Contracts are not just for 'the courts'. It is a standard business practice of having some clear terms for the both parties. Not only that, but any company who could sue and, 'wipe you out' already has their own contracts and NDAs, you not showing up with one just looks unprofessional. It should be also used as a place to outline your workflow and what the client should expect from you. Clients love this, trust me.

To tell new developers that, 'go ahead and put 5K-50K of your earnings on good faith' is just a dangerous thing to say.

A week later you get back from your totally offline trek through Nepal to find angry voicemails and emails from the organization now depending on your software, and you're now facing a $10M lawsuit from the new management for losses incurred due to your software breaking.

Long story short, your liability isn't limited to the relatively small amount you were paid for the work. And because you didn't have a contract, you could be held personally liable and risk losing your house, retirement savings, etc.

I'm fairly sure it's called a limited liability clause. They are literally everywhere. Ski resorts, adventure parks, paintball facilities, and even pools. There are many ways these are worded. Keep an eye out anytime you partake in a service/activity where there is a whiff of danger.

Edit: In terms of asset protection (losing houses and retirement) an LLC, GmbH, or Pty. Ltd. will limit loses to assets owned by the company.

Again talk to a lawyer.

This should include the work to be performed, payment schedule and penalties for late payments (which are generally covered by usury laws, the workaround is often to offer a discount for early payment), what copyrights are transferred and when, responsibilities for providing assets, acceptance criteria, liability for defects, severability, and controlling law. Non exclusive list written from memory, IANALATINLA.

Relationships may be important, but that does not mean automatically getting screwed if the client decides to. A well-written contract protects both parties. We need contracts because this isn't a perfect world, things go wrong all the time, and it's very easy to burn relationships unless you both agree about what to do when things go wrong, before the lawyers start getting involved. And again, if it does get to the point where the legal letters start flying, without a contract you are going to be severely limited in terms of recourse.

Another way to look at it is that without a contract, you are both taking on risk; the risk of not being paid is probably the biggest factor. If you can avoid a $5k to $50k risk by spending a few hundred dollars, why wouldn't you?

If you need more than my words to convince you, I suggest either reading clientsfromhell.net, or watching "Fuck you, pay me." http://vimeo.com/22053820

I can't think of a single case where that's been true, in either my experience or anyone else's.

The contract language comes into play when everything has already gone to hell. Yes, there needs to be a contract. But you should never assume it will give you any particular leverage over a larger, well-represented client who has elected to take an adversarial position.

The above is clearly a situation where contract verbiage for transfer of rights would make any subsequent conversation on the topic very short. However, as to your general point, what do you suggest? Is that risk something that can be mitigated, or priced into your rates?

There were already lawyers working for both parties before they signed the contract. Nobody has to find one just because there was disagreement.

One of the things I've learned from Patrick Patio11 is that negotiations should be on scope not price. The implementation is that clients who expect me to deliver something they cannot afford aren't worth taking on.

Discussing contracts is also a good way to screen clients. It can provide a tell that allows separating people who don't sign contracts from those whose word is their bond. The latter have no trepidation entering a contract.

Everyone who releases open source code uses contracts, which all limit liability. Contracts are hardly something just for rich folk.

> "the client can afford more expensive lawyers than I can, so regardless of the truth they would be able to wipe me out"

Just like lines of code are not a measure of quality of software, hourly rates of attorneys are not a measure of the quality or effectiveness of their legal representation. The only time that you are on equal legal footing with a large corporation is when you're both entering the relationship. If you and a client sign an agreement defining and limiting the work and your liability, a more expensive attorney isn't magically able to rip that contract up.

> "if the client has to read the detail of the contract, it's probably too late to save the relationship anyway"

I couldn't possibly disagree more. If a client isn't willing to work with me on defining the scope of the work to be done for both of our benefits, then I have no faith that they're going to work well with me at all, on anything. For a software developer, a scope of work is also just another piece of documentation: here's what I'm building, and what it does and does not do. A client should be as eager to define that as you.

Case in point: a bank recently suffered a data breach and had to spend more than $150k to comply with its notification obligations, and the bank's insurance company sued the bank's web design firm for, as they allege, failing to do proper servicing, security updates, etc[1].

Web design firms doing ongoing security, monitoring, and maintenance is totally not the norm. Usually the design firm designs the site, either has a couple developers in-house or contracted to another company to build out the front-end and do any integration with the bank's back-end, and when it launches, all is over. But here, this small midwestern design firm with a few employees is on the hook for damages and their reputation will be destroyed.

There are many details lacking in the civil complaint in terms of what their actual responsibility was, or if there even was an agreement in place. But if the design firm had a master services agreement that (a) disclaimed responsibility for doing security monitoring, updates, malware fixes, backups, contingency planning, and any costs or lost business as a result; and (b) limited liability to the amount of money the bank paid the design firm (a common business practice); and (c) indemnified the design agency against any claims by third-parties; the complaint probably would have never been filed.

None of this is legal advice, but don't risk having your reputation destroyed and being personally bankrupted simply because you're desperate for work, lazy, or unrealistically optimistic about people having good faith in all situations.

[1] Article with linked PDF civil complaint: http://www.scmagazine.com/travelers-accuses-web-firm-of-shod...