A Freelance Contract is normally used when a company wishes to get some work done on a project, it can either hire employees or engage independent workers. In the former case, the relationship will be long-term and governed by the applicable employment laws. But if it wants people to work for a short term on a temporary basis, it can engage freelance workers (commonly called freelancers). They are people who work independently for organizations. They are not employees of any organization. They can work for more than one client at the same time.
A Brief Introduction About the Freelance Contract
A freelance contract is a formal agreement between the freelancer and the client wanting to engage her for a project. It governs the terms agreed between them. These include the scope of work, payment, the timeline for delivering the work, and other standard contractual terms.
Purpose of a Freelance Contract
This contract protects both the freelancer and the client. It lays down the rights and obligations of both parties. Since it is a written document, the parties can refer to it in case of a misunderstanding. It also helps to build a strong professional relationship. Having this contract ensures that the terms are fair to both parties. It minimizes disputes by envisaging every potential situation. It covers circumstances when the agreement may be terminated before its stipulated time and what is to be done in such a scenario. This ensures that the parties are not left without a remedy.
Freelancer V/S Contractor
A freelancer and a contractor differ in the kind of relationship that they share with the client that engages them. A freelancer is generally hired for a project where she is expected to turn in the work within a specified time. She does not have to work on-site and can work from anywhere she wants. She will not get the benefits that employees of the client get. Most freelancers usually work alone without a staff. They handle multiple assignments at the same time.
A contractor works with a client over a period of time and is paid by the hour. She can also be placed in the contract by a third-party agency. In this case, she may receive some limited benefits. She may be asked to work at the office for certain hours every day. Contractors usually have their staff to do the work. They mostly work with one client for an elongated period before taking up another assignment.
Purpose of the Freelance Contract
Having a freelance contract is not mandatory. But it is advisable to have a written contract. Since freelancers are independent employees, there are times when their clients do not pay them the agreed amount. In the absence of a contract, it becomes difficult to seek any remedy because there is no such proof. The client may refuse to pay, and there is nothing much that a freelancer can do about. Sometimes, a client can ask a freelancer to do additional work. If the latter refuses, the client may not pay. Similarly, a freelancer may not submit the work according to the client’s wish. Verbal agreements are difficult to prove. Unless a freelancer has been working with a client for a long time, informal agreements hold little value. Having a written contract avoids all these situations where either party stands a chance to lose. It protects both of them. It has all the terms in writing, so the parties can refer to it in case of doubt. It prevents one party from exploiting the other. So while it is not compulsory, it always helps to have written a proof of the agreed terms.
Contents of a Freelance Contract
A freelance contract template usually includes the following terms:
- Name of the client and the freelancer
- Date of the agreement
- Services that the freelancer shall provide
- Delivery of the work
- Term of the agreement
- Payment details
- Intellectual property rights
- Obligations of the parties
- Termination of the agreement
- Limitation of liability
- Dispute settlement
- Governing law of the agreement
- Signature of the parties
How to Draft a Freelance Contract
You can refer to a freelance contract sample when drafting the contract. Keep in mind the following points:
- Identification of the parties: The client’s identification should include its legal name as well as its business address. For the freelancer, mention his/her legal name and not a nickname.
- Clarity of Services: Be clear about the services that the freelancer has to provide under the agreement. For example, if it is a freelance graphic design contract, the freelancer will have to design images/logos/text as well as edit them whenever asked by the client. However, there should be a limit to the number of edits that the client can ask. If you are a freelancer, you can state the maximum number of revisions that you will undertake. This ensures that the client does not unnecessarily prolong the project by asking for numerous revisions.
- Delivery requirements for the work: This should include the time and manner of delivery. For example, if the contract is a freelance writer contract, it should mention the format (either PDF or Word) in which the work has to be delivered. If there is a schedule to be followed, it should be incorporated into the contract.
- Duration: Mention the duration of the agreement. Post this period; the agreement will automatically come to an end.
