How to Write a Bulletproof Contract That Covers Your Ass

Last month, I sent this email to a client who had still not paid me after 2 months.

Needless to say, I never got the money.

Unfortunately, this whole thing was my fault. Because this was one of my oldest clients, I decided to keep things simple. I continued to use the original document we signed two years ago and had a verbal agreement to continue the working agreement.

Big fucking mistake.

I should have used an updated contract detailing specific deliverables and payments terms. My negligence meant that I was powerless to do anything other than to send out an angry email.

Thankfully, this was a small $1,000 project.

90% of Freelancing Problems Can Be Traced Back to Your Contract

The most common problems freelancers run into can all be traced back to one thing: the contract. A contract is the single most important thing in any freelancing project.

You might have heard it called a legal agreement, client service agreement, or others names. In a nutshell, a contract is a written agreement that is enforceable by law.

In this post, I’ll go over how to write a contract that protects you from all the common freelancing problems.

I Got 99 Problems and Freelancing Is One

If you’ve been freelancing for awhile, you know all too well about the issues that can come up. This includes:

• Clients requesting for refunds
• The threat of lawsuits
• Scope creep (when the client starts adding more to the project than what was originally agreed upon)
• Late payments

All of these problems are preventable as long as you have a contract that clearly defines everything.

A Rock-Solid Contract Will Cover Everything

Good contracts define everything within the project and leave nothing to chance. They cover:

• Exactly what service or deliverable your client is getting from you
• How and when you will get paid
• Late payment policy
• Refund policy
• Who owns what you create for the client

How to Write a Contract for Freelancers

If you’re a freelancer, you need to know how to write a contract that protects both you and your client. A contract provides clear guidance about the work requested and the compensation for that work.

Before performing any service for a client, you need to have your client sign a contract. A contract doesn’t have to be complicated. It just needs to be clear, specific, and thorough.

If you’re feeling lazy, here’s a link to a contract template that you can use. In the rest of this post, I’ll teach you how to write a contract. Much of this is taken from an excellent resource on Wikihow by Clinton M. Sandvick (read it here).

Part 1: Defining the Work and Scope

Step #1: Create a Title for Your Contract

The title should be descriptive of the agreement. It should be centered and bolded at the top of your contract. Examples include:

• Independent Consulting
• Independent Contractor Agreement
• Freelance Web Design Contract.

Step #2: Name the Parties in the Contract

Once you have named each party, include the title that you will use to refer to that party throughout the contract.

If you are working with a business, include the full legal name and the suffix (i.e.: Inc or LLC). You do not need to include the names of individuals signing on behalf of the business.

Here are two examples:

• This Independent Contractor Agreement (“Agreement”) is made and entered into by and between, John Doe (“Company”) and Jane Smith (“Client”).
• John Doe (“Client”) and Jane Smith (“Client”) agree as follows

Step #3: Include a Description of the Services

The length of your project description will depend on the complexity of the job. You should define the scope of work with clearly so that the client knows the work you are delivering. The purpose here is for you and your client to know what work falls inside or outside the scope.

For our project contracts, we include a two to three sentence overview of the project. Then we get into specifics. Since we design and build websites, we break it down into pieces.

We list the number of pages we will be building and certain features the client will need for the website.

This section is important because it prevents scope creep. It means that if your client asks you to do something that is not in the contract, you can point to this section with confidence.

Step #4: Attach a Separate “Scope of Work” Document for More Complex Projects

If your project is more technical and requires a longer description, you will want to put this in a separate document known as a “Scope of Work” (SOW) or “Project Plan”. This way you can keep your contract clean.

For something like this, you can describe the job as providing your client with “services described in the attached project plan.”

Using this format gives you the flexibility of describing each job in detail without having to change your entire contract for each new job.

Part 2: Defining the Work Relationship

Step #1: Define Compensation

Write down the compensation you will receive and in what manner and time frame it is due. You may choose to use either flat or hourly rate methods, or include both. For example:

• “Client shall pay Contractor $ _____ per hour due on or before the first Friday following the end of any week in which Contractor performs services for Company.”
• “Client shall pay Contractor a flat fee of $__________ as total compensation for the project described below. Payment shall be made as follows: a. $_________ due before work will begin, and b. $_________ due upon receipt of final deliverable.”

Step #2: Include a Description of the Working Relationship

Specify that you are a freelance or contract worker and will perform the services at the time, place, and in the manner of your choosing.

Because employees and contract workers are treated differently for tax purposes, a description of the working relationship will help ensure that no mistake is made regarding whether you are a freelancer or an employee.

• Sample language could be: “It is understood that Contractor is an independent contractor and not an employee of Client. Client will not provide any fringe benefits, including health insurance, paid vacation, or any other benefits, for Contractor.”

