Both the freelancer and the hiring company benefit from a written agreement establishing the basics of the project.
We all understand the importance of contracts, but that doesn’t mean we always use them.
Maybe you’re put off by all the legalese and fine print. If you’re a business owner, perhaps you think it’s a waste of time to draw up a lengthy legal document for a project that will last just a few days, particularly when hiring a service provider you already know or who comes highly recommended from a trusted colleague.
If you are a freelancer, maybe you’re nervous that requiring a signed freelance contract could make you seem high-maintenance to clients. You worry that it might negatively impact your client relationship or your ability to win new clients.
But spending some time writing out the details upfront can spare you headaches down the road—whether you run your own freelance business or you are a business owner hiring a freelancer.
Let’s look at the essentials you need to know about freelance contracts.
Table of Contents
What Is a Freelance Contract?
A freelance contract (or a freelance agreement) is a legally binding agreement outlining the working relationship between freelancers and clients. It details the project scope, project deliverables, and payment agreement. It offers some protection to both parties should problems or disagreements arise.
In short, a freelance contract ensures that everyone is on the same page.
Freelancer vs. Independent Contractor
The terms freelancer and independent contractor are sometimes used interchangeably, and they do have a lot in common. A freelancer is essentially a type of independent contractor. Both freelance workers and independent contractors are self-employed, set their own rates and schedules, file their own employment taxes, and do not receive company benefits.
The difference is that independent contractors are hired for a specific project. They are typically employed by one client at a time—though they can work for other clients if they haven’t signed a contract with a noncompete clause.
(This is true in the U.S. Read more about independent contractors here—including differences between the U.S., Canada, and the UK)
Freelancers are usually hired to produce a deliverable, such as a written product or some other form of intellectual property. This means, says labor and employment attorney Paul Starkman, that freelancers may have intellectual property rights—unless the freelance agreement specifies otherwise.
Why Are Freelance Contracts Important?
An oral agreement or loosely written agreement without explicit parameters can overlook important details. This can lead to misunderstandings that cost you time and money.
Let’s look at why freelance contracts are important:
They Answer Essential Questions
So many details go into a freelance arrangement. For example:
- What deliverables are required?
- Are the agreed-upon delivery dates for the first draft or final product?
- Are the project expenses reimbursable?
- Does the client owe the freelancer a kill fee or any additional compensation if the project is cancelled or paused?
- What are the expectations around response time and requested edits?
- How and when will the freelancer get paid?
- Who owns the deliverables?
Having these details in writing is important for both the freelancer and the business owner.
“Contract terms almost always favor the drafter [since] the drafting party selects contract terms and looks out for its own interest.”
— Christopher Collins, attorney
They Offer Protection
Written agreements provide protection on both sides. If and when questions come up around the details of the project, all you have to do is refer to the contract—and you have your answer. And, while not all contracts are legally binding agreements, they can provide some legal protection if disputes arise.
As a business owner, a contract can protect you from a freelancer claiming they were hired as an employee who would be entitled to things like benefits, overtime pay, and workers’ compensation.
As a freelancer, a contract protects you from being underpaid or being blindsided by extra work beyond the original scope of the project.
Not all contracts protect both parties equally, however. Contract terms, says Christopher Collins, partner at Yugo Collins, “almost always favor the drafter [since] the drafting party selects contract terms and looks out for its own interest.”
But some U.S. states employ the contra proferentem rule, which resolves contract ambiguities in favor of the non-drafting party. So, says Collins, “while drafting parties have the immense advantage of selecting terms, they should take extreme care to avoid ambiguities.”
Starkman advises, “When in doubt, prepare your own contract or be prepared to negotiate for clauses that protect you.”
They Prevent Scope Creep
If you’ve ever been asked to complete work or revisions beyond the initial scope of the project, you’ve experienced scope creep. It can be frustrating. Even more so when you don’t have a document to refer back to with specifics around deliverables, deadlines, and change requests.
When Do You Need a Freelance Contract?
“Every significant freelance job deserves a written freelance contract,” says Starkman. “Without one, you open yourself up to potential disputes about all aspects of the job.” Especially if you are planning to work with the same freelancer or client repeatedly, a contract is a worthwhile investment.
A good rule of thumb, says Collins, is to invest in a contract if the amount involved in each transaction exceeds the price of drafting a contract—usually a few hundred dollars.
