Poorly drafted contracts that don’t accurately reflect the terms of the agreement can result in costly and time-consuming disputes. If you are an independent contractor and are entering into an agreement, educating yourself about what to look for in a contract can help you maintain your rights when negotiating with an employer. In this article, we look at some of the standard contractual terms that often cause disputes and offer some tips for negotiating your contract.
Should I Use a Standard Contract?
Where possible, start with a contract that is customised for your particular industry. Usually, employers that engage contractors on a regular basis have a preferred standard contract. As an independent contractor, you can either accept the hirers’ standard contract as is or negotiate the terms. Every job is different, so one standard contract may not be suitable for every job.
Common Terms in a Contract
When drafted inadequately or without sufficient clarity, standard terms in contracts can often result in disputes. While you should be able to determine whether your contract includes the following terms, you should speak with a lawyer to ensure that your contract is suitable to your role.
- Who are the parties to the contract? Make sure that the contract accurately records the names and business addresses of all parties. It’s important that you know who you are contracting with. If a party has an ABN or an ACN, the contract should include these details.
- What services are you providing? You should describe the services you are providing in detail, for example, what results you will achieve. In some circumstances, it might be appropriate to include details of what services are not included. Don’t forget to include specific commencement and completion dates as well the location(s) of where you will complete the work.
- How will you receive payment? The most common methods of payment for independent contractors is to quote a fixed fee for specific services or calculate fees based on either hourly or daily rates. However, if you intend to invoice your employer, ensure that it is clearly described in the contract, especially if payment is calculated based on time spent or some other variable. You should also consider your payment terms. For example, whether you require payment upon completion of the job or within a particular time frame (within 14 or 30 days) and whether payment is to be made direct to your nominated bank account or in some other way.
- Indemnity: The purpose of an indemnity clause is generally to shift the risk of any loss or damage as a result of your work, from the hirer to you. It is important that you understand the full impact of the indemnity clause as you may shoulder an unreasonable burden of liability. If you have any concerns about a proposed indemnity clause, you should speak with a lawyer.
- Subcontracting: If you envisage a situation where you may be required to engage a subcontractor to either complete some work or assist you in some way, ensure that there is a clause that allows you to subcontract.
- Restraint of trade: A hirer is likely to include a restraint of trade clause in your contract in circumstances where they have concerns that you may take their clients or compete against their business. A restraint of trade clause will usually operate for a specified period and within a specified geographical location.
- Dispute resolution: If a dispute arises, the first thing parties will look to is the dispute resolution clause. A dispute resolution clause sets out the procedure, or particular Alternative Dispute Resolution (ADR) method such as mediation or arbitration, which parties must follow before commencing court proceedings. Take some time to consider what types of disputes may arise and what kind of ADR will be most helpful to resolve it quickly.
Tips for Negotiating Your Contract
Don’t be afraid to negotiate the terms of your contract with your hirer until you agree on terms that are suitable to you both. Taking the time to get things right at the beginning can reduce the chance of disputes arising in the future. Below are some helpful tips for contractual negotiations.
- Be prepared: Good preparation is the key to success. Before you start negotiating, it is important that you think about what you want from your contract. It is also helpful to know who you are contracting with and whether they can be trusted. Where possible, do some research and due diligence. A business website is a great place to start, and don’t be afraid to ask questions.
- Have the right attitude: You are negotiating a business contract, so having a professional attitude will assist you with creating and maintaining a good business relationship. This can help resolve any problems or disputes that arise down the track.
- Know your rights: Independent contractor agreements are commercial in nature and are governed by contract law. As such, you are free to negotiate whatever terms you like with your employer. The terms of your contract, however, must not contradict any laws. Contracts which are considered harsh or unfair can also be set aside.
- Be clear: Once you have signed a contract, you will be legally bound by its terms. It’s important that your contract accurately reflects your rights and obligations.
- Write the terms down: Parties can enter into verbal contracts, but it’s always better to have the terms written down in a formal agreement. Even if you have signed a written contract, a court can imply oral terms into the agreement. To avoid confusion as to what happened during negotiations or other meetings, take notes of all discussions that you have with your hirer before and after you have signed a contract. Your notes should include:
- the date;
- who you spoke with; and
- what was discussed or agreed.
While this might seem tedious, accurate note taking can be valuable should a dispute arise down the track.
- Get advice or assistance if required: If you are unsure about any terms in your contract, it is important that you seek advice before signing. Once a contract is signed, it may be too late to change it. You may need to seek advice from your accountant, legal advisor, professional association, union or lawyer. If you have difficulties with reading your contract, you should use an appropriate interpreter or translator. Claiming that you didn’t understand the terms of the contract is not a defence for not performing or adhering to your obligations.
Before signing your agreement, ensure the contract is clearly drafted and accurately reflects the terms you agreed to with the other party. If you have any questions about your contract or need assistance reviewing your agreement, get in touch with our contract lawyers on 1300 544 755.