Disclaimer: Please note that this article contains general legal information and doesn’t contain legal or tax advice, and isn’t intended to constitute legal or tax advice.
Yes! Even though most oral contracts are in theory enforceable, in practice it will be much harder to enforce such agreements. Putting in the time and effort to nail down the terms of your relationship with the other side upfront will help you avoid severe misunderstandings down the road – plus save your energy, time, and nerves.
Find out why every freelancer needs a solid contract for their freelance work with clients, and what to look out for when entering into an agreement with them.
Do You Need a Freelance Contract?
A freelance contract is a document defining the legal relationship between you and your clients. It’s a legally binding agreement where obligations, rights, and guarantees have been created between two or more parties, and where a form of value (service, goods, etc.) has been provided as a result of the deal.
A written agreement is usually the clearest and most indisputable form of contract, even though contracts can in many cases also be implied or formed verbally. It means that where a contract is of importance, it is generally considered necessary to record the agreement formally, i.e. to put it in writing. A solid written contract will set out your (as a freelancer) and your client’s rights and liabilities, and it will provide valuable evidence in the event of a dispute.
Why Do You Need a Contract for Freelance Work?
A well-drafted freelance agreement will help you and your client create a better deal. The contract drafting and negotiation process takes into consideration all the nuances that can often be missed when concluding only an oral agreement, but which could actually become big factors in the partnership.
A contract will help you manage the expectations of your client regarding the scope of the project, deadlines, the materials they have to provide for you to carry out the project, the number of revisions, and any additional charges for anything exceeding the agreed-upon scope.
Make sure all of it is clearly stated in your contract – the last thing you want is to end up doing more unpaid work only because your client changed their mind.
Benefits of Drafting a Freelance Contract
|A clearer understanding of both parties’ obligations||Compliance with local laws|
|Better legal protection||Easier to prove enforceability of the contract|
|More formal and engaged legal relationship with the client||Solid framework and foundation for the relationship with the client|
A suitable contract for freelance work ensures, in particular:
- Your working relationship with the client and your freelance status.
- Confirm that your relationship with your client is on a freelance basis – your freelance work conditions can’t constitute an employment relationship. Read more about when a freelancer becomes an employee.
- Scope and nature of service(s) provided or goods sold.
- Your role as a freelancer and the nature of the services/goods offered.
- Obligations of each party regarding the performance of service or delivery of goods.
- Terms of remuneration.
- The agreed-upon billing structure.
- Late fees and/or interest for late payments.
- The revision clause establishes a maximum number of revisions you may need to do on your work. After exceeding this number, the client has to pay you extra for any other corrections or adjustments.
- Intellectual property and ownership rights.
- Stating who will have ownership and all the rights to the product (copyrights, trademarks, and other rights associated with the product).
- Termination of the freelance contract.
- Pay close attention to the clause “early termination” on your contract. It can happen surprisingly often that clients change their minds and cancel projects. If you’ve already started working and the client pulls the plug, you have to have a plan in place. It can be in the form of a so-called “kill fee” which the client has to pay you if they terminate the agreement early, or clauses that the client pays you for the work you have completed as of the termination date.
- Governing law and dispute resolution.
- The governing law and dispute resolution provisions of the contract will detail how a contract breach or default has to be handled.
Additionally, I recommend using your own (prepared by you or your lawyer) contract whenever possible as it will almost always be more favorable to you than a contract your client presents you with. In this case, make sure your contract is written in a simple and clear style – adopt a level of complexity suitable for the deal at hand.
However, in a case when you’re using your client’s agreement (especially likely to happen when you’re working with a large client), always read it! Make sure your needs are met, and ask questions. If you don’t understand something, some clauses don’t seem right, or make sense to you, ask the other party for an explanation, and if necessary, why it was included.
Never assume that not knowing or understanding some provisions or terms in the contract is a sign of ignorance to your client – it’s not. Ask about the big picture as well as the details, and confirm what’s absolute and what’s flexible so you can negotiate it. This approach shows you are engaged, ready to protect your interests, but also to enter negotiations in order to find a mutually acceptable deal.
Never sign any agreement without reading every sentence. Add missing terms, and don’t allow vague terminology – everything should be clearly explained and written down. To inform about and negotiate your change requests, you can contact your client in a standard manner, i.e. per email outlining your proposals or a redline version of the contract, or in extreme situations, attaching an entirely new contract.
What Is the Best Business Structure for a Freelancer?
When you start freelancing, it’s crucial to set up the legal structure for your freelance business so it’s best suited to your current and future needs. For most freelancers, there are 2 main types of business entity: a sole proprietorship or an LLC. A sole proprietorship can work well for simple businesses without significant growth plans. However, this structure might not be flexible enough for some freelancers. Importantly, it also doesn’t limit your personal liability for any debts your freelance business incurs.
FAQ – Contract for Freelance Work
Yes, freelancers need a contract for freelance work! When working with clients, it’s crucial that both you and your client fully understand the terms of your engagement. This reduces the odds of a disagreement, and if a potential dispute arises anyway – can help in resolving it.
As a minimum, your contract for freelance work should include:
1. Date of the agreement.
2. Preamble (name and effective date of the agreement, legal names of the contractual parties).
3. Service or sale of goods terms and scope.
4. Payment terms and schedules.
• Rate or fee and currency.
• Invoice details and payment procedure.
5. Intellectual property/NDA provisions.
6. Term & termination provisions (including early termination fee).
7. Boilerplate provisions (amendments, termination notices, governing law, dispute resolution, etc.).
8. Communication methods with a client.
When you offer services, make sure the contract describes the services as clearly as possible. Whereas if you sell goods, make sure the contract clearly outlines the sale terms, such as what the goods are, when and how they will be delivered, whether any guarantees are being made, and what options your client has for returns/refunds.
If you’re just beginning your freelance journey, our comprehensive how to start freelancing checklist will help you set up your new business properly from the start.
A freelance contract should have unambiguous provisions clarifying where, when, and how the services must be performed – if you provide a service to your clients. If you sell goods, it should have clearly outlined sale terms. Make sure your freelance contract has also clearly stated the obligations of each party regarding the performance of services or delivery of goods, payment terms, intellectual property/NDA clauses, and termination rights.
As a freelancer, knowing which issues and language to look out for in a contract can go a long way in maximizing your business potential and minimizing potential costly risks. Even if you’re thinking that contracts aren’t the most fun part of freelancing, putting in the time and effort to nail down these issues up front will help you avoid serious misconceptions and allow you to more quickly resolve disputes.
The time when you’re preparing or reviewing a contract (if you are presented with it from your client) for your freelance assignments is also a great moment to review how to invoice for freelance work and download a free invoice template with some annotations to help you get started. Correctly managing the invoice process is crucial to your business liquidity and not getting into any legal trouble.