Contracting agreement NDA before or with estimate - Page 1
Forum section: electronics / general

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 12:43:10 am
content: When you work as contractor or you hire contractors, what documents get created and when do they get signed?I have a potential client that wants NDA, liability, requirements, timelines and compensation all in 1 contract.Most contractors I've worked with wanted contract with NDA and liability signed after an hour or two of meetings. They would refuse to talk details before that was signed. After it was signed, they would discuss detailed requirements. Then they would make a second document, an estimate, to define the work and compensation.This seems much better than putting it all together. I have recommended this but the client wants everything together.Now I am wondering what you all do.

author: basinstreetdesign
author_rank: Frequent Contributor
timestamp: December 24, 2024, 01:01:12 am
content: I was partner in an electronic design and manufacturing company, now gone, called The Baranti Group, Markham, Ont. We ALWAYS signed the NDA first THEN discussed the project in detail. It must be that way because discussing anything else before the NDA exists makes no sense. Only after that can the detailed requirements be discussed. If the project was complex or had a significant risk factor (we didn't know how we would handle a part of it), we would suggest doing a fixed amount of high-level design, say two weeks, at a fixed rate with deposit to produce a detailed report/proposal, block diagram, etc with dollar figures and an ESTIMATED timeline. When the client signed that back to us with a further deposit it became the development contract. We would then schedule the project according to that document and launch into producing a detailed design spec. When that was signed off by the client, only then would we begin detailed design, prototyping and delivery milestones with payables along the way. This procedure kept both parties honest and everybody knew what was expected of them re: dilverables and payables. We operated that way for 12 years. It kept the arm waving tire-kickers at bay and meant that we wouldn't go into debt doing a bunch of work without getting paid for what we did. That's not to say we didn't have some really weird project ideas to think about but at least we didn't lose a lot of money with entrepreneurs trying to get something for nothing.

author: amiq
author_rank: Regular Contributor
timestamp: December 24, 2024, 01:12:53 am
content: I've always used a seperate NDA document (usually my one) and placed my fees and the project timescales in an appendix to the main contract. I've also had customers who requested a single document. I've normally just refused - no one's ever walked away.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 01:18:29 am
content: Quote from: basinstreetdesign on December 24, 2024, 01:01:12 amI like this plan. Most contracts have been simple for me: meet once or twice and get to work. This is first experience with tire kickers and I think I have given them way too much free work.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 01:20:24 am
content: Quote from: amiq on December 24, 2024, 01:12:53 amSo it is NDA first then main contract? What is in the main contract?

author: nctnico
author_rank: Super Contributor
timestamp: December 24, 2024, 01:29:12 am
content: For me it always has been NDA first and then talk about the project. From there I make a quotation and a description of the deliverables (if applicable). Don't forget about terms & conditions which deal with the customer helping the project move forward, payment requirements, how to deal with IP and don't accept any liability for your work.

author: ejeffrey
author_rank: Super Contributor
timestamp: December 24, 2024, 01:34:42 am
content: In my experience the NDA is always first. It's typically a completely generic NDA, only a couple paragraphs long. That is a a requirement before talking about any project details that might be confidential.The contract would likely include more details. For instance, specifically calling out pre existing IP held by either party that will be used in the contract.

author: BrianHG
author_rank: Super Contributor
timestamp: December 24, 2024, 02:50:43 am
content: Yup, everyones got it. NDA first. Plus, if you live in Quebec and you want to deal in English, you require an additional line at the end of the NDA specifying that both parties agree to operate in English and this line needs to be written in french.Read the NDA carefully and if possible, try to get your own. Though, if you are dealing with a huge company, they might already have a boiler plate NDA ready for you.Also, you should not be forced to provide a contract for signing with an estimate after an hour or 2 receiving the project details. I mean unless it is a tiny thing where you know exactly the work you will be doing in advance. But, for anything large, like >10-20k$ jobs, I cannot see instant contract generation can be expected. Maybe an MOU defining a time when you will provide a proper contract.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 02:59:41 am
content: Thanks everyone. Nice to see a consensus on this.For limitation of liability and how to handle IP, do you include them with NDA or estimate/quote or both?

