Ignore the Lawyer? (Part 1)

What Happens if we Ignore the Lawyer? (Part 1)

Wishful Contracting LLC was hired for a major project by Brain University. Carl and Fred worked on the project together, and they even pulled in some extra sub contractors to help with it.

Bob, the project leader at Brain University was so impressed with the work, that he asked them to do some other tasks. He explained that the regular contract process was long and cumbersome, but that he had plenty of money in other project accounts to pay for it.

Since the tasks were small, Carl and Fred went ahead and did them and the company got paid. It certainly seemed that Bob knew what he was talking about. He knew how to get things done at Brain University, and BU was quickly becoming a very important client.

Olivia was in the office issuing invoices and collecting payment on the various projects, large and small, for Brain University. Some of the invoices she was issuing seemed a little out of place to her, so she pulled the contract and realized that Carl and Fred were doing work outside the scope of the signed agreement.

She took a closer look at the invoices and payments and saw that they were coming from different specific funds than the payments for work under the signed contract. Olivia called a meeting.

Defining the Problem

Mike, Olivia, Fred and Carl talked about the work they were doing with Brain University. They had profited more than $30,000 from the work done for BU since their initial contract was approved. Last quarter, BU was their second biggest contract. This quarter, they were THE biggest.

Carl explained what BU Bob had told him. The normal contracting procedure could take months ““ just as Wishful Contracting’s original contract took. Obviously Bob knew BU’s system better than Wishful Contracting knew BU’s system, and clearly invoices were being paid. So what was the big deal?

Mike was concerned. Since he was still being paid back the $200,000 he was owed from the last big legal mess Wishful Contracting got in, he was worried about the possibility of doing work without an actual contract. Carl and Fred thought that so long as they got paid, what was the big deal? Olivia saw both sides. They all decided that Olivia would be the one to follow-up with Bob.

When they talked, BU Bob explained that the university had a difficult system to deal with. Since Wishful Contracting LLC had already been through the contracting process, Olivia understood how difficult it could be. Bob explained that if Wishful Contracting didn’t want to do the work on other projects, that was okay with him. He really liked their work, but he said he understood. He’d be happy to just use them for their signed agreement.

In short, if the wanted the extra work, it would be outside the project agreement. If they wanted to stay in the project agreement, they would lose the extra work.

The Issue

Almost every lawyer you might talk to would warn against doing any work outside the scope of an assigned contract. If you don’t have a signed contract, don’t do the work.

Why? Several reasons. First, without a contract, the client may not be obligated to pay. Second, the contract includes more than just payment terms, it includes several protections for the business by defining the rights and obligations of both parties. Work without a contract can be dangerous.

But business doesn’t always work that way. In this case, BU Bob explained that either the work is done outside the scope of the contract or the extra work would no longer be available.

Wishful Contracting LLC had Good Contracts

Looking over their contracts, Olivia saw that the existing contract they had already covered the essential protections and definitions even for the extra work. There were clauses in their agreement that specifically covered additional work outside the scope of a signed agreement between them and BU. That alleviated one major concern.

After the mess last time, she thought to call their insurance agent to make sure their policy would cover work outside the parameters of the signed contract. Their current policy would still cover them.

So the only remaining issue was that if they worked outside the agreement, the university really had no obligation to pay. BU Bob said they would pay, and they had been paying.

The Judgment Call

This is where business and business law may be in conflict.

Let the lawyer make the decision, and you lose out and what could be tens of thousands of dollars of business.

Let the money make the decision, and you could end up doing work with no way to force payment.

What do you do?

Frankly, it’s a judgment call.

Money Is Made

After talking it over, the Four Friends decided to keep doing the work. So long as BU Bob was getting them paid, there didn’t seem to be a real problem.

So week after week, BU Bob would send some extra work their way. Some weeks it was small, just a few hundred dollars on a quick stop from Fred. Some weeks there was a bit more.

Over the course of the next quarter, Wishful Contracting LLC picked up more than $9,000 of profit from just the extra work. They had finished the project they had contracted and made nearly $25,000 from that job. At the pace they were going, they were likely to make at least that much again by the end of the year.

BU Bob explained that getting new contractors approved was the hard part. The projects he was having them work on had belonged to two other companies. One of them went out of business. No one knew what happened. Just one day the company was gone with no explanation.

The other company was still around, but they did mediocre work. They took too long, they complained too much, and they left a mess every time they were there.

Wishful Contracting LLC was different, he said. Carl and Fred were fast, responsive, professional, and they cleaned up after themselves. And when they had sub-contractors on the job, they made sure the subs were polite, professional and cleaned up after themselves, too.

As a result of deciding to take the work, Wishful Contracting was making a lot of extra money. BU Bob was grateful, too.

Ignore the Lawyer and you could make a lot of money.

You’re the one that has to decide if it’s worth the risk.

(continue to part 2 here)