We all understand the importance of contracts, but that doesn’t mean we always use them (or use the right ones). For years, you may have skated by without taking a client contract seriously…maybe you hastily downloaded one from the Internet —“hey, it contains some fancy legal terms, so it must be good.” Maybe, you immediately sign whatever document a client sends your way, or maybe you don’t have any kind of contract at all.
A contract is not intended to create traps with legal fine print, but rather to make sure everyone is on the same page when it comes to important details like project scope, deliverables, payment, timeline and other contingencies.
At its core, a good contract should spell out who’s doing what, when and for how much. Keep in mind that clunky legal terms just confuse people. I went to law school, and my eyes still glaze over whenever a contract is full of legalese. As a standard rule of thumb, don’t include anything in a contract if you don’t know what it means. I’ll spell out a couple of areas below where you’ll need to sound a bit like a lawyer, but at least sound like a lawyer who speaks plain English!
Here are the basics:
Here’s an easy one to dive into. Every contract should include the legal business name, main contact, physical address and billing address for both the client and contractor. Be sure to use your official business name (for example, if you incorporated or formed an LLC, use the exact name that’s on this paperwork). In addition, use your name and your client’s name throughout the contract. Leaving generic terms like “client” or “service provider” in the contract will make it sound so much more impersonal.
Try to be as specific as possible as to what you’re being hired to do. For example, if you’re being hired to redesign a website, are you responsible for the new copy? Will the client provide the copy? Does the scope of the project include other aspects like keyword/SEO optimization? How many initial comps will be included, as well as how many revisions? How should their edits be provided?
The goal here is to set expectations and guide the working relationship with some predefined parameters. You don’t want to end up feeling like you’re being pushed to work out of scope, and you don’t want your clients to feel like they’re not getting what they paid for.
Are you to be paid on an hourly basis or by the project? If it’s hourly, you may want to stipulate a minimum/maximum hour range to avoid surprises. If you get paid by the project, be sure to lay out the exact deliverables.
In addition to the rate or amount, you’ll want to iron out the payment schedule. For hourly models, will you bill on a predefined schedule (e.g. every week or month)? For project models, will you invoice after hitting certain milestones, and what are they? In addition, you should spell out a few more details:
Be crystal clear about any deadlines, including final deliverables as well as any project milestones. If the deadline hinges at all on the client, be sure to specify this. For example “deliver first comp three weeks after receipt of x” or “meeting the schedule is dependent on the timely review of drafts.”
Employer/employee contracts often stipulate that either party can terminate the contract by giving a two-week notice. However, this kind of arrangement tends not to carry over well for freelance projects. But there are a couple of details you can include to give you a little protection:
This won’t apply to every project or work arrangement, but you may want to define the copyright terms for the final deliverable and/or earlier drafts and comps. It’s common that the service provider (you) owns the rights to your produced work until the final payment is made. Then, rights are transferred over to the client. If copyrights are a particular concern for you, you’ll definitely want to hash this out before starting.
Here’s one area where we do need to sound a bit like a lawyer. It would be helpful to your client to include some language that states that you’re being hired as an independent contractor/service provider and will be responsible for paying your own taxes (assuming that is indeed the nature of your relationship and you’re not being hired full-time).
Why is this important? Companies can get into trouble by tax agencies for incorrectly categorizing employees as contractors. Adding this section will help them show that you are indeed an independent contractor and not being hired as an employee of their company.
Feel free to use whatever language you’d like, but here’s some sample legal text:
“It is understood by the parties that Contractor X is an independent contractor with respect to Company Y and not an employee of Company Y. Company Y will not provide fringe benefits, including health insurance benefits, paid vacation, or any other employee benefit, for the benefit of Contractor X.” Remember to fill in specific names for Contractor X and Company Y and it will sound a little more human.
A contract is not intended to create traps with legal fine print, but rather to make sure everyone is on the same page when it comes to important details.
In the US, contracts can actually specify where disputes will be handled and which state’s laws will govern those disputes. This might be helpful if you and your client are located in different states. Unless you have a particular reason for picking another state (for example some large corporations choose to be governed by the state of Delaware, which can be more favorable to business), then just choose your own state. After all, it can be costly and time-consuming to travel out of state to settle a dispute.
You may want to include an arbitration clause in the contract. If any disputes arise related to the contract, a neutral third party will hear the evidence and make a decision. If you don’t have an arbitration clause in the contract, you can still have an arbitrator as long as both you and your client agree, although it can be tough to reach an agreement on this once things get heated.
The benefit of arbitration is that it’s typically faster, simpler and easier to schedule than courtroom litigation. Note that arbitration isn’t necessarily cheaper than litigation, but it can be less hostile and it’s a private proceeding.
You can pick up a sample arbitration clause from the American Arbitration Association.
In many cases, a client will have their own contract, or require specific clauses like liability or confidentiality. You can certainly use your client’s contract, but that doesn’t mean you need to blindly sign your name. If you don’t understand what a certain clause means, just ask.