A contract is the foundation of every business relationship. It gives you legal certainty in the case of customers who are unwilling to pay and also protects you from other risks that independence entails. He also helps you:
- Define clear expectations before you start working.
- Customer’s objections regarding payment, deadlines, revisions to be clarified in advance.
- Invoice additional work that was not included in the original project scope
This article gives general tips but does not constitute legal advice. Please check your current legal situation and, if necessary, contact a legal expert.
In this article we cover the following aspects of contracts for freelancers and freelancers:
Does every freelancer need a contract?
You don’t necessarily need a contract to offer your services. But without a contract, you or your customer run a huge financial risk if a project doesn’t go according to plan.
You may not need a contract if:
- Your freelance work is just a hobby for you.
- You don’t have to rely on your freelance income to pay your bills.
- You usually take on small, short-term projects that don’t cost a lot of money.
In any case, a contract is recommended if:
- Your freelance work is your full time job.
- You rely on your freelance income to pay your bills.
- You are working on extensive projects, the completion of which can take weeks or months.
According to experts, what clauses should you have in your freelancer contract?
What you should include in your contract depends on how you basically want to work. Do you need a separate contract for each of your projects? Or do you offer your customers a framework contract that covers all the jobs you do for them? Or do you have general terms and conditions (AGB) that your customers must first of all agree to?
Nevertheless, according to experts, there are some indispensable clauses that should not be missing in any freelance contract. For industry-specific details, you should definitely consult a legal expert.
Indispensable components of a contract for freelancers
- Your prices and payment terms
- Penalties for late payment
- Unforeseen additional work (Scope Creep!)
- Copyright and ownership of your work
- Use your work for your portfolio
- Cancellation policy and cancellation fee
- Inability to work due to illness or injury
- Changes and revisions
- Your status as a contractor
- Your main point of contact
1 Your prices and payment terms
In this section we want to determine how much you want to earn and when you want to be paid. Do you want a deposit on commission, a full payment in advance, or will there be multiple payments during the project? With freelance writers, it is often common to get half when commissioned and the rest after the project is complete. This means that they remain financially liquid and have a buffer if a customer leaves a planned project for any reason.
“Why should I pay in advance?”
This is a common objection you’ll hear from customers who don’t want to pay for work that they haven’t delivered yet. Before you start a sales discussion, think about the following: If you work as a freelancer, your time is ultimately the product that your customers pay for – and it’s only limited. With a down payment or a full payment in advance, your customers reserve a place in your schedule. If a customer does not book his seat in advance, you cannot guarantee that you can work on his project when he needs you. Because then you assigned this availability to someone else.
2 penalties for late payment
What happens if a customer doesn’t pay on time? One option is to charge interest on arrears to motivate customers to pay the bill quickly. For example 5 percent for every two weeks in which the customer does not pay.
But before you charge late payment interest, you have to inform your customers about it. So write them down in your contract and make sure that they are appropriate – 50 Euro penalty for a 100 Euro project is definitely not! Alternatively, you can offer a discount for customers who pay particularly quickly.
3 unforeseen additional work (scope creep)
If you offer your customers a flat rate and do not bill their individual hours, the question arises: “What happens if there is suddenly more work?” In English this is often referred to as “scope creep”. This means that the requirements of the project suddenly go far beyond the original concept. For freelancers, this usually means that your customer can expect more work for the same money.
Therefore, it is always a good idea to specify in your contract exactly what your customer will get from you. Also write about how you want to deal with additional work – will you bill them per hour or charge a new project fee?
4 Copyright and usage rights
Who does your work belong to? As an employee, this usually belongs to your company – regardless of whether they are photos of company parties or ideas that come to mind in meetings. As a freelancer, you own your work, you are the author. As a rule, however, you transfer the rights of use to your customers. At what point exactly this transfer takes place (if at all) should be enshrined in your contract. For example, when you hand over your finished product after the customer has paid, or at any other point.