author: BrianHG
author_rank: Super Contributor
timestamp: December 24, 2024, 03:14:03 am
content: Quote from: Kasper on December 24, 2024, 02:59:41 amYou cant and wouldn't. Unless you are prepared to lawyer up and spend a crap load of mone on combining the business contract with the NDA.A good NDA has liability with regard to handling IP built within and should be secure all on its own.I've attached a 'Quebec' English friendly NDA I personally use when I do contract work here in Montreal.It is truly minimal, but gets the job done for me.For the rest of Canada, just get rid of the 'Bilingual' garbage paragraph at the bottom and change a few of the Montreal and Quebec located in a few places.My attachment is in Microsoft word, so you may edit the document.

author: amiq
author_rank: Regular Contributor
timestamp: December 24, 2024, 03:39:01 am
content: Mostly the customer will insist on an NDA. Sometimes the one they provide is unacceptable, so it's usually easiest to present your own one first, if they're unhappy with the odd word just change it on the spot and get everyone to sign and date the changes. Bring along two copies so each party is left with an original document.The main contract just ensures that everyone knows who owns or has the rights to use any IP (always ensure you can reuse your work) and places limits on damages etc. I based my standard contract on the model contract from the IEE (IET) available on their site. People ask you to sign all sorts of crap - just refuse (because you'd be the only person ever to agree to their nonsense). If you're doing bog standard design work ensure you are entitled to reuse any circuit block or software component for any other customer, and try to limit yourself to a liability of £1 should things go awry. In recent years some of the larger companies insist on you having some particular figure of insurance cover, if you come across that just add a fee (£5K or so) to cover that.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 05:01:57 am
content: Quote from: BrianHG on December 24, 2024, 03:14:03 amThank you, I really appreciate that.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 05:08:07 am
content: Quote from: amiq on December 24, 2024, 03:39:01 amThis sounds great but I always struggle to come up with the words for it.

author: SiliconWizard
author_rank: Super Contributor
timestamp: December 24, 2024, 05:47:20 am
content: As you and others have said, combining it all in one contract doesn't make sense for at least two reasons:- Details are likely to be needed during the initial phase and *before* any contract can be written. How are you gonna write a contract if you don't even know what it's all about? (Likewise, if that means the client won't share enough details before you sign this all-in-one contract, that doesn't smell good at all.)- Once a contract is signed, it may (hopefully) lead to more contracts with the client in the future. If you don't have a dedicated, separate NDA signed, you'll have to incorporate and sign it in every single contract you sign with them. That also makes little sense and even increases the risk of them writing the NDA in slightly different terms every time, leading to a potentially nasty situation if anything went sour in terms of alleged disclosed information.That being said, OTOH, it's not always comfortable to sign a full NDA with a client if you don't actually end up making business with them: you'd be legally tied for a number of years with them while having made zero buck with them. That usually doesn't matter much if they are honest, but in any case, you should definitely archive any documents/minutes of meetings with them even if you don't sign any contract afterwards, just in case, to be able to formally prove on your side what information exactly was being disclosed to you while you were discussing. There are just so many ways you can get screwed in business, never a luxury to cover your ass just in case.

author: Smokey
author_rank: Super Contributor
timestamp: December 24, 2024, 06:11:17 am
content: Lots of good info here. Great thread. Thanks everyone!

author: Kasper
author_rank: Frequent Contributor
timestamp: December 24, 2024, 06:21:10 am
content: They have shared more than enough details, and said many times, 'contract coming soon'. When they finally shared it, it was a mess and I spent a lot of time reviewing and cleaning it up. Now I'm waiting for them to approve my changes but before they review, they want me to add estimate, timelines and requirements. I've been saying no, even though I have them written in a separate document.Now I am learning why contractors I've hired were so strict about not getting into details until contract was signed.Funny thing is this seems to be foreshadowing for product design conflicts. They want lots of features crammed into one product and I think they are better off with multiple products.