An exception is when you work through a freelance platform like Upwork or Guru. These sites’ terms of service typically cover the essential elements you’d find in a freelancer contract. This should cover your bases, both on the client and freelancer sides.
“Every significant freelance job deserves a written freelance contract. Without one, you open yourself up to potential disputes.”
— Paul Starkman, attorney
What Should a Freelance Contract Include?
The good news? You don’t need a lawyer or legal expert to help you draw up a freelance contract. (Though it is a good idea to have an attorney review it.) A quick search on Google can help you find a suitable freelance contract template for your project that you can modify using plain, simple language.
“Even if it ultimately omits a few terms that an attorney would have included,” says Collins, “it is almost always better than not having a written contract at all.”
Following are 13 things every good freelance contract should include.
1. Contact Details
Any written contract must include both parties’ contact details, including:
- Legal business names
- Primary contact
- Physical address
- Phone number
- Billing address
If there’s ever an issue, everyone involved in the project has the details they need to get in touch with the other party quickly.
Note that if you have incorporated your freelance business or your company, the party referred to in the contract should be your business entity, rather than your name.
2. Project Scope
This section is probably the most important in terms of setting proper expectations. When laying out the scope of the project in your freelance contract, you want to be as specific and as detailed as possible about the what, where, and how of deliverables.
For example, let’s say you’re a business owner and you’re hiring a few freelance writers to create content for your blog. The project scope section of the freelance contract should answer these questions:
- How many blog posts should they write?
- Are they expected to write them from scratch or edit existing copy?
- Will you provide stock images or graphics to go with the blog posts, or will they submit them with their copy?
- Does the scope of the project include keyword/SEO research?
- How many rounds of revisions or rewrites are included in the project fee?
The goal is to outline as many details as possible upfront so that everyone is on the same page and there are no disagreements or hard feelings down the road. Freelancer workers understand what’s expected of them, and clients know they’re getting what they paid for.
3. Payment Terms
Every freelance agreement should outline the payment arrangement for the project, including payment terms.
The freelance contract should explain the following:
- Will the contractor be billing for their freelance jobs by the hour or the project?
- For hourly payment, what is the hourly rate? What are the minimum and maximum number of work hours?
- For per-project payment, make sure the exact details of the deliverable are laid out in the previous section
- Include acceptable payment methods, like PayPal, credit card, direct deposit, or check.
- What are the invoice payment terms? For example, on submission or net 15?
- What happens if the freelancer’s invoices are not paid on time?
Along with the payment terms, the freelance contract should explain the payment schedule, including:
- For hourly work: How frequently will the freelance worker submit invoices: Every week? Every month?
- For per-project work: Will the contractor invoice at specific milestones throughout the project? For example, 25% as an upfront deposit, 25% at the midpoint, and the remaining 50% upon project completion.
In your freelance contract, be crystal clear about any deadlines associated with the freelance work, like due dates for completed services/services delivered and any key milestones along the way. And include a time schedule for client review and feedback.
If applicable, include a brief description of who will be responsible for any project expenses or business expenses in the freelance contract.
In most freelance contracts, this section could be a simple statement explaining that:
- The independent contractor must pay all their own expenses and provide their own equipment
- The client is not responsible for reimbursing the service provider for any expenses outside of the payments outlined in the contract
6. Final Copyrights
Depending on the nature of the work, you may need to define the intellectual property rights and copyright terms. In many cases, the freelance worker owns the rights to the produced work until the final payment is made. Then, the ownership rights are transferred to the client.
And, says Starkman, this clause should also state who owns the drafts and derivative works, and whether or not the freelancer will be able to use the deliverables on other projects.
7. Relationship of Parties
It’s important to state that the freelancer is being hired as an independent contractor—and include contract language that clearly outlines the terms of that working relationship, including that the contractor is not a full-time employee and is responsible for paying their own taxes.
“It is understood by the parties that Contractor X is an independent contractor for 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.”
Along these lines, clients cannot exert too much control or supervision over independent contractors. For example, clients can set project deadlines, but they can’t define the contractor’s schedule or how they should work to get the project done.
8. Nondisclosure Agreement
Depending on the scope of the project, the freelancer may get access to sensitive information—information that the client doesn’t want them to discuss outside of the confidential relationship between the client and freelancer.
Including a nondisclosure agreement in the freelance contract ensures that any information discussed or shared stays between the client and freelancer and isn’t shared externally.
9. Termination Clause
A termination clause allows either the freelancer or the client to back out of the project if, for whatever reason, the relationship isn’t working out.
