Startup crisis. Dorm room style.

Don't be afraid of the lawyer dad. Keep in mind that lawyers want to make things complicated so that only they understand them. (That is not really true, but it saves time to think that way.)

They made you an offer. You rejected it, smartly. Now it is time for your counter-offer. You already mentioned several downsides to their offer (you can't understand it, no equity, too low pay, probably lots of personal liability for you). You already mentioned that you don't even need this deal (because you are young and you could be doing other things).

I don't understand why you don't see your own leverage here. He wants you to do work RIGHT NOW. If he needs the work done right now, then he will capitulate to your demands, if you have the guts to make any. The first thing you need to do is STOP WORKING RIGHT NOW.

Then, throw away the 17 page contract and write a 1 page contract of your own, where (a) you disclaim all liability, (b) you can walk away at any time, (c) you get significant equity (if you are doing all the work, you should be getting at least 50%), and (d) you get paid a real wage ($20 an hour is not a real wage for a programmer). Give him that one-page contract and tell him to sign it if he wants you to continue working on the project.

He will object. He will want to make changes to the contract. You have the leverage, so tell him no. Definitely do not let his dad insert anything into it--you must write every word yourself, in crisp, clear, English.

If you can convince him to agree to a contract where you have no significant risk and you have significant benefits, then the deal can continue. Otherwise, you have to walk away, because his lawyer is too big of a problem. (Notice that this turns the tables so that his dad is a liability for him, not an asset.)

You might think that it is not possible to convince somebody to sign a contract where you have no risk and you receive a lot of benefits. Not True. I've done it twice on contract programming gigs. Each time, the (small) company signed the contract because they needed something RIGHT NOW. Then came back later with changes suggested (demanded) by their lawyer. I rejected all changes (think "I am not willing to sign anything except the backs of my checks"), they got mad, and they either canceled the project (1 time), or got over it (1 time). You just have to stand firm.

Personally, I still wouldn't take the deal because it sounds like your "partner" is adversarial. The point I am trying to make is that you don't have to be scared of lawyers, and there is no need to be intimidated when you have all the leverage.

That is his money, not theirs. He doesn't need to pay it back to demand changes to the agreement (equity or otherwise). And he gets nothing if he gives it back.

Since he did the work for hire the IP rights belong to the partner, not to him. At least, he doesn't have the ability to win a court case there due to the mismatch in legal representation.

Again, do not let the dad write even one word of the contract. Signing the dad's contract will be way worse than walking away from the project.

exactly. i just finished creating an application for a doctor, but since it was done as part of my master's program, the school owns the code. this means that though the doctor may have aspirations of turning it into a million-dollar product, he can't without working out a deal with my university. i'd be very surprised if this guy's school doesn't have a similar policy regarding code written for its classes. i think it's likely that the contract the other person's lawyer dad drew up is moot--the school probably already owns all (or most) rights to the stuff.

You already agreed to this via verbal contract to the $400 maximum. I'm not sure where some of the other guys can say you should do anything.

Unless you stated you would keep on working for free after the $400 (which I think probably would be the softest point in the verbal agreement later even if you did), the best you can do is work until that contract expires and negotiate a better written one with equity.

Let me repeat: you verbally agreed to work when he offered to "pay [you] to work on his project". You need to do the best you can to meet that agreement because you agreed to the deal.

You need to return the contract to them and firmly state you did not agree to this during the verbal agreement. If he wants you to sign something more than you already verbally agreed, he has to negotiate. Be sure he understands you want equity opportunity during any renegotiation because you are interested in the site and want to continue to work to help it grow after the contract is over.

...or the roommate may have perfectly good intentions, but his father's intervention is damaging the business relationship, and either the roommate doesn't recognize that's going on or can't tell his father to tone things down a bit.

Any way you interpret it, though, it's a warning sign.