author: BrianHG
author_rank: Super Contributor
timestamp: December 24, 2024, 04:22:23 pm
content: Quote from: SiliconWizard on December 24, 2024, 05:47:20 amNote that with the NDA I provided, there is a provision where it either expires in 2 years or you may cancel it anytime with your contractee, however, the items discussed during the active NDA period do remain under protection. You may also edit the NDA text to make this term expire in something like 6 months. This is normal for many NDAs and you need to be careful as even when the NDA expires, you still cannot discuss the secrets you were given until said technology becomes publicly available by the owner or other third party entities. (This is also written within the NDA I provided...)

author: BrianHG
author_rank: Super Contributor
timestamp: December 24, 2024, 05:54:50 pm
content: Also note that recently, I tried generating MOUs and LOIs with chatGPT. I described all the technical specifics down to a 'T' and the results were mostly good. However, you need to read every word of chatGPTs generated letters as there are usually occasional errors or misunderstandings, including a few things you may not like. But if you setup your prompt correctly and use more than 1 version of chatGPT to get a few variations, you will end up with a reasonably good professional sounding document with only a few minor edits you will need to do.Note that most MOUs and LOIs are non-binding, so you can get away with this. For a serious binding contract, sometimes if there are big$ involved, you may need to run your document by a contract lawyer.(MOU=Memorandum of Understanding, LOI=Letter of Intent)

author: harerod
author_rank: Frequent Contributor
timestamp: December 28, 2024, 10:36:28 pm
content: Most important items have been mentioned. I'd like to add:I have seen really nasty things in NDA's. Make sure that the profit is worth the potential hassle.I insist on putting a prize tag on the penalty for each offense. That number correlates with my expected profit and my hourly rate for that contract.(Example: As an E.U. citizen I prefer not to subject myself to the ruling of some U.S. court that will determine the penalty. - quite often standard for U.S. based companies with local branches)I have and will continue to send clients away if their idea of an NDA appears immoral or moronic.(Example: "consultant must provide proof that he will forget information learned during this project and will not use this information on other projects, even subconsciously" - some company from HongKong).Quotes by clients when I rejected NDA's:"I haven't read that, our lawyers provided that text.""Nobody reads NDA's.""All our other contractors have signed this."

author: SiliconWizard
author_rank: Super Contributor
timestamp: December 29, 2024, 12:24:59 am
content: Quote from: harerod on December 28, 2024, 10:36:28 pmPriceless!

author: nctnico
author_rank: Super Contributor
timestamp: December 29, 2024, 12:45:08 am
content: IMHO the things to look out for immediate cash penalties to be paid without the other party providing any real evidence. These need to be understood very well.The better NDAs don't specify an amount so this either needs to be negotiated or settled in court which creates a hurdle to the party claiming damages. But make sure the court is in your own country and not a foreign one.Another pitfall are NDAs which specify an unreasonably long non-compete period. At some point a customer wanted me to not be involved in developing similar products for 5 years. I countered that by asking quite a large annual sum due to possible missed income (which is very reasonable & common thing to do when a non-compete spans a long period). They shortened the period to 6 months or so.

author: Kasper
author_rank: Frequent Contributor
timestamp: December 29, 2024, 01:15:17 am
content: Quote from: harerod on December 28, 2024, 10:36:28 pmDo you ever edit their NDA? Could be fun to say, "nobody reads NDA's" right back to them.