Step #3: Outline the Project Schedule

The contract should lay out the steps and expected time frames for the project. A web development contract, for example, might specify development milestones, and testing and acceptance periods.

• A sample project schedule could say, “Benchmarks. Contractor agrees to provide first drafts by August 22, 2015. After approval of the draft and input from Client, Contractor will then provide an updated draft within two weeks of receiving input from Client…”

Step #4: Outline the Circumstances for Termination of the Contract

Specify on what grounds either party could terminate the contract, such as missed deadlines or missed payments. In this case, the party has the right to terminate the contract without violating the contract.

• For example, you could add, “In the event of a material breach of the contract, either party has the right to terminate this contract within 14 days of notice of the breach by the non-breaching party. Client may also terminate the contract immediately in its sole discretion in the event Contractor breaches the Confidentiality Clause.” Or revise this language to reflect the grounds for termination that you and the Client agree to.

Step #5: Describe Who Will Own Any Product You Create

Forms, recipes, research, memorandum, graphics, and software are generally owned by the client. You want to be clear and specific about who owns what.

• “Including but not limited to,” is a good phrase to use in this section of the contract. For example: “all documents produced by Contractor, including but not limited to memorandum, research notes, correspondence, e-mails, pleadings, and reports in the course of his work for Client, shall be the property of Client and Contractor shall retain no ownership, interest or rights therein.”

Finalizing the Contract

Step #1: Determine if You Need a Confidentiality Clause

If you will be performing services that make you privy to information that is confidential, such as legal or medical files, secret formulas or recipes, or a client’s financial or personal information, you should include a confidentiality clause.

• A typical confidentiality clause contains the definition of “confidential information,” prohibits disclosure generally, identifies exceptions (such as disclosure required by law), and states the duration of the confidentiality obligation.
• For example: “Contractor acknowledges that he/she may be furnished with information relating to Client’s products, vendor lists, creative works, business or marketing strategies, pending projects, and other confidential information. Contractor agrees not to disclose this confidential information unless required by law or court order. This duty to maintain confidentiality shall continue throughout the life of the contract.”

Step #2: Include a Choice of Law Clause

You should specify which law will govern the contract. Generally, people choose the laws of the contractor’s state of residence, but you could also choose the client’s state laws. Choose one state only, and specify where you will mediate, arbitrate, or bring legal actions under the contract should a dispute arise.[9]A choice of law clause may look like this:

• Governing Law — This Agreement shall be governed in all respects by the laws of the United States of America and by the laws of the State of Indiana. Each of the parties irrevocably consents to the exclusive personal jurisdiction of the federal and state courts located in Indiana, as applicable, for any matter arising out of or relating to this Agreement, except that in actions seeking to enforce any order or any judgment of such federal or state courts located in Indiana, such personal jurisdiction shall be nonexclusive.

Step #3: Include a Severability Clause

A severability clause provides that if any of the terms of the contract are found to be unenforceable by a court, all other terms shall remain operative. A severability clause may look like this:

• Severability — If any provision of this Agreement is held by a court of law to be illegal, invalid or unenforceable, (a) that provision shall be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.

Step #4: Describe Specific Relief for Breach

Service contracts commonly contain a specific relief clause which allows client to seek an injunction (a judicial order that either restrains or compels specific action), should the contractor attempt to disclose confidential information in breach of a term of the contract. It may also include an order for a specific performance, should the contractor refuse to perform some duty under the contract which causes the client irreparable harm. A specific relief for breach clause may look like this:

• Injunctive Relief for Breach — Contractor agrees that his obligations under this Agreement are of a unique character that gives them particular value; Contractor’s breach of any of such obligations will result in irreparable and continuing damage to Client, for which there will be no adequate remedy at law; and, in the event of such breach, Client will be entitled to injunctive relief and/or a decree for specific performance, and such other and further relief as may be proper (including monetary damages if appropriate).

Step #5: Include the Date

This should be the date the parties will sign the contract. If you are unsure of the exact date, leave a blank line where necessary, so that the day, month, and/or year can be hand-written in when you execute the contract.

• For example, “Agreed to this ___ day of February, 2008.”

Step #6: Include a Signature Block

Each party should have a line to sign on, plenty of room to sign, his or her title listed, and his or her typed name below the line.

A Template Contract for You to Use

Now that you know how to write a contract, I want to share with you a template contract you can use to get a head start.

Questions, Comments, Suggestions?

Did I miss anything? Do you have any questions or comments to add? Let us know in the comments section below!

Victor runs The Remote Lifestyle (http://theremotelifestyle.com), where he teaches you step-by-step how you can become a successful digital nomad.