Freelance Contracts: Top 10 Essentials & Common Mistakes
Tim Perry
Top 10 Must-Haves & Pitfalls to Avoid
Freelancing comes with the promise of flexibility, autonomy, and the potential to earn more. But with these perks comes the absolute necessity of protecting oneself legally. Enter the freelance contract—a vital tool to ensure that both parties understand their obligations, rights, and expectations. Here, we'll dive into the top 10 elements you must include in your freelance contract and common pitfalls you should steer clear of.
Top 10 Must-Haves in a Freelance Contract:
While all 10 points below are crucial, it's worth highlighting that Payment Terms and Revisions/Overages are detailed extensively. From my experience as a freelancer, sole proprietor, and agency leader, these areas have consistently been the most challenging because they impact cashflow and eat into your budget. After all, we're not a charity (well, most of us aren't)!
Clear Scope of Work: Define the services you'll provide in detail. Avoid vague descriptions.
Payment Terms: Clearly outline the amount, payment schedule (e.g., 50% upfront), and accepted payment methods. Some may hesitate to ask for a substantial upfront payment, but requiring 50% in advance or payments at project milestones demonstrates commitment from both parties. This approach also aids in cash flow, especially since some clients, particularly larger companies, might operate on a net-30 or net-45 payment schedule, which could delay your payment up to 45 days post project launch.
Project Timeline: Include project milestones, due dates, and the overall project deadline.
Termination Clause: State under what conditions each party can terminate the contract and any penalties associated.
Revision and Overages Clause: Clarify the number of revisions included and costs for additional changes or work. I like to include something like this : " In the event of significant changes to the project scope and/or changes in the schedule that may impact the billing forecast, potential overages will be submitted via a Production Overage Sheet, which must be approved by XYZ company before any additional work can continue."
*It's worth noting that overages often lead to extended project timelines and financial forecasts. This means that any pending payments (like the final 50% upon completion) may be delayed until the project concludes, potentially adding another 15-30 days. Hence, it's critical to discuss with your client the possibility of adhering to the original payment schedule while addressing overages separately.Intellectual Property Rights: Specify who retains rights to the work. Typically, rights are transferred to the client upon full payment.
Confidentiality Clause: Ensure that any sensitive information shared remains confidential.
Liability and Indemnity: Protect yourself from potential legal claims related to your work.
Governing Law: State the jurisdiction or country's laws that will govern the contract.
Signatures: Make sure both parties sign and date the contract.
Common Pitfalls to Avoid:
Being Too Informal: Even if you're working with a friend, always maintain professionalism. Oral agreements can lead to misunderstandings. This is where being 100% clear on the scope and ensuring your client understands and agrees on all points of the scope is important.
Omitting Specifics: The more detailed your contract, the less room there is for misinterpretation. It may be worth 'over-explaining' and providing diagrams where necessary.
Failing to Update the Contract: As project details change, ensure the contract reflects these changes OR provide an addendum, or overage sheet to the original contract.
Not Addressing Disputes: Clearly outline how potential disputes will be resolved, whether through mediation, arbitration, or court. This is typically outlined in the 'general terms' at the bottom or top of your SOW or contract. Consult with a lawyer to add that into your contracts, if possible.
Ignoring the "What Ifs": Consider potential challenges (e.g., what if the client doesn't pay on time?) and address them in the contract.
Not obtaining a signature - At times, clients might postpone the contract sign-off because they await approval from their boss. However, they may still be pressuring to kick-off the project. Resist this temptation. Always secure a sign-off (and the timing for the initial kick-off fees, e.g. 50%) before beginning any work. You'll thank me later for this one!
In conclusion, a robust freelance contract is more than just a formal agreement—it's the foundation of a successful and harmonious working relationship. By ensuring that your contract includes these essential elements and steering clear of common pitfalls, you're well on your way to a hassle-free freelance journey.
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