206 lines
5.1 KiB
Markdown
206 lines
5.1 KiB
Markdown
# Module 03: Alignment & Signoff
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## Lesson 4: External Contracts
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**Formalizing alignment with external contracts**
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**Time:** 15 minutes
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---
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## When You Need External Contracts
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**External contracts are for:**
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- **Consultant → Client**: You're proposing a solution to a client
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- **Business Owner → Suppliers**: You're hiring consultants/suppliers to build software
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**These contracts:**
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- Formalize agreements between separate parties
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- Include legal protections (jurisdiction, governing law)
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- Cover payment terms, IP ownership, confidentiality
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- Protect both parties legally
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---
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## Two Types of External Contracts
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### 1. Project Contract
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**For:** Consultant → Client
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**When:** You're a consultant proposing to a client
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**Perspective:** You're the contractor/service provider
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**Key Focus:**
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- Protecting your work and payment
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- Clear scope boundaries
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- Fair payment terms (upfront payment for fixed-price)
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- IP ownership transfer upon payment
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### 2. Service Agreement
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**For:** Business Owner → Suppliers
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**When:** You're hiring consultants/suppliers to build software
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**Perspective:** You're the client/owner
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**Key Focus:**
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- Protecting your investment
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- Ensuring deliverables meet requirements
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- Clear payment terms and milestones
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- IP ownership of deliverables
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---
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## Business Models
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**Before building the contract, determine the business model:**
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### Fixed-Price Project
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- Set price for defined scope
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- Not-to-exceed clause applies
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- Upfront payment recommended (50-100%)
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- Clear deliverables and scope boundaries
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### Hourly/Time-Based
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- Pay for actual time worked
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- Hourly rate and time tracking
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- Optional not-to-exceed cap
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- Flexible scope
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### Retainer
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- Monthly commitment
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- Minimum hours per month
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- Availability expectations
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- Overage hourly rate
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- Hour rollover policies
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### Hybrid
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- Combination of models
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- Multiple payment structures
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---
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## Key Contract Sections
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**Saga will guide you through building:**
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### 1. Business Model
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- Explains selected payment structure
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- Sets foundation for all payment terms
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- Clarifies expectations upfront
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### 2. Scope of Work
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- **IN Scope**: What's explicitly included
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- **OUT of Scope**: What's explicitly NOT included
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- **Deliverables**: What will be delivered
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- **The Path Forward**: How work will be done
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**Critical for fixed-price contracts** - Clear scope prevents disputes.
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### 3. Payment Terms
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**Adapted to business model:**
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**Fixed-Price:**
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- Upfront payment recommended (50-100% is fair)
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- Milestone payments tied to deliverables
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- Payment on completion (risky, not recommended)
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**Hourly:**
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- Billing frequency (weekly, bi-weekly, monthly)
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- Payment terms (Net 15, Net 30)
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- Time tracking requirements
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**Retainer:**
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- Monthly retainer amount
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- Minimum hours included
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- Overage billing
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- Hour rollover policy
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### 4. Availability (Retainer Only)
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- Business hours
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- Response time expectations
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- Meeting availability
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- Urgent request policies
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### 5. Not-to-Exceed Clause
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**Conditional based on business model:**
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- **Fixed-Price**: Required (equals project price)
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- **Hourly**: Optional cap if desired
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- **Retainer**: Not applicable (monthly cap exists)
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**Purpose:**
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- Prevents scope creep
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- Protects budget
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- Requires change orders for additional work
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### 6. Confidentiality Clause
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- What information is protected
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- Duration of confidentiality (typically 2-5 years)
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- Exceptions (public info, required by law)
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- Mutual protection
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### 7. Legal Framework
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- **Governing Law/Jurisdiction**: Which laws apply
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- **Contract Language**: Language of the contract
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- **Work Initiation**: When work can begin
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- **Dispute Resolution**: How conflicts are handled
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### 8. Other Important Sections
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- **Change Orders**: How scope changes are handled
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- **Termination**: How to exit the contract
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- **Intellectual Property**: Who owns what
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- **Timeline**: Delivery dates and milestones
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---
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## Best Practices
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**Saga will provide guidance on:**
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### For Consultants/Service Providers
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- Request upfront deposits (50%+ for fixed-price)
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- Define scope extremely clearly
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- Include change order process
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- Set not-to-exceed cap
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- Specify IP ownership transfer
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### For Clients/Business Owners
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- Review scope thoroughly
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- Understand payment terms
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- Know what's included/excluded
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- Understand change order process
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- Clarify IP ownership
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### Common Pitfalls to Avoid
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- Unclear scope definitions
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- Unfair payment terms
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- No change order process
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- Unclear IP ownership
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- No not-to-exceed cap (for fixed-price)
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**Goal:** Simple, fair contracts that build long-term relationships.
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---
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## After Contract is Finalized
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**Once contract is signed:**
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- ✅ Alignment achieved
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- ✅ Commitment secured
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- ✅ Legal protection in place
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- ✅ Ready to proceed to Product Brief
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**Next:** [Module 04: Product Brief](../module-04-product-brief/module-04-overview.md)
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---
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## Key Takeaway
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**External contracts formalize** agreements between separate parties with legal protections. They ensure clarity, protect both parties, and secure commitment before starting work.
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---
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**Next:** [Lesson 5: Internal Signoff Documents →](lesson-05-internal-signoff.md)
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[← Back to Module Overview](module-03-overview.md)
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*Part of Module 03: Alignment & Signoff*
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