When you’re a contractor, your contract is what defines your relationship with your client. Although you or the client may be eager for the project to begin, you should never start work without an agreement that clearly defines the terms of the assignment.
Whether you’re a programmer, trainer, writer, or consultant, be sure to include certain clauses. In fact, it’s a good idea to have a standard contact that can be modified to fit any particular project.
In the first of a three-part series on contracts, I’ll present points to address in two of the most important clauses: project scope and payment. Next time, I’ll discuss specifying the term of the contract and spelling out standard legal stuff, such as your status as an independent. Once you know how to adapt these to your specialty, the third article will examine resources you can use as a framework for building customized contracts. I’ll provide information that can be helpful even if you aren’t a contractor but hire contractors for your company. Among other benefits, the right contract can help shield the hiring firm from IRS penalties.
Why you need a written contract
When things go well, you’ll rarely need to refer to your contract. Yet a contract is something you can’t afford to go without. At best, it forces you and the client to scrutinize the project ahead of time.
While agreeing on the contract’s terms can prevent a lot of disputes, you’ll also have a well-written contract for reference in the unfortunate instance when you and your client disagree.
Of course, many verbal agreements are binding and can be upheld in court. But you really don’t want to go there.
Title and preliminaries
Obviously, your contract needs a title, something like Independent Contractor Agreement or Consulting Service Agreement. Just don’t use the word employment anywhere as this term contradicts your independent status.
After your title, specify that the contract be between you and the client. Use your name, (your business name if you have one or Sole Proprietor if you don’t), and the address of your place of business. Never use the client’s address as your place of business (even if you will be doing significant work there) and add the same information for your client.
Scope of work
This is the clause your work will be judged by, so make it as specific as possible. In as much detail as possible, spell out what you’re supposed to do, the deliverable milestones and dates, and the requirements for each milestone. The only thing you don’t want to specify is how the work will be done. The client has the right to accept your finished work but not how you will do it.
You do want very detailed specifications of what will constitute an acceptable finished product and you should be able to show that your finished work meets these specifications. You may want to provide this clause as an attachment to the contract that’s more like a detailed proposal based on your analysis of the client’s needs.
Here are two examples:
- · Bad: Contractor will perform programming services for client.
- · Better: Contractor will develop a database back-end solution using Application X that will interface with client Application Y to perform Goal Z. Review schedules and dates, and the exact fields, keys, and data elements to be included are specified in Attachment A of this agreement.
Revisions and changes
If you’ve started with a standard contract that your client uses, you might find a phrase like “contractor will make all revisions required by client.” Don’t use this! It’s so vague that the client could completely change the scope of the project six months in and expect you to scrap all your work and start over at no charge. This could devastate your pocketbook if you’re working on a flat fee.
Ideally, you want to include the following points regarding project revisions:
- · The Client is entitled to one revision within the original scope of the contract at no charge.
- · The Client will compensate Contractor for additional revisions at an hourly rate of $x or a flat fee to be negotiated.
- · Revisions outside the original scope of the project (as defined in the Scope of Work clause) will be negotiated separately.
You’re probably beginning to see the importance of that Scope of Work clause! If your client wants you to increase the number of revisions, don’t agree to more than two or three. Don’t give ground on the third point unless you enjoy working for free.
If you rely on certain input from the client, be sure to specify that any delay in receiving it will affect your deliverable items or dates. You may want to stipulate that an extended period of non-responsiveness is grounds for you to terminate the contract.
If the project is lengthy and you’ve built in review periods (which I highly recommend), specify the following:
- · The name of the person to whom you’ll deliver the work and who has the authority to accept or reject it (make sure this person literally signs off on every review).
- · The time in which the reviewer must accept or reject the review.
- · Work submitted for review will be considered accepted unless it’s rejected in writing within the time period specified. In the rejection notice, Client will clearly spell out all changes required.
Payment and terms
Be sure to have in writing not only what you’ll be paid, but when. If you’re to be paid a flat fee for the project, get at least a fourth to a half of the fee up front. You could get the next fourth halfway through and the last half or fourth on completion.
If it’s a very long project, you may want to receive 10 or 20 percent up front and another 10 to 20 every month. Only agree to payment on completion for very short projects, such as writing a magazine article.
If you will be paid on the basis of a unit of time, specify what that unit is (hourly, weekly, monthly) and the period for which you will bill. For example, if you bill hourly, specify whether you will submit an invoice weekly, twice a month, or monthly.
Note that if it comes up, the IRS is more likely to question your independent status if you bill based on unit of time rather than on a flat fee. If it’s standard for your trade, that’s okay. However, as long as other conditions support your status, do what’s right for you on the project. For example, if you don’t believe at the time of signing the contract that you can sufficiently define the scope of work, you’ll probably be more comfortable stipulating payment by the hour. You may want to add an option to renegotiate once the scope becomes clearer.
Stay tuned for more
In the next article, I’ll look at other important clauses you should include in your contracts, including setting beginning and end dates, grounds for termination, and standard legal stuff like resolution of disputes.
Meredith Little has worn many hats under the broad term of freelance writer, including technical writer, documentation specialist, trainer, business analyst, photographer, and travel writer.To comment on this article, please post a comment below or write to Meredith .