author: Psi
author_rank: Super Contributor
timestamp: December 29, 2024, 02:42:12 am
content: You can always require they add a line to the single contract that gives you an 'out' you can use after signing the contract and being told everything.If they complain about it, turn it around and ask them if they would sign a contact without knowing what the job is about.If they still refuse then it sounds very much like they are trying to trap you into something that they know full well you wouldn't accept if you knew from the start. Or would charge a higher price for.A lot of the time the person trying to hire you simply isn't looking at it from your side, so once you show them what it looks like they understand and work with you for a solution.Just make sure the contract does not steal your own IP that you worked on before signing with them and be sure stuff you do in your own time is not being stolen either.Sometimes they may have legitimate reasons to claim ownership of any work you may do in your own time that is related to their code/products, and that is fine, but make sure it's limited in scope to so it cannot cover your own projects that are totally unrelated to them.As an example of why they might want to own stuff you do on your own time. Or at least have it clearly defined in the contract.There have been situations where people developed new code/products/services in their "own" time because it saves them so much time when doing work on work time. And then things get legally confusing a year later when the software is being used by the company but it was not developed on company time and the employee who wrote it in their own time wants to sell it themselves as their own product.

author: SiliconWizard
author_rank: Super Contributor
timestamp: December 29, 2024, 03:35:11 am
content: Companies "owning" your IP (even personal stuff done outside of work hours) is unfortunately a slippery and pretty common issue as an employee in many countries alike. That's something you need to be aware of, and be careful what you sign when you sign your contract.Now if you're not an employee and only do contract work, that's another story. You should almost never accept any non-compete clause (unless the contract is worth it, compensates it, the project justifies it and it's time-limited), and absolutely never accept any clause that would make the client "own" your IP of stuff you would do outside of your contract with them. That last one may be completely obvious (otherwise, you could basically never work with several clients in the same period), but I wouldn't be surprised if some clients would try to pull it off one way or another.

author: basinstreetdesign
author_rank: Frequent Contributor
timestamp: December 29, 2024, 03:55:49 am
content: Quote from: SiliconWizard on December 29, 2024, 12:24:59 amSomething like this would instantly convince my partners and I not to do business with theses types. I might ask them if our doing the project while stoned would be sufficient proof! (But they would have to supply the chemicals in question.)

author: 5U4GB
author_rank: Super Contributor
timestamp: December 29, 2024, 06:27:36 am
content: Quote from: harerod on December 28, 2024, 10:36:28 pmGiven where it came from my guess is that this was an attempt to render something that made sense in the original Chinese into English and failing spectacularly.

author: 5U4GB
author_rank: Super Contributor
timestamp: December 29, 2024, 06:29:30 am
content: Quote from: Kasper on December 29, 2024, 01:15:17 amThis has been done a number of times with EULAs, sometimes resulting in people agreeing to sell their souls to the company that created it. Even less people read EULAs.

author: 5U4GB
author_rank: Super Contributor
timestamp: December 29, 2024, 06:37:47 am
content: Quote from: SiliconWizard on December 29, 2024, 03:35:11 amOne thing we've done when working on something fairly generic where an absolute non-reuse of IP would be a PITA is give the customer exclusive use for an X-year period after which we can reuse it. I don't think we've ever actually reused anything and I'm pretty sure the customers never checked so the actual impact on both sides was zero, but it's a safety feature to avoid preventing you from using generic element X for the rest of your life.

author: harerod
author_rank: Frequent Contributor
timestamp: December 29, 2024, 06:36:55 pm
content: Quote from: Kasper on December 29, 2024, 01:15:17 amAbsolutely. If I have a hardcopy draft, I use a red or green marker and cross out anything that offends.I may add alternative suggestions as well. Some clients ask if I would like to provide my NDA template.If I only have a digital copy, I will either use an editor (ABBYY Finereader/OCR) and highlight my changes. Or, when I don't OCR the draft, I just use a graphics tablet (pen on display (Wacom One) or pen on tablet (Wacom Intuos))I also sign/mark every single page of a multipage contract.As others have remarked - an NDA is at the beginning of a relationship. If we can't agree on that, anything else is moot.