Also determines what your customers can use in the end. Just your final product or any idea you suggested during the project? If you are unsure, a look into UK copyright law or a chat with a legal expert of your trust is recommended.
5 Use your work for your portfolio
Presenting your previous work is the best way to win new customers. But if you want to use work that you have done for your customers, you must first ask for permission. You can also specify in your contract that you can use extracts from your work for marketing and self-promotion.
Nevertheless, you should clarify this with each of your customers individually – that already requires courtesy. This shouldn’t come as a big surprise to your customers, because most of them have probably hired you because of your portfolio.
6 Notice period and cancellation fee
What happens when a customer jumps off – either before the start of the project or in the middle of it? That should be regulated in your contract. Do you allow cancellations without further ado or do you keep your advance, for example. If you have a contract for a longer term, a statement about the notice period must not be missing. Depending on the contract, this can be between 30 days and six months.
A cancellation fee is due if you are already in the middle of the work and the customer cancels the project without your fault. The fee is usually a certain percentage of the full price and thus covers at least part of the time that you have already invested. This can be of great help especially if a customer cancels a project at short notice and you have no further orders in the pipeline.
7 Inability to work due to illness or injury
No matter how healthy you are generally, you must always expect an unexpected illness or injury. Not only with you, but also with relatives that you have to take care of in the event of illness. In such a situation, work is the last thing you want to burden yourself with. It is therefore particularly important to regulate your absence from work with a corresponding clause. For example, you can reserve the right to pass on your order to another freelancer, to adjust the deadline accordingly, or to (at least partially) repay the customer’s money.
Regardless of contractual clauses, it is worth it if you provide for an emergency. For example, by putting a little money aside for your own “health insurance” every month or by taking out private supplementary insurance that pays you sickness benefits earlier.
8 Changes and revisions
Everyone has submitted work before, only to find that a customer comes with endless comments and change requests. Without a corresponding paragraph in your contract, you can easily fall into the “trap of endless improvements”. Therefore, determine how many change loops are included in your price and how much further changes cost. For example, a change loop is common for many freelancers. Anything beyond that is billed per hour.
Also sets a deadline within which changes should be sent to you. This will prevent your customer from approaching you weeks later if you are already working on a new order.
9 Your status as a contractor
As a freelancer, you are not an employee and you are not entitled to the same benefits as continued sick pay or paid leave. Nevertheless, it happens that some customers treat you like their employees. Your contract should therefore specify what it means for you to be an independent contractor. For example, that you can divide up your time yourself and set deadlines or you can also work for other customers.
10 Your main point of contact
This is not necessarily a contractual clause, but specifying a contact person will make your cooperation a lot easier. A person on the customer side who is responsible for communicating with you, checking your work and taking care of your invoices ensures faster processes. This is especially important if you work with large companies and have to deal with different contact persons.
Tips for freelance contracts
- Simple and correct language. Nobody likes to read long, confusing contracts. If your contract is formulated in an understandable way, your customers tend to agree.
- Seek professional support. There are many templates for contracts on the Internet, but there is no substitute for an expert opinion. If you have a first version of your contract, you can have it checked by a legal expert.
- Update your contract regularly. Being self-employed is an adventure that constantly confronts you with new stumbling blocks. Every time you fly on the nose, you learn something new that you can include in your contract.
How to deal with a breach of contract
- Always communicates in writing. Referencing agreements is much easier if you have them in black and white. If a customer relationship should go down the drain, avoid phone calls and use email instead. On top of that, this makes it easier for you to keep things factual and avoid freaking out on the phone.
- Insist on your rights. You have a contract and, if necessary, every right to invoke it. After all, you run your own business and don’t have to be pushed around by angry customers.
- Get legal advice. Your contract gives you a certain amount of security, but if your customer simply ignores it, nothing beats proper legal advice. This can save you a lot of trouble in the long run.
Always remember: your contract is never final. You can always improve it and adapt it to the needs of your business.