- Payment: One of the most important terms is the payment clause. Many freelancers have their own methods of charging for their work. Some charge on an hourly basis while some charge on a project basis. Some freelance writers even charge per word or per page. It depends on the individual. The amount so charged must be clearly written in the contract, preferably both in words and figures.
This clause should also mention when and how the payment is to be made- whether a certain portion is to be paid as an advance or the entire amount as a lump sum.
- Ownership of Intellectual Property: Intellectual property rights (IPRs) are an important aspect of any work. The creator of intellectual work is, by default, the moral owner of that work. Therefore, it is very important to define the ownership of IPRs. If you are representing the client, you should state that the IPRs in work created by the freelancer will vest with the client. This will allow it to use the material as per its wishes. The freelancer will not be able to claim any right in the work.
- Obligations of Both Parties: This clause helps them to understand each other’s expectations. They can conduct themselves accordingly. For example, the freelancer can be put under an obligation to produce original work, free from any plagiarism. The client, on the other hand, can be under an obligation to timely settle the dues of the freelancer.
- Termination: The grounds under which the agreement can be terminated should be written precisely. This helps the parties to understand the situations when the contract can be terminated and what is to be done in such a case. This clause may include the requirement of giving notice to the other party before terminating the agreement.
- Limitation of Liability: Both parties can limit their liability by including a provision to that effect. It protects either party from any indirect, consequential, or special harm suffered by the other in connection with the agreement.
- Confidentiality: Include Confidentiality clause that puts both parties under an obligation to maintain confidentiality. It should extend to any information shared during the course of the agreement, including e-mails, documents, and other sensitive business information.
- Mode of Dispute Resolution: Mention the mode of dispute resolution that the parties will adopt if there is a dispute. This ensures that the parties know how to proceed and which forum to approach.
- Governing Law Clause: State which state’s law will govern the agreement. This provides clarity about jurisdictional and procedural issues.
If you are a freelancer, you should negotiate for better terms before signing the contract. For that, you must be clear about certain points. You must know the prevailing market rate in your industry. This helps to quote an acceptable rate to the client. You must also decide the minimum rate that you are willing to work for. When negotiating, it helps to quote a higher price so that after discussions with the client, you are closer to your expected rate. If you start at a low price, you may end up working for a less than expected amount. Another thing you have to decide before negotiations are how you will charge- whether per word, per page, or per project. Each individual has different preferences. You should know which one works for you.
An important aspect of negotiation is to consider the contract from the client’s point of view. If you can understand what value the client attaches to the work and how you can add to it, you can negotiate the terms in a better manner. It helps to know what the client feels- how much it is willing to pay or how much time it is willing to give you- to arrive at mutually acceptable terms.
Benefits and Drawbacks of a Freelance Contract
- The contract clarifies the expectations of each party. This avoids misunderstandings and helps them approach the project with clarity.
- It protects the rights of both parties. The freelancer undertakes to submit the work as agreed, thereby ensuring that the client gets the work. Similarly, the client agrees to pay the agreed price. This ensures that the freelancer is paid for her work.
Having a written contract is no harm for any business. But it may cause problems when freelancers work with friends or family. They may not like the idea of having a written contract when there is a personal relationship. It also puts some limits on the flexibility because a freelancer has to work according to the contractual terms.
What Happens if a Freelance Contract is violated?
Most freelance contracts mention the mode of settlement of disputes. Arbitration is the preferred mode in most contracts. In case of a violation, parties can opt for arbitration or any other option mentioned in the contract. They can also approach the local court to recover for loss that they may have suffered.
A freelance contract is an important instrument to protect freelancers. Though it is not compulsory, it is advisable to have it in place so that both the freelancer and the client know their responsibilities. It is not a traditional employer-employee relationship. The contract helps to navigate it smoothly. Both parties get fair protection and are able to work in an organized manner. It is not a difficult contract to draft. But if you need clarification, it is better to consult a lawyer than draft an incorrect provision.
[ Also Read: Freelance Graphic Design Contract]