I’m a Freelancer. When do I Need a Contract and What Should it Cover?

So you are a freelancer. You enjoy the independent working life, creating your brand and image, and working to your own schedule. You have also most likely fallen victim to the many aspects of freelancing that are often overlooked or not dealt with appropriately. A client keeps hassling you for work to be completed faster, or the work wasn’t what they imagined it would be and you are asked to revise your work several times. Eventually, you may find yourself completing a whole lot of extra work for an inadequate fee.

When you contract your services to another person or company, you should always have them sign a contract that covers all aspects of a services arrangement that could cause you problems. While you may not be able to deal with every single possible drama that arises, this article will give you clear guidance on how to manage your working relationship with your clients.

Service Contract or Client Service Agreement?

A Service Contract or Client Service Agreement may apply to you. These terms are interchangeable. A service contract or client service agreement is an agreement between a company (your client, often referred to as the “principal”) and a service provider (you, the freelancer). Each one may have different or additional content depending on whether it is a large company hiring several contractors, or an individual offering their services on a freelance basis.

You are mostly agreeing to provide a service to the principal for an agreed fee. This can be a one-off service or continuing services for a pre-determined length of time.

What Terms Should My Contract Include?

The contract establishes all the different aspects that will govern your contractor relationship with your client, so it is important you agree on each term before signing the agreement. We set out below the most relevant terms your contract should include.

Scope

Clearly outline the scope of the task you have been engaged to work on. Think about what it is your client has asked for and then set the parameters of that work, including deadlines for your submissions, and the client’s reviews.

It is important that your client can determine from the contract what you will deliver without any ambiguity or confusion. This will also protect you down the track should your client start making requests for work that is outside the scope, and therefore not calculated in your price.

Rates and Invoicing

You may find it difficult to calculate what your services are worth. However, your contract must outline what you will be paid, and how you will be paid. This can be an hourly rate or lump sum. If you anticipate having certain expenses, you can include this as an additional fee and provide an estimate of these costs.

Your contract will also need to include any initial deposit your require, and this shouldn’t exceed 10% of the whole contract price. This is because if you have a clause providing that the client forfeits their deposit if they pull out of the contract, the amount of money you can retain can’t be so excessive that it might be considered a penalty.

Non-Paying Clients

You need to ensure your contract adequately addresses situations where the client does not pay the invoice, or if they refuse to pay because they are dissatisfied with the work you have done for them.

A well-drafted contract will clearly outline the time for each payment, and the consequences of a delay or non-payment. You should always reserve your right to engage a debt collector, so you do not face a backlog of unpaid fees that you are forever chasing after.

Revisions and Amendments

This is an area where many freelancers fall short, and they find themselves in a never-ending cycle of revisions or rewrites for a dissatisfied customer. Part of the problem is an unclear scope of work. The other problem is that contract either does not outline the scope of revisions, does not limit these revisions, or fails to outline the additional cost. You need to be clear about what fees will cover revisions, and what revisions will require additional payment.

Termination and Dispute Resolution Processes

Your contract will need to specify when the contract ends, and in what circumstances a party may terminate the agreement before that end date. An end date will ensure you don’t get stuck in the ‘never-ending contract’, and termination clauses protect each party from breaches of the agreement or circumstances outside their control that make the contract unworkable.

You also need to consider what process to have for resolving disputes if they arise. Commonly, a process of mediation will be outlined in the contract. You might have a great relationship with your client, but this should not get in the way of you protecting your interests. Even good business relationships can go sour. Including a dispute resolution clause will assist you in quickly resolving any disputes that arise.

Intellectual Property (IP)

This is a critical part of your contract, as there is almost always some use or creation of IP involved in these types of agreements.

What is ‘Intellectual Property’?

IP includes anything created, invented, designed or written by an individual. You need to be clear in the contract what rights you are (or are not) giving in respect of any IP you create or use in the services you provide. In particular, you should specify whether any of the IP is assigned to the client, or licensed.

What does it mean to ‘assign’ or ‘licence’ your work?

If you assign the rights to your IP, you are selling all the rights to your work, meaning you cannot use the work again. This is common if you are contracted to create a particular work for another individual or business.

If you licence your IP, you retain the ownership of your intellectual property but give the client permission to use your IP on your terms. This is common when a creator wants to engage another business to manufacture or market their product or service.

Clients Refusing to Accept Work

The most important thing here is how much detail your contract provides regarding the scope of work you have agreed to provide to your client. If you can determine what is inside and outside the scope of work with ease, you will be in a better position to defend the work you have produced should a client refuse to accept it.

You should know that your likely is likely a consumer under the Australian Consumer Law (ACL) and as such, is protected to some extent by the consumer guarantees. 

When you are providing services, these must:

• Be provided with acceptable care and skill;
• Be fit for the purpose or give the results that you and the client agreed on; and
• Be delivered within a reasonable time (if there is no agreed end date).

Any products provided must (among other things):

• Be of acceptable quality, that is, the product is safe, long-lasting, is of acceptable appearance and without faults. It must also do everything the client can usually expect it to do;
• Match descriptions and/or demonstration models; and
• Be fit for the purpose you were aware the product was purchased for, and meet any additional promises you have made regarding the product.

In your contract, you should limit your liability in this regard, for example by limiting your obligations to re-supplying the services, or refunding the original price paid. You should also reiterate the client’s consumer rights regarding replacement or refunds for major failures, and when they can have services remedied. Informing the client of their rights as well as your own helps build a better relationship with them.

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No matter who you are providing your services to, you should always have your client sign a contract. Protecting your commercial interests is imperative and you should speak to a small business lawyer to help draft your service contract. Questions? Get in touch on 1300 544 755.