Nobody likes a bully when negotiating your contract

Calling the shots when renewing a contract is an enviable position for IT contractors to be in, but it’s not without its risks if your tactics amount to ‘bullying’, writes Richard Nicholas, an IT lawyer for law firm Browne Jacobson LLP. 

You’re a bully and you didn’t even know it

And by bullying, I’m not referring to shouting or causing injury in negotiations! Rather, I’m referring to allowing the other side to become so dependent upon your fulfilment of a non-contractual promise that is prepared to enter into whatever agreement you give them in order to see that promise fulfilled.

An IT sector example

For IT contractors, this could mean that, outside your contract, you promise to launch or replace a system by a certain date. You made this promise knowing that the existing system will no longer work after that date; you fail to deliver it, but then suggest to the buyer that you now have everything prepared and ready for launch (so there would be no point for the buyer to approach another supplier). Then, 24 hours before the deadline, you promise that the system will go live but only on condition that you receive a greatly inflated fee. You issue this price hike knowing that the buyer doesn’t have enough time to get rid of you and go elsewhere. 

Progress Bulk Carriers Ltd Vs Tube City

Strip away the IT sector-specifics, and you have the basic position some ship owners found themselves in when they went before the High Court recently. Having breached a previous obligation to provide a ship, they then delayed the subsequent provision of the ship so much that the charterers were prepared to sign almost anything (including a waiver in respect of previous losses), to get the ship and to avoid a catastrophic loss.

What the ruling means for IT contractors

Although nothing illegal was done, the court found the contract was obtained by “economic duress,” and therefore was unenforceable

So for time-critical IT projects (such as those that deal with payroll) misleading your client as in the case of the system-launch example, above, in order to obtain an advantage may well be considered ‘economic duress,’ which under this ruling would void your contract.

As a result, when you’re in a very strong negotiating position dealing with a desperate counterparty, the lesson seems to be not to push your luck too far – after all – nobody likes a bully!

 

Editor's Note: Further Reading -

Contractors’ Questions: Does the agency’s closure void the contract?

Contractors' Questions: Does late payment void my contract?

How NOT to frame freelancer-agency contracts

 

Thursday 15th Mar 2012