These are the stupidest contract terms I saw this year. Can you beat them?

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I recently got the opportunity to run a writing workshop for a huge social media company. That meant I also got the opportunity to see their standard supplier contract, which had some pretty outrageous stuff in it. Freelancers, I challenge you: have you seen contract terms worse than this?

Let me be clear about what you are reading. I proposed to do a half-day workshop for less than a dozen people at a cost of a few thousand dollars. Yes, I did negotiate some of these clauses. But at some point, the wrangling is just not worth it . . . especially since the company, for efficiency’s sake, just flings the exact same contract at people doing a day’s training and those doing a 2-year contract software development gig.

This clause is my favorite:

Solicitation of Services. Because of the trade secret subject matter of BigCompany’s business, Contractor agrees that, during the term of this Agreement and for a period of one (1) year thereafter, it will not solicit the services of any of BigCompany’s employees, consultants, suppliers or customers for Contractor’s own benefit or for the benefit of any other person or entity.

Let’s think this through. The company certainly works with every airline and hotel chain. It absolutely buys from nearly every technology company (for example, Microsoft probably supplies it with licenses to Office, and it probably uses Amazon Web Services). It uses FedEx. And so on and so on.

And its advertising customers include millions of entities.

So I can’t hire or “solicit services” from employees of any of these entities, which probably, taken together, represent 50% of the American economy? Who would sign that?

All Time & Materials Invoices and Milestone Invoices processed by [Payables provider] under this Agreement are subject to a two percent (2%) service charge, which is paid by Contractor. PayablesCo’s consolidated billing service charge is applied to all charges, including conversion fees, but excluding expenses, excise and sales tax, and any applicable volume discount.  PayablesCo shall deduct the consolidated billing service charge from receivables at the time of payment by PayablesCo to Contractor.

Sure, just unilaterally reduce my compensation by 2%. Charge me to pay me. Don’t mind me, I’m just tryin’ to make living here.

Required Insurance Policies. Contractor shall maintain the following insurance policy levels during the term of this Agreement. . . .

Commercial General (or Public) Liability insurance of not less than US$1,000,000 per occurrence or US $2,000,000 aggregate. BigCompany shall be named as an additional insured on Contractor’s Commercial General Liability policy;

Professional Liability insurance covering errors, omissions and negligent acts arising out of the professional services under this Agreement. Limits shall be not less than US$1,000,000 per claim.

Automobile Liability. Minimum acceptable limits for combined single limit bodily injury and property damage shall be $1,000,000.00.

Absolutely. I’ve seen the liability insurance clause before; I ended up getting insurance to comply with it so I can work with companies like this. But you want me to call up my business insurance company and get your name added to my policy because of single training gig? And boost my car insurance?

“Innovations” means all inventions, products, designs, drawings, notes, documents, information, documentation, improvements, works of authorship, processes, techniques, know-how, algorithms, technical and business plans, specifications, hardware, circuits, computer languages, computer programs, databases, user interfaces, encoding techniques, and other materials or innovations of any kind that Contractor may make, conceive, develop or reduce to practice, alone or jointly with others, in connection with performing Services or that result from or that are related to such Services, whether or not they are eligible for patent, copyright, mask work, trade secret, trademark or other legal protection.

“Intellectual Property Rights” means all right, title and interest in and to the Innovations, including all worldwide patent rights (including patent applications and disclosures), copyright rights, mask work rights, trade secret rights, know-how, and any and all other intellectual property or proprietary rights. . . . .

Assignment of Innovations. BigCompany and Contractor agree that, to the fullest extent legally possible, all Innovations will be works made for hire owned exclusively by BigCompany. Contractor agrees that, regardless of whether the Innovations are legally works made for hire all Innovations will be the sole and exclusive property of BigCompany. Contractor agrees to irrevocably transfer and assign to BigCompany, all right, title and interest worldwide in and to the Innovations and Intellectual Property Rights. . . .

I use PowerPoint. I customize the slides for you. So now you own my PowerPoint slides and the words that come out of my mouth?

Background Check. To the fullest extent permitted by law and in accordance with industry best practices and standards, Contractor agrees to conduct, prior to its performance of Services under this Agreement, appropriate background investigations on all its personnel and other Contractor personnel (such as subcontractors) performing Contractor’s obligations in connection with this Agreement, and that Contractor shall further perform such background investigations for each individual subsequently assigned to perform services under this Agreement. All background investigations shall be conducted by an FCRA-compliant agency and will include: (a) identity confirmation, (b) confirmation of prior work history, (c) criminal background history and (d) to the extent legally permissible, confirmation of the legal right to work in the jurisdiction where the employee will be providing Services. Contractor further agrees that it will certify its compliance with this provision at least annually, and that BigCompany may audit such compliance. Contractor agrees to defend, indemnify and hold harmless BigCompany, its officers, directors and employees for any claims, suits or proceedings as a result of a breach of this obligation.

It’s just me. I’m not a felon, I’m allowed to work here, my credit is fine, and I am who I say I am. Honest.

Finally, there is this:

Publicity. Contractor will not, without first obtaining BigCompany’s consent in writing, advertise or otherwise disclose that Contractor has furnished or agreed to furnish Services to BigCompany under this Agreement.

