contract after work has been done in good faith


I have been developing software with a company owned by my cousin and others for the past 7 months. The most recent software I developed over the past 4 months was based on my own ideas about how to take their business to the next level, and after rolling out just a portion of it, profit has jumped 800% with just a small piece in place. Now the people who refused to sign a contract are annoying the crap out of me for one and want me to hand over all the source code. If I'm going to do this, I really need to know how to protect my interests.

Our "verbal" Agreement:

Originally I was to get 6% and $-- an hour for fixing the company's existing software. My cousin, who bought into the company, was told that this software being buggy was the reason the company wasn't profitable. I know the industry (I've developed for it before), and figured what they told me made some sense, so I decided to take a look and try to fix it. After working on it for a few months, I couldn't see anything that backed up the original owners claims (now minority owners), and told my cousin it was all compete bullshit.

He realized this as well, and owed me for the time I spent working on their existing software. I let him keep about $4000 for another 6% (total 12%), and for $3k a month I would build what I thought needed to be in place for this company to make money. The software I've built and the existing software are totally different, and have totally separate source code. The existing software ran an office, my software automates all the marketing and sales, and scales seamlessly. Now this was the license agreement in the memorandum of understanding I gave to my cousin at the start of all this:

"The contract in no way provides or releases ownership of the source code produced by -- during his tenure at --. The source code, while fully owned by --, is permanently licensed to -- non-exclusively under the conditions stipulated in the contract. So long as the conditions outlined in the contract are met, this agreement shall remain in force.

The source code and its implementation in -- are protected in full from any claim for royalty or licensing fees by the owning party. This protection is limited to the source codes use in -- business of --, and excludes the sale of said software, even as a service, to other companies or parties for use in their business operations."

Now my cousin apparently thought that because he was paying me he owned the software, which I did my best to explain to him from the beginning that this is not the case. This is apparently why he refused to sign a contract. It seems he thought that because he paid me, that he owns it, and that he could sell it and keep all the profit for himself. When he first found out that he didn't own it, he screamed "So I have paid you for nothing." I'm looking at him thinking, no, the software has already made you back more than you've paid me. That being the case your return on investment is already at 500% per year, and is climbing steadily as I put more of it in place.

On the other side of the fence, I have the original owners who are trying to tell me they gave me the idea for the software. This is so insane that its laughable. The software is built around a concept they don't even understand. They think it was written in html. When I press them on it, and ask them to explain how the idea is "theirs." I get a few specs on it that the original owner quite possibly thought of on his own at some point, but never had the ability to produce or understood how to implement effectively. The parts he names are so trivial anyway, as they have nothing to do with why it's so effective. Their argument eventually, after them fussing at me endlessly, boils down to, if you never worked with us, you wouldn't have seen all the defects in our company and developed a system to fix them. I'm not sure how it makes it theirs, but that seems to be position these people are advancing. The software isn't even specific to their industry, it only operates off information relevant to it.

Anyway, all I want is for everyone to live up to the verbal agreement. I don't care about the original owners thinking they own it because it's not their fault. They don't get technology, and honestly they are old and sick and need something good in their life. They are crazy, but not evil. My cousin on the other hand is a definitely a predator, and honestly seems like he won't be happy until he takes everything.
That being said, I don't want to get stuck in this industry, nor do I want to do all the shit that needs to be done for a company like this to run. I want the people I've worked for to benefit from it.

If I'm going to keep the software in the company, I think I should get 20% of the profit if it does get us to the multi-million dollar level. This was brought up before, and agreed to verbally in one of the many we want a contract now agreements. This was agreed to because I'd let them market it to agent, and be a party that would be essential reselling it.

That being said, trading it for ownership or profit sharing has its own problems, considering how ridiculous everyone is. My cousin, who with his business partner, have controlling interest in the company can manipulate the profit and effectively pay me nothing. If I license it to them and hand over the program which is currently running on my server, then what protection do I have? They could pay themselves a salary equal to the profit, so my 20% gets nothing.

Some Ideas I've come up with so far on how to protect myself are:

  • Have the license be contingent upon me getting a % of gross.
  • Make it where any salary paid out must be agreed upon unanimously between all parties.

If anyone can offer some insight into this, it would be really appreciated.


asked Aug 3 '12 at 01:41
6 points

1 Answer


IANAL, but I would think some separation agreement would be in order here.

Some questions:

  • You mention 6% & 12% - is that ownership of the company or profit sharing? Either way, you need to get a signed agreement on that. Make that independent of any code ownership issues. I would do nothing more with the code until this matter is resolved. Some may advise to pull the code all together. Counsel is needed here.
  • Why would your cousin want to go into the business of selling software? Is that related to his business?
As for reselling / distributing code : You developed it, you own it - unless you specifically gave the rights away (you have a copyright block at the top of each file, correct? ). Check with a lawyer - likely you will need to make noise about this if your cousin is anything like you describe.

It would seem to make sense for you / your business to enter into a maintenance agreement with his company, offer the product to others in the industry, and enhance the codebase. You can then each pursue your own Independence business paths with minimal interaction.

However, this snippet is telling:

I don't want to get stuck in this industry, nor do I want to do all the shit that needs to be done for a company like this to run. I want the people I've worked for to benefit from it.

Beyond the not so positive experience working with your cousin, you don't seem to have the interest to continue on. And it doesn't seem like the codebase is complete, so there is more to be done.

Path of least resistance is to offer him different licensing options - sole use, site use & reseller - reinforcing that the initial deal was for (non-exclusive) site use.

How you get paid is up to the legal contact and how well it can be enforced / monitored.

answered Aug 3 '12 at 03:28
Jim Galley
9,952 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics: