What is contract negligence?
The term “contract negligence” covers breach of contract and professional negligence, two related but different legal issues. Both of these can lead to lawsuits for tech companies.
Contract negligence: a mash-up of legal terms
As a small business owner, you may have come across “contract negligence” and found it confusing. You’re not alone.
Contract negligence combines language from two separate legal concepts: breach of contract and professional negligence.
Accusations of breach of contract or professional negligence can result in lawsuits. The concepts are related, and knowing their differences and similarities will help you protect your company.
Breach of contract is clean cut
A breach of contract happens when your business doesn't deliver the goods or services agreed to in writing or verbally.
For instance, an IT consultant signs a six-month contract to design a network at a new office building. Halfway through the project, the consultant’s subcontractor accepts an offer from a competitor and leaves the job unfinished.
The consultant can be held liable for breach of contract and sued for damages.
Professional negligence isn't spelled out in a contract
Professional negligence can be harder to pin down than breach of contract.
Essentially, IT businesses can be accused of professional negligence if they don’t meet certain standards when delivering services or products.
For example, a client hires a database administrator to organize business information in a database. The administrator gets the job done, but the client claims that the way the information is organized doesn't make sense. The client sues, alleging professional negligence.
How professional negligence can lead to breach of contract
In complicated instances, accusations of professional negligence can cause a breach of contract.
Let’s say a software developer signs a contract to build an application for a client. The contract specifies a certain programming language and a deadline for project completion.
The developer, though, has limited experience writing code in that language. And that was never disclosed to the client.
The developer builds a buggy application that doesn’t meet the contract’s specifications. The developer’s poor work constitutes negligence, which causes a breach of contract.
Consider waivers of liability and contract negotiations
Many contracts include a waiver of liability – a clause in which one party agrees not to sue the other. Talk to your attorney about adding a waiver to contracts you send clients.
Your waiver might not make it into the final draft, though. The party with the most leverage frequently requests that the other waive their right to sue. If your small business bids on a job for a large client, they may not agree to your waiver of liability.
Waivers don’t protect you from lawsuits caused by gross negligence, which is deliberate and reckless disregard for the safety of others.
Adding a waiver of liability to a contract can help reduce your business’s risk, but it can’t completely shield you from a lawsuit.
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