Protecting our interests during a takeover

What should we put into a contract?

[rich_b]

Hi all,
A friend and I are on the verge of hopefully securing a web application project which we will be doing in our free time for a reasonable sum of money. The company is a small-sized operation that is now just one year old. The project would take about 3 months. There is a chance that the company may be taken-over or bought out in that time - they have already been approached once but turned down the offer. What should we do from a contractual point of view to protect us, or compensate us if new owners come in half-way through development and decide they don't want the system? Does anyone have any ideas because I've never come across this before. This would be my biggest project so far so it has to be right. Thanks for any ideas!

[diamondgrl]

I would just try to get a 30-day termination notice period or the like.

But if this is your biggest contract by far and it is a spare-time kind of thing, just should take what you can get. The company is not going to jeopardize its negotiations about a purchase with what it might consider to be a "poison pill". There are always lots of issues on the table in a merger/takeover negotiation. The terms of a recently signed contract does not need to be another one of those issues on the table.

[PericlesStrategy]

Is the company a distinct legal entity - such as a limited company in the UK - or a sole proprietor / partnership. I ask because this makes a big difference to your options in this issue.

If the business is a legal entity in its own right, then you have potentially less to worry about, as the contract will have been taken on by the company and a change of ownership should be irrelevant to them honouring their obligations under it.

With a sole propriteor and a partnership - depending on where you are in the world - you have to get legal advice and get a suitable contract drawn up, as it may be difficult to enforce if you need to.

That being said, I would suggest that you talk to a lawyer who specialises in company law anyway and get them to draft a contract for you, which has a clause that deals specifically with this issue.

[rich_b]

Thank you all for the interesting replies. I probably should have mentioned that we'll be proposing a fixed price, rather than an hourly rate.

PericlesStrategy - The company is a Plc. Your point about the change of ownership but is very interesting and something I hadn't realised.

[Corey Bryant]

There are a few websites out there that you can sign up for for free legal advice. You pay them on a monthly basis a membership fee. This might be something else you want to look into - that way you can make sure that your interests are covered.

-Corey