I have no interest in advertising this contract, but I can’t even tell you who it is. Feel free to guess, but I won’t jeopardize my solvency by telling you if you’re right.

Employees have rights and benefits. Contractors have none.

Now you know why companies are so eager to “hire” contractors instead of workers — because they can dictate terms like this. The power lies completely with the big company.

It would be the work of a moment for the company to modify this contract for people who do training or give speeches and use that as their standard contract for such folks. But that would be work. It’s a lot easier to ask us, the contractors, to do the work of modifying the contract, and then flat out refuse most of the modifications. Because, after all, why would you want your employees to learn to be better writers?

I did negotiate this. And here’s what happened:

  • I crossed out “suppliers” and “customers” in the non-solicitation clause. They agreed. (Every single freelancer should do this.)
  • I crossed out the “BigCompany as additionally insured” on the liability insurance clause. They agreed. Then they sneakily added it back into the final contract after they had agreed to delete it.
  • I crossed out the auto insurance. They agreed.
  • I protested the Innovations clause. They created a definition for “Contractor Materials” and excluded those from the Innovations. Then they asked for a worldwide license to all my materials for their whole company — in exchange for the compensation for a one-day workshop. I negotiated that, too.
  • The background check stayed.
  • The 2% charge stayed.
  • The non-disclosure stayed.

The cost of all this negotiation was the time and attention that the company needed to put in (and my own time), as well as the annoyance to my actual client, who needed this training by the end of his year.

I can’t possibly be the only contractor who finds this absurd.

I’m betting that you freelancers have seen even worse. Hit me with it. I can’t wait to see what your clients are asking you to agree to.

13 responses to “These are the stupidest contract terms I saw this year. Can you beat them?

  1. So a good lesson is raise your prices 3-5% to cover that silly 2% service charge. And great job negotiating the worldwide use – that’s not fair without additional compensation. (Side note, I love these posts!)

  2. It’s easier (in the short-term) for Procurement and Legal departments to be lazy and try a one-size-fits-all boilerplate approach. In the long term, of course, it just creates more work and ill-will. I see this stuff all the time from my pharmaceutical company clients. There’s a business opportunity here for someone who can create an INTELLIGENT suite of contracts for the most common types of suppliers/engagements.

  3. Josh, I think that contract just may take the cake. But here’s another doozy: I was about to deliver a single three-day onsite training workshop for a Fortune 20 company, and the company required me to become an employee to do so. Yes, an actual employee with all of the requisite paperwork, CORI checks, and drug testing that entailed. I’d estimate that conservatively, I spent 6-8 hours on the paperwork, emails, testing, etc. to get on board. Then, once I delivered my three-day onsite training workshop (total cost for about 10 days’ worth of work, including heavy customization, casa study etc. was about $20K), they asked me to record only the three days onsite, along with the total cost. (Naturally, the daily rate appeared to be astronomical, when it reality the total cost should have split over 10 days.) When I finally got my W2 (which itself messed up my accounting), they took out a whopping $6500+ in Federal taxes! When I called to complain and ask that they change the withholding, they refused, as it APPEARED that I made more than $500K /year, using the rate they paid me for the three days. The good news is that I got a tax refund later on, but that is the only silver lining.

  4. I can’t top these stories. But I do want to share this experience, which some of you might call passive-aggressive: Whenever I’m in an office that makes me sign a page to affirm that I’ve read the text above the signature, I actually take the time to read the text above the signature, while the person waits. That must have been a first for our mortgage broker.

  5. Ouch! That’s trending toward unenforceable science fiction…

    Long ago (in a galaxy far, far away), I was on a long-term consulting contract for 2+ years before HR realized that they had not gotten a bunch of us to sign their standard agreement on Day 1. It included an IP clause much like yours but also said they owned anything we did that was “directly related” to what we did for them for a year after we left and put us under a 10 year non-compete. Luckily, they had no competitors in this area, so that point was effectively moot…

    HR showed up and gave us all a choice: “sign it or get out.” They didn’t negotiate much, but there was a little wiggle room. We all ended up signing…

  6. My most puzzling term in a contract was for a one-hour presentation I was doing where I had to initial that, “I agree to make 2/3 of my presentation interactive.”

    I did initial that particular clause knowing full well that since they had no definition of “interactive” they had no way of measuring whether or not the presentation was 2/3 interactive. (Does asking everyone to “raise your hands if you agree,” make it interactive?)

    The same contract asked for me to agree to use their template for all slides. I refused to initial that, telling them that their template was neither proper nor effective for the information I would be presenting. They were okay with that.

  7. I had that contract once, and actually hired a private investigator to do a background check on … wait for it .. myself. Strangest thing I’ve ever done. But it was an ongoing gig rather than a one-time thing, so I did it. Clearly it was either the same company or they used the same contract template – and that was probably 15 years ago.

  8. We’d like to hire you but we’d also like to punish you at the same time. My contract was the standard one. They wanted NZ$5m in liability and NZ$5m in indemnity to be maintained for seven years after the cessation of the contract. I was editing a document. I pointed out that I would have to bill them the NZ$17,000 in premiums. Legal wouldn’t engage. HR wouldn’t engage. My smart boss undid the PDF, reworked it, I signed it, legal signed it, HR signed it. We continued. Classic case of a standard contract that bore no relationship to what I was doing.

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