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legal responsibility of contractor

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infocus

Member
What is the name of your state (only U.S. law)? CA

I want to contract a web design team to make sites for our clients using our company name.

How can I protect my business if the contractor screws up and customer goes after me?

Also, what does indemnification mean and how does that apply to my agreement with contractor?
 


Some Random Guy

Senior Member
How can I protect my business if the contractor screws up and customer goes after me?
1. Have oversight of the project. Do not just hand it off and wash your hands of it. You are liable so stay on top of it.

2. Have well written contracts that outline responsibilities of the contractors and their expected performance and behavior.

3. Have clearly defined objectives for the web site. Include milestones and dates. Include processes for making scope changes. Include clear indicationof how things will be handled if their responsibilities are not met.

4. Ensure that your margins in this arrangement are sufficient to cover your sales efforts, time, liability and profit.

Also, what does indemnification mean and how does that apply to my agreement with contractor?
Good luck in getting your client to indemnify you from any liability for this project. If you do that, then you are not providing a web site, you are a referral service for the real providers. Referral sources get much much lower margin.
 

infocus

Member
Thanks for your response. Is there any liability at all in terms of the contractor if something were to happen? Not everything can be controlled so I'd like to know the bottom line risk of this type of arrangement.

Also, will we need a contract for each client's website? I would prefer to have just one contract that covers all situations, but this is difficult to write.
 
What is the name of your state (only U.S. law)? CA

I want to contract a web design team to make sites for our clients using our company name.

How can I protect my business if the contractor screws up and customer goes after me?

Also, what does indemnification mean and how does that apply to my agreement with contractor?
If the contractor screws up such that you breach the contract with your clients, then you can be sued. Therefore, you should require that the contractor indemnify you if you should be sued for breach of contract that arises from the contractor's activity. Indemnification means that the indemnifying party (the contractor) steps into the shoes of the indemnified party (you).

The most common example of indemnification is between a consumer and an insurance company. If you cause a car accident and are sued, then your insurer must indemnify you by defending you and paying for the damage you caused.

So, your contract should state that the contractor must indemnify you for any liability that results from its conduct. Of course, you'll want it worded better than that...you'll want it worded such that it must pay for your legal defense, any judgments, any settlements, etc., etc.
 

infocus

Member
That is really helpful. I was thinking about it for weeks, never got a clear picture. Now you have said it all. Bravo! Gratitude!
 

ecmst12

Senior Member
And again, good luck finding a contractor that would agree to such an arrangement. Most commonly, the contractor would have to provide for his own defense in a lawsuit situation, but you would be responsible for defending your company. If anything, the company protects the employee or contractor, not the other way around. If you are asking for something that's not considered the standard way to do business in your field/area, you will have a much harder time finding people willing to work for you, even in the crappy economy.
 

infocus

Member
I am working on indemnification now. Does this seem correct:

Contractor will at all times indemnify, defend and hold harmless myself from and against any and all claims, damages, liabilities, costs and expenses, including, without limitations, fees and disbursements of counsel, incurred by myself in any action or proceeding between myself and any third Party arising out of any breach or alleged breach of this Agreement. Upon the occurrence of any action or proceeding between msyelf and any Third Party arising out of any breach or alleged breach of this Agreement, contractor shall be defined as the “Indemnifying Party” and myself shall be defined as the “Indemnified Party” and shall become immediately obligated as set forth in Paragraph B hereunder)
 

eerelations

Senior Member
I write this stuff all the time for a living and my advice to you is: get an attorney to do this for you. (Didn't we go through this with you some time ago?) It will be money well spent - the few hundred you spend now on this will save you many many thousands later on down the line.
 
And again, good luck finding a contractor that would agree to such an arrangement. Most commonly, the contractor would have to provide for his own defense in a lawsuit situation, but you would be responsible for defending your company. If anything, the company protects the employee or contractor, not the other way around.
If the contractor wants business, then it very well may agree to an indemnification clause. They are quite common in the business world.

In addition, your statement about a company "protecting" a contractor is way, way off base. Even without an indemnification clause, the contractor would be liable to the company if it negligently damaged the client's property and the company had to pay the client.

I agree with eerelations that an attorney should be drafting this stuff for the OP.
 

infocus

Member
I'm not sure if I am getting the correct information from this thread. Go to Findlaw and find the following case:

Daniel Ferguson (injured party)
v. Marshall Contractors (general contractor)
v. Ajax Construction (construction company)
FindLaw: Cases and Codes

Question: Can a general contractor of a construction project obtain indemnification for alleged negligence at the job site from an injured employee's subcontractor-employer in the absence of an express agreement between the employer and the general contractor providing for such indemnification ? The short answer to this question is NO. Read below:

It looks like the defendant, Marshall signed a contract, including an indemnification paragraph, with Bennington Iron Works to provide steel for a project.
Bennington in turn contracted with Ajax to do the steel construction work.
Ferguson (plaintiff) was an employee of Ajax when he was injured while working on the project. He collected workers' compensation benefits from Ajax but then brought suit against Marshall and Bennington for their negligence in connection with his injury.

The jury awarded Ferguson $1 million and Marshall had to pay that to Ferguson. Marshall appealed the verdict to a higher court, but they upheld the verdict. Marshall contends that it is a third-party beneficiary of an indemnification provision contained in the written purchase order between Bennington and Ajax. Ajax said the language is very clear: it asserts that the indemnification clause requires Ajax to indemnify the buyer, Bennington or the owner of the property where the work was to be performed.

Although Marshall contends that it does not seek indemnification for its own negligence, only for that of Ajax, IT OVERLOOKS THE FACT THAT NO INDEMNIFICATION CONTRACT OR OTHER SUCH AGREEMENT EXISTS BETWEEN AJAX AND MARSHALL. Rather Marshall bottoms its claim for indemnification upon a third party contract beneficiary theory and upon the law of agency. But the cases cited by Marshall in which the court upheld claims for indemnification are based upon EXPRESS AGREEMENTS BETWEEN THE INDEMNITOR AND THE INDEMNITEE. Here Marshall's claim for indemnification from Ajax must fail BECAUSE THE PARTIES THEMSELVES HAVE NO DIRECT AGREEMENT BETWEEN THEM THAT SO PROVIDES, and nothing in the Bennington-Ajax purchase order contains an express promise by Ajax to indemnify Marshall.
 

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