Perhaps nothing strikes more fear into the heart of a freelancer than having to negotiate a contract with a client. How do I know what to include? Will a contract hurt or help me? What happens if something goes wrong?
To lessen that anxiety, we asked attorney Emily Morris of the Morris Law Firm for some tips. (As any good lawyer does, Emily began with a disclaimer that her talk was not actual legal advice. We’re giving you that same disclaimer. These are notes from the general discussion, not legal advice.)
Here’s what Emily had to say about some of the questions she gets, as well as her answers to questions from the audience.
Do I need a contract?
Yes! You definitely want a signed agreement before any work begins. The goal of a contract is to keep you from getting sued. Contracts can keep both you and your client happy by preventing miscommunication. And they’re crucial when it comes to protecting your intellectual property and the work you create.
Should I use my own contract or use one from the client?
It’s best to use your own if you can. If your client provides one, consider having a lawyer look it over. Hiring a lawyer can sometimes give you more negotiating power.
Once a contract is signed, can it be changed?
Yes. The terms of how that will happen should be clearly spelled out in the contract. Specify that your entire agreement is limited to this specific document, excluding emails, etc.
Can I copy a friend’s contract?
If your friend is in your industry, that could work, but it’s best to have an attorney look at it. It’s not a good idea to buy one over the internet. Those tend to have terms that don’t apply or are missing terms you need. Some of them don’t even make sense. Look at them, but don’t let them be the bottom line.
Are contracts different for independent contractors and employees?
You can have a contract as an independent contractor or as an employee, but don’t get trapped by being listed as a contractor when you’re really an employee. Some of the differences are:
Independent contractor: You’re hired for a specific project, such as to work on a piece for a website. You set your own hours. The employer gives you a 1099 and doesn’t withhold taxes.
Employee: You’re hired on a consistent basis to do the same work. You’re expected to work during set hours, such as 9-5. You can still have a contract. You can also negotiate to keep your intellectual property.
What kinds of things should go into independent contractor agreements?
- Products and services to be provided. Clearly define the what, when, where and how. Do not leave this vague; that creates room for argument and confusion.
- Project schedule. Include your start date, milestones and when the project is considered done.
- Payment schedule. Include how and when you want to be paid. Include the dollar amount, the frequency of payments and when invoices will be due.
- Intellectual property ownership. This can be important with both images and writing. You and the client need to understand what’s yours to keep and what is theirs. You can have a combination, with the project being theirs but you have the ability to use it in your portfolio. Anything you create outside of the project is yours.
- How to end the relationship. If the project isn’t working, you’ll want to be able to end the contract, or the client may want to end the contract with you. You could say that it will end 14 days after written notice, for example.
- Dispute resolution and mediation. You will probably have to deal with this at some point. Try to resolve disputes as quickly and as amicably as possible, starting with mediation. The goal of mediation is to facilitate agreement. The process is usually confidential, meaning the other party cannot use what you say in court. Companies often like to use arbitration, which is usually not as friendly to the little guy.
- Governing law. This specifies which state’s laws apply. It should be the state, including the county, in which you live.
- Liability and indemnity clauses. These cover who must pay or who is exempt from paying for damages if something goes wrong. They can keep you from getting sued. One (unlikely) example of when you might get need these clauses: While writing the client’s blog, a computer flies off your desk and hits another person who then wants to sue for damages. Another example: You’re a subcontractor and the client sues both the contractor and you. You can specify that the contractor agrees to pay the subcontractor’s legal fees. You can also specify that the client can’t sue you during the course of the project. It’s an especially good idea to have a lawyer review these clauses.
What about nondisclosure, nonsolicitation or noncompete clauses?
Some of these restrictions can last indefinitely, depending on the nature and the sensitivity of the work. Some are limited to certain amount of time. Nondisclosure means you agree not to disclose information about the project. Nonsolicitation means you won’t solicit their employees or clients for work. The usual term for these is two years. Noncompete clauses should be limited in geography and scope. It shouldn’t apply to just anywhere in the world, so try to limit it to a specific area, such as Austin. If someone wants you to sign a noncompete, have an attorney look at it.
What is a licensing agreement?
Include this if there is work you own but you will let the client use. Specify the extent of the use, how much you’ll be paid and when the license will end – in years or months.
What if you present your contract, and the client hands you one that’s contradictory?
Don’t have two documents for the same transaction. Pick one.
Should I form an LLC or be a sole proprietor?
The details of your business formation are extremely important. Emily generally recommends forming an LLC as a liability shield. If you’re a sole proprietor and get sued, the other party can take your personal assets. If you have an LLC, they can pursue only the assets of your business. She also recommends getting an employer identification number.
What do I say if the client doesn’t want to sign a contract and wants an email to be the agreement?
Ask them to explain why and tell them what your contract includes. That will often resolve the issue.
Can emails be considered a contract?
Yes, but not if you have other protections, such as a signed contract.
As a freelancer, do I need insurance?
You should carry your own business insurance. How much coverage you need depends on what type of work you do. Talk to your insurance provider about a small-business liability policy when you first form your business. Having an insurance policy in place can help you pay for your expenses while you’re being sued as well as for legal disputes.
What is the function of small claims court? I wanted to take a client to small claims court, but I was advised not to even try.
Emily said she would never advise someone not to try. The cap on how much you can sue for depends on the county. Usually neither party has an attorney.
How much should I push back on a client’s contract that I don’t like?
That depends on how much they need you. If there’s something in the contract that you don’t like, get an attorney to look at it. Negotiate to the extent that you can.
How much does it cost to have a lawyer review a contract?
The low end is $200/hour.
Do contracts start only when they’re signed?
No, and signatures don’t actually make a contract binding. Doing the work starts the agreement, but a signed document is good as evidence if you need it.
We hope these tips make you feel a little less anxious about contracts. All freelancers have different needs when it comes to agreements, but we all want to keep our clients, and ourselves, happy. Our takeaway from November’s meeting: Investing in a bit of legal advice could be much less expensive than dealing with a lawsuit – and may help us sleep better at night!
If you could use more information on contracts, check out Emily’s earlier post on the subject, or get in touch with her directly at email@example.com.
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