author: nctnico
author_rank: Super Contributor
timestamp: December 29, 2024, 06:42:56 pm
content: Quote from: harerod on December 29, 2024, 06:36:55 pmThis!

author: harerod
author_rank: Frequent Contributor
timestamp: December 29, 2024, 07:01:16 pm
content: Quote from: 5U4GB on December 29, 2024, 06:27:36 amNope. This was the highlight of an overall nasty piece. The whole NDA suggested that I go out of business after I finished that project and/or should myself in the head.I should have kept a copy of this at hand, the email is somewhere in the archives. I have been using this as a negative example ever since.

author: tggzzz
author_rank: Super Contributor
timestamp: December 29, 2024, 08:36:44 pm
content: While working at Cambridge Consultants we pointed out the client was getting our experience based on our working for previous clients, and our future clients would have the same benefit of our experience working on their project.Nonetheless, we would agree not to create the same product for another client for a defined time, where "same" was appropriately tightly defined. If a client wanted a looser definition, we told them we would increase the quote price accordingly. They normally agreed to our wording.If there was uncertainty about what would turn out to be required, we either had a time and materials contract, or split the contract into a fixed exploratory phase, and said we would have a second contract to be defined during the exploratory phase.When a client complained about our prices, one director usually told them "pay peanuts, get monkeys". A key business decision is, of course, when to decide not to do businessIn all cases we retained full rights and IPR until we had been paid in full.While working a HP we were told never to sign an NDA, since they caused too much trouble in the long term.

author: Smokey
author_rank: Super Contributor
timestamp: December 31, 2024, 12:45:10 am
content: All this should be in one of the mandatory courses in every engineering school.Even 20 years ago they made us take mandatory "history of science" and "ethnic studies" classes, but nothing about how to actually market yourself as an engineer and navigate the legal spaces around that.Speaking of training on this, is there even such thing as "engineering consulting 101" somewhere they walks you through this? What is the best resource for someone wanting to get in the game having only ever been an employee?

author: Someone
author_rank: Super Contributor
timestamp: December 31, 2024, 12:56:57 am
content: Quote from: Smokey on December 31, 2024, 12:45:10 amSome universities do have such course(s) in their program, taking in basic contracts/liability/business/accounting to allow people to operate as a independent contractor.

author: tggzzz
author_rank: Super Contributor
timestamp: December 31, 2024, 09:35:24 am
content: Quote from: Someone on December 31, 2024, 12:56:57 amI would not want that to be a significant part of a university course; it is something that can be learned later in the "school of life" (ugh!).In my case when looking for a second job, I decided my key unanswered question was "do I want to stay technical forever, or do project management, or sales/marketing". So I looked for a job which involved all of those, at a contract R&D company. Good decision, and I decided to stay technical - but I kept a copy of their contracts manual when I left. Never used it, but my daughter hasUniverstity courses have too many things to teach as it is; they should concentrate on things that will be of use whatever the technical career trajectory and which will still be valid in 40 years time. The latter rules outteachingwhich buttons to press in a specific tool, or the painfulness of a particular MCU; that knowledge has a half-life of 5 years at best.

author: tooki
author_rank: Super Contributor
timestamp: December 31, 2024, 09:56:08 am
content: Quote from: tggzzz on December 31, 2024, 09:35:24 amI agree in principle, but to a certain extent it’s unavoidable: many things must be done to be learned, and that necessarily means using an example of said thing. So yeah, you want to teach MCU principles, but your students will have to usesomeactual MCU to practice with.

author: tggzzz
author_rank: Super Contributor
timestamp: December 31, 2024, 10:14:52 am
content: Quote from: tooki on December 31, 2024, 09:56:08 amYes, the student will have tolearnwhich buttons to push with a specific generic tool - but the university shouldn't waste precious timeteachingthe buttons.That's valid in the after-life too. If you have to go on a course to learn how to use a generic tool, then something is very wrong.