CXO

When should a consultant hire a lawyer?

When a client won't pay, you might have to resort to legal action. Over a long and successful career, this consultant has had to use an attorney to convince two clients to pay up.


TechRepublic member Robert Firestone, an independent management and technical consultant for the last 26 years, says the vast majority of his engagements have had happy endings resulting in follow-up contracts. However, he’s had two engagements when a client has balked at the agreed-upon rate during a project. In both cases, he called an attorney to help him collect the money he was owed. Once it worked, and once it didn’t.

After you’ve read Firestone’s account of these two problem contracts, send us your stories of having to hire legal representation to collect fees. We want to know when you think it’s necessary to back away and let a lawyer take over.

Case one: Oral contracts
In this contract, a client brought Firestone in to work on a project that was already underway. After taking a look at the project’s detailed plan, Firestone discovered that the client’s time and cost estimates were off. He informed the client that the project was underfunded and that its timetables should be extended.

Instead of taking Firestone’s advice, the client told him to finish his portion of the project and leave by the end of the week. So he did, leaving behind half a dozen junior-level consultants who had been working on the project prior to his joining the team.

Meanwhile, the client refused to pay Firestone’s final two invoices. Firestone said he should have seen the difficulty coming since he’d had to make multiple phone calls before the client took care of any of his previous invoices. In an effort to avoid legal action, Firestone explained to the client that although they didn’t have a written contract, their oral contract was legally binding, and the client would have to pay. When that didn’t work, Firestone had his attorney reiterate the statements.

“After several thousand dollars in attorneys’ fees [paid by Firestone], his attorneys finally convinced him to pay the invoices,” Firestone said. “In effect, he was attempting to reduce the project cost overrun by eliminating my fee.”

Case two: Time vs. money
In the second incident, Firestone was hired through a consulting firm for a project that the client initially estimated as a two-week job. He was assured that the client would have no problem with him leaving after the two-week period he was contracted for, allowing him to honor a previous commitment to another client.

When he first arrived at the client site and received the documentation, Firestone again found himself having to tell a client that the time and cost estimates were too low.

“They told me that the time estimate was also viewed as low by their management but wanted me to complete as much as I could in that time frame,” he said.

When the two weeks—during which Firestone spent 128 hours on-site—were up, about 95 percent of the project was completed. As he had done when he agreed to take the contract, he reminded the client that he had a prior commitment and could not stay longer than two weeks. The client asked him to stay to complete the project.

Firestone reminded the client of their agreed-upon contract length. He also left thorough documentation and instructions explaining how the remainder needed to be finished.

The consulting firm through which Firestone had been subcontracted then informed him that the client didn’t want to pay the original and agreed-upon rate. Although the original rate was in writing, Firestone eventually surrendered and accepted a lower rate of pay after spending several thousand dollars in attorneys’ fees trying to get paid.

Written vs. oral; legal pursuit vs. compromise
In the first scenario, Firestone had an oral agreement with the client and managed to get paid in full after hiring an attorney. In the second, he had a formal written contract and still was not paid according to its terms even after intervention by a lawyer.

Although he admits that in the second case he was “too busy to pursue it” and so accepted the lower rate, he noted that it’s interesting that the oral contract seemed to hold up better than the written agreement.

When presented with a written contract, Firestone said he usually has a lawyer review it. However, he said he most often uses oral agreements and has never had a problem other than the described incident.

When to bring in the legal eagles
Firestone said he brings an attorney into the consultant/client relationship when it becomes clear that he’s not making any progress or “getting the point across to the client.” He said it’s important to have proper legal representation ready and suggests that consultants use the “best you can find” for legal services.

“Yes, it will be expensive, but if you want to get results, you retain the people who know how to get results,” Firestone said.

Tell us when you bring in the legal eagles
Do you call your attorney at the first sign of trouble, or do you make every effort to compromise with clients? Tell us when you know it’s time to call your attorney. Send us an e-mail outlining your legal hassles, or post your story below.

 

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