Our quick guide to contracts for freelancers and agencies.

Contracts 101: What Freelancers And Agencies Need To Know And Why

Posted on June 14th, 2017 by Chris

Contracts are the pillar of business, especially in the freelancing world. They protect the freelancer in case things go sour with the client and vice versa. It also prevents misunderstandings. When two parties create, read, and sign a contract, they’re aware of each other’s expectations and needs.

Are you thinking about putting together a contract? Stop and listen, because we’ve put together the 8 aspects any contract worth its salt needs to have!

1. Contact Information

It seems self-evident to include the contact information of both parties on the page. Yet, somehow people still get this wrong. A name is not enough either. You’re going to need both parties’ legal business names. Furthermore, you’ll need their primary contact information, physical addresses, and billing addresses.

2. Statement of Work

Your Statement of Work, also known as the Scope of Work, is the agreement. It states what is expected from both parties over the course of the project, so be exact. Think objectives and clear goals. Everything in the SoW can hold either party accountable. It’s key to avoid vagueness and define the expectations with as little wiggle room as possible. Be explicit about who provides what during the project.

3. Timeline and Deadlines

The projects deadlines should be set in stone before you even begin. As a freelancer, you need to find out if the goals are achievable within the timeline. You also need to make sure the scope of the project and parameters can’t be changed by the agency without consent. As an agency, you need to keep tabs on progress to prevent your project from stalling. Set clear deadlines and stick to them. Making changes outside of the contract will make both parties’ terms subject to change. This will cause a lot of legal hassle that should be avoided.

4. Terms of Payment

How much will the contractor be paid? When will they be paid? Every month? Per project finished? What day of the month? Should the contractor provide an invoice to the agency? How will the money be delivered? What is the deadline imposed on the agency to pay the contractor? If the deadlines fail to be met, will there be late fees? These are some of the payment terms that need to be answered in your contract, leaving no room for interpretation.

5. Expenses

Most freelancers will find little use for this section, but not all deals are the same so it bears mention. Independent contractors are often responsible for their own expenses and charge agencies accordingly. But when a situation arises in which the freelancer incurs costs that the agency is expected to cover, it should be stated in the contract. Again, don’t be vague. State plainly what the contractor will be reimbursed for, when, and how.

6. Copyrights

Who owns the work created for the project? In most situations, the simple answer is that the freelancer’s work was made for an agency and copyright is held by the agency. If you see the words ‘work for hire’ or ‘made for hire’, it often means exactly that: full ownership by the client. But you’re going to need to pin this all down in the contract. Does ownership include the right to modify the work or create derivative works from it? Will the freelancer be credited in any way? Make sure there’s no question about who owns what when the project has been completed.

7. Terms of Termination

Freelancers and agencies alike need to have a termination process in place. Nobody likes getting fired and nobody likes firing people. But sometimes collaborations don’t work out or projects change. It is important that both parties know the procedure, should that occur. An agreement terminated early often comes with ‘kill fees’. Other times, the client will simply pay for time worked and goals reached. The benefit of the ToT is that freelancers aren’t left out to dry because of early termination. On the flip side, agencies don’t have to deal with further unexpected fallout from a terminated project.

8. Signatures

A contract has little value without the explicit agreement of both parties. That’s the purpose of the signatures. Whether you’re an agency or a freelancer, make sure you agree with every word in the contract. There should be no room for interpretation about the work involved. Understanding your contract will guarantee peace of mind during the duration of the project for both sides. And that peace of mind will definitely reflect in the work done.

Creating A Contract From Scratch

In practice, you won’t often find yourself needing to create a legal contract from scratch, but it’s good to know what needs to be on there when you are presented with one. Online there are many templates and yet, many of them get the basics wrong. Both agencies and freelancers need to stay on their toes when it comes to financial agreements, so never sign anything on a whim.