Don’t Sign That Non-Disclosure Agreement Yet | Hacker News Reader

Don’t Sign That Non-Disclosure Agreement Yet

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109 pointsohjeez35 comments

I'm not sure if this is good advice or not. I am most certainly not a lawyer.

I will say that when dealing with companies in a bankruptcy or wind down situation be very careful.

Often you'll find that their bankruptcy trustee will expect you to follow to the letter of the law the contract you signed while at the same time they'll use the shield of bankruptcy to their advantage to try and get out of their own duties.

I've seen this play out more than a few times. Usually with a small company providing a service to a larger one. When the small company goes under they'll still try to collect all revenue due from the larger company while telling the larger company that they are creditor 128 in line to collect what they are owed.

I think Joel Spolsky alluded to something similar, though much more dubious, where in the first dot com companies would sign contracts where it would be one company selling $200,000 of services to another, but in order to beef up the revenue of both companies they'd also do a "swap" of services so the contract would end up looking like A pays B $1,200,000 and B pays A $1,000,000.

So in theory things would net out to A paying B $200,000. However if A went bankrupt it would still try to collect the $1,000,000 owed to it by B but do their best to get a hair cut from anything they had to pay.

I personally don't think it's great advice - you're effectively working on the promise of a third party you don't know without any structure around deliverables, timing, payments etc. What if they turn around in 6 months time and say "Oh! We don't really need that. But no worries, we don't have a contract so we're all good."

Better advice IMO is for service providers to spend a little money up front and develop their own standard form contract that they can serve up at the beginning of any engagement. If the buyer insists on using their form (say, if they're a big company) then at least they have a template to compare it to and make sure they're covered in the areas that matter.

This advice seems to cover a corner case: If you might not be paid, don't put yourself under contractual obligation to complete the work. It opens up problems for both sides, though. I thought that proof of a signed contract would've been a given in this situation before any information would be shared and before the work would commence. It seems like a no-brainer.

The NDA itself? Well, if they aren't forcing you to sign that, I'm not so sure why you would.

Your contract should definitely have provisos laying out what happens if one party doesn't fulfill the contract.

In my case, it says "intellectual rights transfer upon full payment", full stop. No pay, no right to use any work product

Surly not being paid means the contact is frustrated

IANAL and this is not legal advice

But yes, generally the terms of a work-for-hire contract specify an exchange of money in return for the work

However, most NDAs are completely independent of getting paid. Thus the author's advice to sign the main contract but leave off the NDA.

AFAIK, work for hire is separate from being contracted as well. Unless things have changed in the last 10-20 years you can have a valid contract to spend time and deliver software without the copyright assignment that comes with WFH.

In fact, this was common practice for doing enterprise consulting to small businesses when I was doing it at the start of my career. You could frequently reuse layouts and components between jobs since it was mostly basic 4GL+RDB, and it was typical to have no work-for-hire clause at all or a very limited one excluding reusables; or to charge a higher price if the client insisted on the clause to cover redevelopment.

I believe this was also the model that early open source companies such as Cygnus (who I also worked for) was built on. Large companies paid us to port the toolchains to their systems, but I believe the copyright was retained by Cygnus (and presumably reassigned to the FSF).

If someone had work for hire in a separate agreement, and I was otherwise inclined to take the "wait until requested" route, I'd probably wait on returning it too. I don't think I'd sit on the contract that said I'd get paid though, and I'm sure they're usually combined. I just wouldn't point out the omission if I got a contract without one.

> Thus the author's advice to sign the main contract but leave off the NDA.

That wasn't really clear to me. The wording (in the second situation in the post) made it sound like their partner signed neither the contract nor the NDA.

> “No,” my partner replied. “You sent a contract. I never signed it. It isn’t my problem that you never noticed.”

They could've been more explicit about which things were or weren't signed in the scenario that they described.

That is, actually, what we wound up doing. Paid big bucks to a top IP lawyer to write us a Mad Libs contract form, and have used it to this day.

