Freelancers' Questions: Do self-employed people need to issue their own contracts?
Freelancer’s Question: I've recently started promoting my freelance business and have won a couple of jobs already, which is great. I was wondering about contracts; what’s the sensible but speedy way forward?
One project is for an ongoing rebrand -- including logo, website, social media marketing and online brochure. The other is to design a one-off glossy brochure, at least just to begin with. Would it be recommended to send out contracts to these clients? Or is that too formal? One especially seems very casual and doesn’t ‘do’ formalities apparently, but I’d still like to be safe!
Expert’s Answer: First of all, congratulations on the success of your new business so far. And well done for considering contracts - this is always a lawyer’s number one priority, so it is great to hear you’re doing it too!
The sensible way to go forward regarding contracts is to always, without fail, no matter what the circumstances, issue a contract. We can’t stress this enough!
What to tell informal-types about contracts
Contracts exist in order to provide certainty and they will work in both you and your clients’ favour. They can also be very personal to a freelance business, so you can use them as an opportunity to demonstrate you are professional to your clients and advertise your competence.
A client should never be offended at receiving a contract -- you are looking to protect both parties, after all. Given the current coronavirus pandemic, more businesses than ever are conducting affairs online, which is great, but you should always be careful to keep everything in writing and avoid purely verbal contracts.
Use your contract as a chance to show that you are fair and flexible, and make clear to your client that you are happy to negotiate any points in the contract to show you are just as casual and cooperative as they are: you just take your business seriously, too!
So what should you and other freelancers get in writing, as a bare minimum?
It bodes well that you seem to be on their wavelength about the work and commercial activities to be carried out, however, a contract sets out elements of your relationship which might not have been discussed.
The client might be aware of the price, but think about the payment terms of the contract. Set out whether payment will be at intervals or when the project is completed. Avoid it being dependent on the client’s satisfaction, as this could be a never-ending goal. Describe the process that will be followed if payment is late and how to determine a payment is actually late.
Then, think about the intellectual property of the logos, websites and designs that you are producing. Without a contract in place, the ownership of these creations can get messy with complicated legal rules. You should be clear that all of your intellectual property remains yours, and the client has no right to use this.
Is it your intention that the intellectual property in the newly created logos, for example, will transfer to the client? If so, you should think about setting out that the creations are provided on an ‘as-is’ basis, and you have no responsibility for infringements you could not have been aware of.
How to protect yourself, contractually
That brings us on to liability. Will the client be able to claim money from you, for example if the social media performance is not as was expected? You should make sure here to carve out any indirect losses, such as loss of goodwill. Consider adding a cap, for example that any liability under the contract will not exceed the fees that have been paid under it.
If the client will be providing you with any personal data of its employees or its clients, you must also think about data protection, since you can receive hefty fines from data protection authorities if you do not follow the rules set out in the GDPR (General Data Protection Regulation). If this is the case, and you are unsure about data protection rules, we would highly recommend seeking advice from a data privacy lawyer.
Next, think about confidentiality. It sounds like the client will be supplying you with information of a potentially confidential nature. To what level do they expect you to protect this information, and what should you do with it when the project is finished? Also, think about mutual confidentiality obligations -- do either of you want to advertise the fact that you are working with one another?
As to the concerns you raise, a contract does not mean you need to be inflexible. In fact, you can even include variation clauses to set out how you can both go about changing the contract, and even include here that simple agreements by email on certain points might be agreed. In addition, consider adding a force majeure clause to deal with any problems that may crop which stop you from completing the tasks you have agreed to.
And lastly, think about term and termination -- what if either of you want to stop the project before it has been completed as agreed?
A template contract?
These general points show that there are a number of important considerations when it comes to freelancers issuing a contract to a client, and most contracts will need to be adapted depending on the project. However, we understand that it might seem time-consuming and potentially costly to get legal advice on every new project you begin! So, perhaps you could seek the advice of a commercial lawyer for a standard set of terms and conditions, and set out here your:
- payment timeframes
- late payment interest rate
- what to do if fixed fees are exceeded (i.e. will you revert to an hourly rate?)
- IP ownership and IP transfer (being on full receipt of payment),
- data protection
- term and termination
- liability caps
You could include in these standard terms and conditions a section for ‘Project Scope,’ and use this part to carve the relationship between you and specific clients. This way, you can have a laid-back procedure when issuing official documents, but make sure that you are protected and have certainty. The best of both worlds is possible!
One final piece of advice…
You have discussed with your clients what their needs for the projects will be. It might be necessary to think about drafting a standard Non-Disclosure Agreement (NDA) to be issued during pre-contractual negotiations. Most freelancers will issue a large portfolio and might even go to the trouble of creating ideas and mock-ups for potential clients, and unscrupulous clients can take these ideas and run! An NDA can prevent this from happening and contractually oblige a client to keep the information you give them secret until a contractual relationship is entered into.
We hope these tips give you a good basis to start from. As always, we would stress the importance of getting legal advice tailored to your specific circumstances. While it can appear unprofessional to neglect to issue a contract, it is equally unprofessional to issue a template contract which clearly does not fit the circumstances. Good luck with the future of your new business, we hope your success continues!
The expert was Lily Morrison, legal consultant at Gerrish Legal, a law firm specialising in commercial law for freelancers and the self-employed.