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Should You Require Contracts as a Freelancer?

business.com editorial staff
business.com editorial staff

Considering freelancing? Here's everything you need to know about freelance contracts.

  • Learning to implement a solid contract is vital to long-term success as a freelancer.
  • Having a contract in place that implicitly states the nature of the work being performed and the compensation due for services rendered is the best way to protect yourself from disagreements or theft.
  • Freelance contracts are an important part of building a solid business infrastructure as an independent contractor.

When you pursue freelancing, you are choosing an independent career path that requires you to look after yourself. In other words, you're your own boss, and you need to secure your finances, insurance, retirement savings, etc., on your own terms. 

One major responsibility freelancers must prioritize is creating a contract to establish a legal agreement between you and your clients. 

"A freelancer needs a contract," said Drew DuBoff, blogger and chief career coach. "Because they are not full-time employees, they are acting as independent contractors, so this document is an independent contractor agreement." 

If you're considering taking the freelance route, here's everything you need to know about freelance contracts.

What it is

A freelance contract is a legal document that outlines the specifics of your agreement with a client to prevent miscommunications or foul play on either end. It can take many forms, from a two-line email stating the projects you will be completing and compensation to a signed physical sheet that includes various clauses. However, the more formal the contract is, the more protected you are from an infringement. 

"Technically, [email] counts as an expressed contract, but it won't be as legally binding," said DuBoff. "Having a contract adds legitimacy, and having an arbitration clause … will set a procedure for what to do in the event the contract is breached." 

While you might think it's enough to have proof that your client agreed to compensate you for your work, your contract should be much more in depth than that.

What to include

DuBoff includes the clauses outlined below in his freelance contracts.

Compensation

You want to indicate the exact compensation for each project, assignment, etc., that you plan to complete and the deadline for that payment (i.e., within two weeks of submitting, last day of every month, etc.) 

"Getting paid is one of the most important elements, so outlining this is crucial," said DuBoff. "Especially if you invoice through a third-party platform such as PayPal, working in fees to the contract is important." 

Currency

To ensure you're on the same page, especially when working with international clients, DuBoff recommends adding a section specifying the expected currency (i.e., U.S. dollar, euro, etc.)

Confidentiality and ownership of intellectual property

Work with your clients to determine which side possesses ownership of the intellectual property in the relationship. 

"This is important especially on sensitive projects and if you are contributing to any copyrighted, trademarked or patented material," said DuBoff.

Services provided

In this section, describe the exact services (i.e. copy editing, social media, etc.) you will provide to your client.

Governing law

According to DuBoff, this clause includes what happens when a contract is breached. Arbitration will help both parties move in the right direction without confusion or exorbitant legal fees.

Communication

Communication is key; this section will establish how you will communicate with your clients, whether via email or phone calls.

What to do in the event of a breach of contract

If any of these clauses are broken, you should act right away. For instance, if your clients refuse to pay for any reason, there are many steps you can take, from sending a friendly reminder to involving outside help. 

If the issue is minor, like a misunderstanding of one of the clauses, you might be able to work one on one with your client to smooth things over. 

However, more severe and deliberate breaches require further action, usually requiring outside help. Your arbitration clause should also help you determine how to move forward.

What are the consequences of not using a contract?

As a freelancer, you are especially vulnerable to unscrupulous business practices. You don't have an entire legal team at your disposal to settle a dispute you may have with a client, so it's better to be safe than sorry. 

Not having a proper contract in place before doing business can lead to an issue with compensation or intellectual property theft. Handshake agreements rarely hold up in court, and any time you agree to work for someone, it's important to have something in writing. 

Compensation

Say you agree to build a website for a client for $500. After the job is done, they claim you gave them a 50% discount and only pay you $250. If you do not have a contract in place – or at very least an email exchange – that states the exact price or the work being performed, legally, it will be difficult to dispute their claim. 

Intellectual property

Maybe you have a meeting with a client to discuss marketing ideas for their business. Weeks later, they're not answering your phone calls, but you notice that they're implementing your concepts on their social media. If you did not sign a contract to work for this client before divulging your ideas, it would be hard to get credit retroactively. 

This doesn't mean that you should be fearful that every potential client is going to rip you off. But it's wise to have a defense strategy in place in the event that a deal goes wrong and you need protection. 

Being prepared

Freelancing is an inherently risky endeavor – you do not have the resources and stability of a traditional job to fall back on. If a client is late on a payment or trying to nickel and dime you after the fact, it could put your entire business in jeopardy. 

Having a solid contract in place will provide the checks and balances to keep your business relationships running smoothly. Even if your client is a friend of a friend, it's always smart to sign a contract. It eliminates the temptation of cutting corners or behaving in an uncouth manner because the consequences become more apparent than in a handshake deal. 

Here is a useful template from Pandadoc for structuring your freelance contract. You'll have to play around and customize it to fit your need, but it can get you on the right path to crafting a solid legal document.

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