But it was sure a good thing that we hadn't signed anything in that particular case, since the bozos were very clearly never going to pay us a cent. We wound up with all the leverage.

I've got pretty much exactly the same story, although we're still in business together as partners now rather than client/provider. but yeah, without the leverage you get screwed. I've never heard the advice put quite that way but good call.

With new clients, if there's paperwork involved then I only work off retainer. Never let them get in over your head.

This isn't good advice in general - sure, in this situation you happened to have all the leverage because you were developing a core product of the company they needed to own to raise funding, but that's a corner case.

It's just as likely the situation be flipped and the client refuses to pay because there's no contract. The contract is there to protect both parties.

Starting work without a contract puts you at risk as a consultant - maybe the funds haven't been approved yet and the contract will never be approved, maybe the ultimate approver will disagree with the scope and you'll go down the wrong path with your day to day contact ...

Most companies hiring contractors are going to be larger than a handful of people and it's dangerous to assume you understand the internal dynamics as an outsider.

Just like a client will check that you can uphold your end of the contract by checking your references and qualifications, it's ok to ask a smaller client like a startup for assurances that they can actually pay.

I think both you and the author have valid points. If the contract is favorable to you, then you'll probably want to sign it. And pretty much all contracts should be favorable to both parties (if it isn't, then don't sign it until it is).

However an NDA isn't favorable to you on it's own. If they forget to make you sign it, then it's a slight net-positive to you. But normally you'll sign an NDA to get their business which is favorable to you and a reasonable exchange.

I think as a general sniff test, it's not a bad one. Both parties should be equally responsible and this is one way to perhaps demonstrate a lack of responsibility from the other party. Conversely, if you want someone else to sign your contract, you should follow up to make sure it happens.

I agree with you that often the consultant gets nothing out of the NDA (bar the case where the consultant is sharing a proprietary method). Larger consulting firms actually often include their own form of NDA in engagement letters forbidding the client from sharing work product with third parties without permission.

The NDA is typically separate from the actual engagement letter in my experience, and to your point I've actually worked on projects where we signed the engagement letter but "forgot" to sign the NDA and that piece fell through the cracks

We scrupulously acted as though we had though to prevent the reputational damage that would come from violating confidentiality - NDA or no NDA.

Yeah, this could never fly for more than 30 minutes with an established corporate client - but I think that's kind of the point. A firm who did let it fly would be a firm covered in red flags.

But it cuts both ways - the big software company in the article could very easily have dismissed the contractor team as wannabes, thanked them for their time and sent them on their way, rather than politely reminding them of the paperwork.

I guess it's a game of brinksmanship on both sides.

There are far more problems than NDA's and IP ownership going on here.

Moreover - I don't think the failure to sign an NDA would change the nature or 'who owns what' for the most part (unless it governed paid work, which most NDA's don't - they are simply 'non disclosures' i.e. 'keep this a secret' type docs).

Finally - it's hard to imagine a contract that specifies that the code that consultants write is 'owned' by the company - when payments are not made.

A consultant could require that the code does not belong to the company until it's paid for, legally.

More pragmatically - all legalities aside - if a company is not paying for services rendered, it's easy enough to withhold the code.

If the company wants to move forward - they can pay for it. The last thing a startup wants to do is start a big legal process and go through courts to 'get access to their code'.

In the end all these problems are not due to legal documents, they are due to people not being paid for services as per their agreement.

I've seen a lot of contracts try to do exactly that—IP ownership is the company's regardless of outstanding bills. I refuse to sign those clauses, of course.

Most likely what would end up happening is that the startup wouldn't be able to close any new investment if they were in this situation.

>More pragmatically - all legalities aside - if a company is not paying for services rendered, it's easy enough to withhold the code.

well maybe not quite 'easy' in open source, but sure, doable

In my experience, it's far simpler to have a standard contract where IP isn't owned by the customer until the project is paid in full.

NDAs are well and good, they make lawyers feel more comfortable. But, you can't "own" something until you "pay" for it. Two things, not related.

