Freelance contracts are rapidly expanding across the world. Many companies are choosing to create a workforce based on what works for them, rather than the traditional model of employment. In this respect, freelancers have been a growing segment of the workforce, with many businesses choosing to create a team based on multiple different working relationships: employees and freelancers alike.
Due to this new form of work organization, more and more companies need to have a freelance contract model. A Freelance Contract -also known as an Independent Contractor Agreement- once fully executed with signatures from the client and freelancer, is a legally binding document. This document is an agreement between the Freelancer and the employer on the terms of the work and deliverables.
Many freelance working relationships go without any document signed. However, without having a contract, the employer opens yourself up to potential misunderstandings that can have far more costly consequences than the time and money spent setting up a Freelance Contract. In fact, the simple act of signing a contract agreement often makes a person (the Freelancer) feel more accountable to fulfill his/her obligations.
A Freelance Contract clearly and specifically outlines exactly what the working relationship entails and the services that are expected from the freelancer, and it does so in a legally binding manner.
Below, we are going to describe the most important clauses that a Freelance Contract and Agreement must include to provide legal security to the parties involved.
Every Freelance Contract should start with an introductory paragraph. This section should describe the parties (the employer and the freelancer) that enter into the agreement. It should state the full names of each party, the date that the parties enter into the Freelance Contract, and the physical address of each party.
DESCRIPTION OF SERVICES
After the preamble, there should be a section about the services. This is usually one of the most important parts of a Freelance Contract. This section is where the services (Scope of Work) are described in detail. In addition, it should list the duration of the services and the timeline of works or milestones. The purpose of this section is to clearly state the expectations of both parties. The more detail included, the fewer potential misunderstandings that could occur.
After the preamble and the description of services, a section on compensation should be included. This clause should state whether the freelancer is paid a flat fee or an hourly rate. It should also include information on how and when payments will be sent, whether invoices must be submitted, and when those invoices will be submitted. Sometimes, Freelance Contracts include additional compensation or bonuses to incentivize the work of the freelancer.
The confidentiality clause of the independent agreement states the terms under which the freelancer is to keep the client’s company information confidential. This could include industry and company secrets, trademarks, and business strategies depending on the language of this section. This section is crucial to keeping the business information private.
INTELLECTUAL PROPERTY RIGHTS
This clause describes the ownership of intellectual property such as the copyrights of products or inventions created during the working relationship. If the employer wants to own the work created by the freelancer, the contract should explicitly state that.
The Freelance Contract should include terms that will specify when and how the employer can terminate the contract. Typical scenarios include missed deadlines and work not meeting specifications. This clause may also include an option to terminate without cause – for example, if the company’s situation or needs change, and the employer wants to discontinue the work before completion. Notice requirements are also usually included in the contracts. The notice requirement specifies the number of days required before terminating the contract.
This last part of the contract includes standard clauses applicable to other contracts of a more general nature, such as, for example, the Service Provider Contract or the Business Consultant Contract. This section is basically a legal section. The key components are about the choice of law/dispute resolution. There’s usually a paragraph that states that the agreement represents the entire agreement between the parties and no oral promises are part of the contract unless specifically included herein. The Choice of Law/Dispute Resolution clause outlines the country/state/province in which the jurisdiction will govern and enforce the agreement and also outlines procedures in the case of legal action. In some cases, companies may choose to state that arbitration or mediation is the first required step before legal action is taken.
Finally, authorized signers for each party (company and freelancer) must sign, date, and list their titles to fully execute the legal contract. Without completing this section, the Freelance Contract and Agreement is not a legally binding document. That means the contract could not be legally enforced. E-signatures are acceptable, but simply emailing the freelancer a copy of the Freelance contract agreement is not enough. The employer must have the freelancer sign (or e-sign) the agreement.
In conclusion, Freelance Contracts legally and clearly define the working relationship between an employer and a freelancer. These types of contracts should be carefully reviewed before presenting to the freelancer.