The contract should provide the amount of notice required before terminating the working relationship and how payment will be handled for partially completed work.
Two types of termination should be outlined in the freelance contract:
- Termination without cause. If the employer cancels the project, for example, it’s considered termination without cause. The employer should provide 1–2 weeks’ notice before termination becomes effective.
- Termination with cause. This applies if, for example, the freelancer fails to meet deadlines. Termination with cause is typically effective immediately.
10. Insurance Clause
Including terms regarding insurance in the freelance contract protects the business owner. Starkman explains: “This clause will usually state that the freelancer must provide his/her own insurance, including workers’ compensation insurance, errors and omissions insurance, and professional liability insurance.”
11. Dispute Resolution Clause (or Arbitration Clause)
What if you have a contract dispute? How will you resolve it? Including guidelines in your freelance contract for settling disputes out of court can prevent headaches and legal expenses later.
This clause could include alternative dispute resolution like mediation or arbitration, Starkman advises. He adds, “The clause should state when dispute resolution procedures must be utilized, and where and by whom the dispute must be resolved.”
12. Force Majeure
In the age of COVID and disruptive global conflicts, a contractor agreement that protects you against unexpected events is more important than ever.
A freelance contract should always contain provisions explaining what happens if something unforeseen happens, like a pandemic or war.
A freelance contract outlines the key elements you’ll need to provide legal protection for both parties. But only if you sign it! Include a section for signatures, whether written or digital.
Other Freelance Contract Terms to Consider
The following are some clauses you might include in a freelance contract, depending on your needs.
14. Forum Selection
If both parties are based in the same state, this clause may not be necessary. Forum selection explains where the parties can file a lawsuit to enforce contractual rights. “It is a massive advantage [to the employer] to name the employer’s home state as the litigation forum,” says Collins.
15. Choice of Law
Choice of law is related to forum selection and indicates which state’s law will be applied to a lawsuit to enforce contractual rights.
If you are the employer, it benefits you if the laws of your home state are named here. Your attorney if you have one, or a local attorney you hire in the event of a lawsuit will be most familiar with these laws.
16. Non-compete Clause
Sometimes you don’t want the people you hire to work with or for competitors. In this case, it’s essential to include a non-compete clause in the freelance contract. This prevents the contractor from working with any competitors for a certain amount of time following the completion of the project (e.g., 1 year).
Non-compete clauses generally benefit the hiring party, not the freelancer—as they prevent the freelancer from working with other clients in the same industry. If you’re a freelancer and a client wants you to sign a non-compete, make sure you understand if and how you’re limiting your future work before you sign.
Caution: Know the Law in Your State
You shouldn’t always include a non-compete, Collins advises. Some U.S. states have strict limitations on non-compete provisions, and others prohibit them entirely. For example, in Virginia, where he practices, an employee/contractor can sue the employer/principle if an invalid non-compete clause is included in a contract.
Should a Lawyer Review My Contract?
If you want to ensure that you have a legally binding contract, it may be worth the investment to have an attorney draft or review your freelance contract.
However, says Collins, “The price of reviewing it must be weighed against other factors. These include whether the same contract will be used with other similarly situated contractors, the total compensation involved, the complexity of the relationship, and the potential liability if something goes wrong.”
Starkman agrees that not every job warrants a separate agreement drawn up by an attorney. But, he says, for freelance projects involving significant work and money, “You should at least have an attorney draft or review a template agreement that is tailored to your business.”
If you don’t consult with a lawyer to create your freelance contract, you run the risk of it not being a legally enforceable document. An attorney can provide legal advice and help you select the appropriate contract language and avoid unforeseen legal issues.
Freelance Contracts TL;DR
Freelance contracts provide an extra layer of security for both the freelancer or self-employed worker and the hiring company. They give you some recourse if things go wrong, and they clarify project deliverables and payment details.
Depending on the size and cost of the project, you may choose not to have a written agreement. But having a legal document that includes the clauses outlined here and reviewed or drafted by an attorney (that both parties sign!) can protect both you and your work.
About the Contributors
Paul Starkman is a labor and employment attorney at Clark Hill in Chicago, Ill. His employment law practice is dedicated to helping businesses and nonprofits with their workplace issues.
Christopher Collins is a partner at the law firm Yugo Collins, PLLC, in Roanoke, Va. He specializes in employment law and has worked as a state Supreme Court clerk, prosecutor, and civil attorney.
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This post was updated in May 2022.