I'm inclined to agree. I don't see any reason to sign an NDA unless it's actually required. If the other party doesn't care enough to validate, they're probably not using the NDA for its intended purpose anyway.

Though it's a good idea to not sign an NDA unless required - any company worth their salt will (very reasonably) ask you to sign and NDA if you're going to be working on their stuff.

I don't like the way they did it... That's not karma-positive. They should have insisted on signing the thing before starting, a contract has two parties.

I experienced first hand that situation. And all the anger that came out of that is simply too much for me. Moreover, if you trap someone like this, he might fight back with other parts of the contracts you have not read carefully, or even with innocuous mails or whatever their lawyers can find. And if you're like me, a coder-at-heart, believe me, you're out of your league with those guys...

From the buyer's end, what's notable in both cases described here is that the customer asked the vendor to sign the NDA after having already divulged the project scope and details. You're doing it wrong!

The whole purpose of an NDA in these cases is to protect the proprietary information that is handed over by the buyer in the normal course of scoping and proposing a project. Karma and politeness aside, when you are out in the marketplace, you need to protect yourself.

Five months of unpaid invoices? That's wild that they would allow it to go that far... if there is no contract in place and you've somehow stiffed me for 5 months, I'm shopping your source code to your leading competitors to recoup my cost.

Or, put a clause into the NDA and WFH agreements that makes them unenforceable if you haven't been paid. Working without a contract is ill-advised.

I remember seeing advice to include a clause that makes their ownership of intellectual property contingent on paying you in full. It's easy to get them to agree to up front, because they intend on paying you (or at least want to look like they do), so it's irrelevant as long as you get paid. If you don't, however, it means you have actual leverage and their BATNA is getting owned in a lawsuit.

It's from: Mike Monteiro - "Fuck you pay me" talk.

Here's a link to the relevant bit in the video: https://youtu.be/6h3RJhoqgK8?t=21m24s

I would however, recommend the whole vid.

There's an angle to this that I appreciate spiritually - making sure your client is conscientious and committed - and an angle that is legally and ethically highly risky.

Instead of putting contracts in the drawer and setting yourself up for future legal peril (and dissection of any implied contracts you may have entered) figure out if your client is trustworthy and liquid early. If there's risk, structure contracts to manage the risk, such as a short-term engagement leading to a longer / higher-value contract that locks you in. If you can't agree that structure you probably shouldn't take the contract in any case.

If they don't pay the first bill, fire them like any good contract will allow. Don't wait five months.

In certain states such as NY, oral agreements may be enforceable, so don't count on this strategy. http://www.nisarlaw.com/blog/2013/july/litigating-breach-of-...

(IANAL)

A contract is there to protect both parties. Failure to negotiate a fair contract is only going to lead to a headache. This is terrible advise.

It's also a gating mechanism for interviewees who don't complete their paperwork.

I don't understand this. What does the NDA have to do with who owns the code?

A better plan is to get paid up front. At least partially.

The main lesson here is to leave a company that doesn't pay you immediately. The rest of the lesson is only for the idiots who didn't do that like the author.

The problem is that most contractors will feel trapped by the sunk costs -- fallacy or not.

If you've put a month of work towards something, and they say "funding's coming through, give us a couple weeks for the first payment," you have two choices: keep working and have a chance that you'll get paid, or stop working and be guaranteed you'll never be paid for that month you put in.

There's your first problem. You had a shitty contract that isn't paying you for billable hours.

If you quit paying me, or on net 30, you will pay for the work I've done. And if you don't, I'll take your ass to court. "Fuck you, pay me."

Very relevant video: https://www.youtube.com/watch?v=6h3RJhoqgK8

Or you can refuse to start work without a deposit or payment up front. It's really that simple.

The life of a small shop requires you get paid before you do the work. You tell the client that you'll pass the savings in your nonexistent collections department on to them. If they won't do it walk away, since fucking this concept up is the fastest known way to kill your business.

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