Contract Basics for the Self-Employed

contract basics

Do you really need a written contract when you are self-employed? After all, this client sought you out. You don’t want to risk offending him, and anyway, he’s such a nice guy, you’re sure that he’ll pay up. Just this once, you can get by without a formal contract, right? I mean, it’s just a piece of paper…

Wrong! A contract is much, much more than a piece of paper. It is the essence and the basis of your business relationship. It is your own private set of “laws.”  Yes, you can be friendly with your customers, but you need to protect yourself by drawing up a comprehensive, clearly-worded contract every time you sign on for a job.

Having a contract is the best way to protect a business relationship…

In fact, having a contract is the best way to protect a business relationship: it outlines the terms of the agreement in plain black and white so that there’s no confusion, no misunderstandings, and no hurt feelings.

A contract not only provides you with legal protection in the event that a client defaults on a payment, but it also limits the scope of a project, outlines payment rates and schedules, and guarantees that both parties are on the same page.

So Why Does the Client Want A Contract?
Your client wants a contract for many of the same reasons you do. It protects the client, guides them, and gives them some breathing room. If you’ve been hired through an online job marketplace, the client may be relatively unfamiliar with your work, your personality, and your values. The contract guarantees that their project will be managed responsibly and predictably, according to standards agreed upon by both parties.

Every contract can be a bit different, but all contracts should include some basic elements. When in doubt, write it down! Put everything in a contract, even if it seems like common sense. You might be surprised by how little “common sense” some clients have. By putting everything in writing and having everyone involved sign on the dotted line, you can guarantee that disagreements and misunderstandings will be kept to a minimum.

Here are some basic elements that should be a part of every contract.

The Term.
This is the part of the contract that states when the project starts, how long it lasts, and when it ends. Every experienced freelancer knows the danger of “feature creep.” The terms can protect you from a project that stretches on interminably.

Service Rates, Payment Details, Invoicing Standards
Time to outline your compensation, including deposits or retainers, installments, and bonuses. If a client wants to be invoiced for each successive phase of the project, this is the section where you will agree on an invoicing and payment schedule: for example, “Contractor must invoice Client every 30 days; Client must pay invoice within 10 days of receipt.”

If you’re so inclined, you might include an early payment bonus that knocks 2 or 3% off your fee if payment arrives within two days.

Provision of Services, Client Obligations
This section sketches your services, including the specified time frame for completion. Basically: what are you going to do and when are you going to get it done. You should also include a paragraph outlining the client’s obligations and any materials, permits, or tools the client has agreed to provide.

Indemnities
This part’s tricky but crucially important. Include a short section explaining that the freelancer is not responsible for any stated or implied claims unless backed up by written documentation. This protects you from yourself, just in case you get flustered and start making promises that you can’t, or won’t keep. Once, again, get it all in writing!

The X
Include a blank line. Sign it. Now get to work!

 

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