If you are starting a freelance business, you should know that a written agreement is the basis for a good working relationship between the client and the consultant or freelancer working as an independent contractor. Entering into any freelance task without a written agreement can be a serious mistake.
A written agreement ensures that the two parties are agreeing to the same thing, and it clearly outlines the responsibilities of each party. The complexity of the agreement will vary according to the scale of the project.
The following is not meant to provide legal or any other kind of advice. Nothing can replace the expertise of trained and experienced legal counsel. We recommend that the client and the contractor each seek independent legal advice prior to entering into any complicated agreement, especially if large sums of money are involved.
The basics of a work-for-hire agreement are the same, but the details needed in a freelance software development agreement will be quite different from those in a freelance writing or editing agreement; a consultant who teaches children to use computer software at their homes will need different agreement clauses from those needed by a consultant who assembles and installs computers for small businesses; and a consultant evaluating export market opportunities for a manufacturer will probably want some different clauses from those needed by a publicist doing work for a singer.
These agreements typically comprise two or three parts:
1The agreement itself, which spells out the relationship between you (the freelancer) and your client.
2One or more Schedules to provide details about various aspects of the task you are being contracted to perform.
3One or more Change Orders, used to make a change to a contract that has already been signed. For example, if the scope of the work changes, this change should be recorded on a Change Order so it is in writing and signed by all parties.
Below we describe why you need an agreement and suggest terms and conditions you can add to your agreement as your circumstances require.
Don’t use the word “employment” anywhere as this term contradicts your independent status. And never use the client’s address as your place of business (even if you will be doing significant work there).
This is what your work will be judged by, so make it as specific as possible. Use one or more Schedules and in as much detail as possible, spell out what you’re agreeing to do, the deliverable milestones and dates, and the requirements for each milestone. The only thing you don’t want to specify is how the work will be done. The client has the right to accept your finished work but not to specify how you will do it.
You do want very detailed specifications of what will constitute an acceptable finished work product and you should be able to show that your finished work meets these specifications. Provide these details in one or more Schedules to the agreement.
If you’ve been offered an agreement that your client uses, you might find a phrase such as “consultant will make all revisions required by client.” Don’t use this! It’s so vague that the client could completely change the scope of the project six months after you start and expect you to scrap all your work and start over at no charge. This could devastate your pocketbook if you’re working on a flat fee.
If you rely on certain input from the client, be sure to specify that any delay in receiving it will affect your deliverable items or dates. You may want to stipulate that an extended period of nonresponsiveness is grounds for you to terminate the agreement.
Be sure to have in writing not only what you’ll be paid, but when.
If it is a very long project, you may want to receive 10 or 20 percent up front and another 10 to 20 percent every month. Only agree to payment on completion for very short projects, such as writing a magazine article.
If you will be paid on the basis of a unit of time, specify what that unit is (hourly, weekly, monthly) and the period for which you will bill. For example, if you bill hourly, specify whether you will submit an invoice weekly, twice a month, or monthly.
Note that if it comes up, the tax authority is more likely to question your independent status if you bill based on units of time rather than on a flat fee. However, as long as other conditions support your independent status, do what is right for you on the project. For example, if you don’t believe at the time of signing the agreement that you can sufficiently define the scope of work, you’ll probably be more comfortable stipulating payment by the hour. You may want to add an option to renegotiate once the scope becomes clearer.
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