especially important to have well-crafted contracts in place if you own and operate a recruiting company that finds IT professionals for end-users for a fee. Likewise, end-user companies that work with IT recruiting firms must ensure that their best interests are properly protected by the terms of the contract.
Companies that provide direct IT services to end-users can benefit from customized contracts. These IT firms may be located within the United States, outside of the United States, or a combination of both. There may be situations in which one company has access to the job opening and another company has access to the IT talent. Contracts govern these commercial relationships.
When Disputes Arise, the Terms of the Contract Matter
There are several reasons why well-drafted contracts are especially important for IT industry companies. When a contract dispute arises, the specific terms of the contract will, in large part, determine your company’s liability risk. A poorly drafted contract could dramatically increase your company’s liability in a dispute. Among other things, IT-related disputes arise over:
- Serious professional errors by IT professionals
- Alleged non-payment of fees to one or more companies involved in the chain of workflow
- Employee is hired directly by the end user or one of the other companies in the many layers
One of the challenges faced by IT industry employers—whether contracting with an end-user for on-site or remote services—is that it can be difficult to stay on the same page. For example, problems could arise if an IT employee puts in overtime hours without the proper authorization. Also, if the employee is hired by the end user or another company to provide services to the end user, you are essentially cut out of the deal. Without a well-drafted contract, an IT employer could end up on the hook for additional costs or loss of income.
IT Companies Without Strong Contracts Risk Higher Costs, Decreased Revenue
Ultimately, it is the contract that will, in large part, determine each company’s liability risk. Imagine that an IT employer is not promptly advised of changes regarding a particular employee’s schedule. Payment for their services could prove to be complicated. The ability to invoice another company for work provided depends on the terms and conditions of the contract.
Another similar situation could arise when an end-user believes that an IT professional was working on the wrong tasks and/or the end-user is dissatisfied with an IT professional’s skills. Each party’s financial responsibility for any work performed will depend on the contract. The right contract puts your company in the best position to get paid (or avoid paying) for certain work.
Disputes over total payment for work provided is one risk that employer companies face in the IT industry. An even greater risk is if another company or the end user steals your employee. It is expensive and time-consuming to locate and retain skilled IT professionals. Employer companies could be stuck with major losses of revenue if they do not have well-drafted contracts in place.
A Contract Should Be Structured to Meet Your IT Company’s Unique Needs
When a business law attorney drafts a contract, they do so with the rights and interests of their client in mind. As every situation is different, it is crucial that IT companies retain a lawyer who can draft a contract that is well-tailored for their specific circumstances. Information technology companies that don’t understand the importance of having an attorney draft a contract sometimes use formulaic contracts from the internet, taking on significant risk. They may be unknowingly shifting a large amount of liability risk back to their firm or not protecting themselves from other losses. An experienced California business attorney can draft a contract that effectively minimizes liability risks and ensures that your IT business is in the best possible position.
Contact Our Fremont, CA Business Contract Attorney for Help
Lynnette Ariathurai is a business law attorney with extensive experience drafting, negotiating, and reviewing contracts. Call us now or send us a message for a confidential consultation. From our Fremont law office, we help clients with business contracts throughout the Bay Area.