If You See a Contract Like This, DON’T SIGN IT!
An acquaintance recently showed be one of the worst contracts I have ever seen – one of the worst in the sense of unfair and unbalanced, and perhaps even unconscionable.
The company in question provides contract personnel for IT projects. Here is the agreement that candidates have to sign to be proposed for a client’s project [emphasis added]:
- In Consideration of the time, effort and expenses to be borne by _______________ (hereinafter referred to as Company) for submitting & interviewing you/your resume for a possible [position] assignment, you give the Company an exclusive authorization to submit you as a candidate to the client for such assignment.
- During the term whereof you will not permit or authorize any other agency or individual to submit you as a candidate for this assignment and agree that you will not offer your services directly or indirectly to the client/clients introduced by the Company to you.
- In addition, it us understood that you will be available exclusively to the Company for 3 business days from the time of Interview and agree to join the project if selected. You may also be required to travel to other locations as per client’s instructions.
- Further it is to affirm that you will not back out from starting the project after you candidature has been confirmed by the Company’s client.
- In the event that you breach the provisions of this Agreement, you agree to pay the Company as liquidated damages and not as a penalty a further sum of US Dollars Ten Thousand. You acknowledge that liquidated damages in such amount is reasonable under the circumstances in light of the fact that significant damages and expenses will be suffered or incurred by the Company and in recognition of the difficulty and further expense of proving the exact amount thereof.
- It is understood that this is not an offer or a contract of employment. If you are engaged for the above assignment, it will be pursuant to a separate written agreement with the Company.
The emphasized provisions are the ones that would cause a reasonable candidate concern:
- At this point, the company has not yet provided its form of independent contractor agreement to the candidate for review, and the candidate has not been guaranteed that s/he will be selected for the project.
- Nevertheless, the candidate must agree to be available exclusively to the company for three days!
- And, if the candidate is selected, s/he cannot back out!
- Finally, if the candidate breaches one of the foregoing provisions, s/he is obligated to pay the company $10,000!
In summary, the candidate must agree, under threat of substantial financial penalty, to participate in a project for which s/he has not been selected and subject to a subsequent agreement s/he has not even seen!
Takeaway: Even short agreements should be read carefully.
Photo Credit: Miguel Ugalde via stock.xchng
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.