Legal Considerations for Freelancers & Agency Owners: Contracts and Agreements

Whether you’re a freelancer in the struggling gig economy or an agency owner juggling multiple clients, understanding contracts and agreements is crucial. These documents aren’t just legal formalities—they’re the backbone of your professional relationships, the blueprint of your projects, and, most importantly, your safety net.

Let’s break down the essentials of contracts and agreements in a way that’s easy to understand and, dare I say, even a bit enjoyable.

Understanding the Basics of Contracts

First things first: What exactly is a contract? At its core, a contract is an agreement between two or more parties that’s legally binding. Think of it as a handshake, but with paperwork and way more protection. Here’s what makes a contract a contract:

Offer: One party proposes a service, like designing a website.
Acceptance: The other party agrees to that service.
Consideration: This is the payment or compensation involved.
Mutual Agreement: Both parties agree to the terms laid out.

For freelancers and agency owners, contracts come in various flavors. You’ve got fixed-price contracts, where you charge a set fee; hourly contracts, where you get paid for the time you spend; and retainers, which are ongoing agreements with a steady flow of income. You might also run into non-disclosure agreements (NDAs), which keep sensitive information under wraps.

Imagine you’re a freelance web designer hired to create a website for a new startup. You agree on a fixed price of 200k. The contract outlines the specific deliverables—a mobile-responsive website—and the timeline for completion. This agreement protects both you and the client by clearly defining the scope of work and payment terms.

Key Clauses Every Contract Should Include

Now, let’s talk about the meat of the contract: the clauses. These are the specific terms and conditions that outline what each party is agreeing to. Here are the must-haves:

Scope of Work: This section details exactly what services you’ll provide. It’s crucial to be as specific as possible—vague descriptions can lead to misunderstandings down the line.
If you’re an agency developing a website, the scope of work should list every page, feature, and functionality the client expects. This prevents scope creep, where clients request additional work outside of the original agreement without additional pay.

Payment Terms: Here, you’ll outline how and when you’ll get paid. Will you require a deposit upfront? What happens if the client pays late? Spell it all out to avoid headaches later.
A typical payment term might state, “Client will pay 50% upfront and 50% upon project completion. Invoices are due within 14 days. Late payments will incur a 5% fee.”

Deadlines and Deliverables: Set clear deadlines and define what’s being delivered. This helps manage expectations and ensures everyone is on the same page.
For a marketing agency running a campaign, the deliverables might include “three social media posts per week for three months, with a monthly performance report.”

Revisions and Edits: Let’s face it, clients often ask for tweaks. Define how many revisions are included in your fee and what constitutes an “extra” that requires additional payment.
A web design agency might include in the contract, “Three rounds of revisions are included. Additional revisions will be billed at 40k per revision.”

Confidentiality and Non-Disclosure: If you’re dealing with sensitive information, an NDA might be necessary. This ensures that what happens in the project, stays in the project.
If you’re working with a startup that shares proprietary information, an NDA clause will protect that information from being disclosed to third parties.

Termination Clause: Life happens, and sometimes contracts need to be ended early. This clause outlines the conditions under which either party can terminate the agreement and what happens afterward.
“Either party may terminate this agreement with 14 days’ written notice. Upon termination, the client will pay for all completed work up to the date of termination.”

Intellectual Property Rights: Who owns the work once it’s completed? Make sure this is crystal clear. Will the client have full ownership, or are you licensing it to them?
“Upon final payment, the client will receive full ownership of the website and all associated assets.”

Dispute Resolution: Hopefully, you won’t need this, but it’s smart to include a plan for resolving disputes. Mediation or arbitration might be preferable to heading straight to court.
“Any disputes arising from this contract will be resolved through mediation in [Your City], following the rules of [Your State’s] mediation association.”

Tips for Creating a Strong Contract

Creating a contract might sound daunting, but it doesn’t have to be. Here are a few tips to help you craft a solid agreement:

Use Templates and Legal Resources: There are plenty of reliable contract templates available online. Find one that fits your needs, but remember to customize it to your specific situation.
Consult with a Lawyer: If you’re unsure about any legal terms or clauses, it’s worth getting a lawyer’s input. A quick review could save you from future legal troubles.
Regularly Update Contracts: Your business evolves, and so should your contracts. Revisit and update them regularly to reflect any changes in your services, pricing, or legal requirements.
Example: As an agency grows and starts handling more complex projects, the standard contract might need to be updated to include new services or stricter payment terms.

Common Legal Mistakes to Avoid

We all make mistakes, but when it comes to contracts, a few common pitfalls can be costly:

Relying on Verbal Agreements: A handshake or a verbal agreement might feel more personal, but it’s not legally binding. Always get it in writing.
Overlooking Important Clauses: Don’t skip any sections, no matter how insignificant they might seem. Every clause serves a purpose.
Failing to Address Disputes: Ignoring the possibility of disputes won’t make them go away. It’s better to have a plan in place.
Ignoring Tax Obligations: Freelancers and agency owners alike need to stay on top of their tax responsibilities. Your contract should clarify who’s responsible for what when it comes to taxes.
Example: A contract might state, “The contractor is responsible for all applicable taxes related to the compensation received under this agreement.”

Conclusion

Contracts and agreements are more than just formalities—they’re essential tools for protecting yourself and your business. Whether you’re freelancing or running an agency, a well-drafted contract can help you manage expectations, avoid disputes, and ensure you get paid for your hard work.

Resources

Presentation – https://drive.google.com/file/d/1_YgfnUcyj3eHLlu5vhsXGtvc9f6bKto7/view?usp=sharing

Service level agreement template – https://docs.google.com/document/d/1nsqdEHAddQVdRlnAuJWF_h7q69Icskqz/edit?usp=sharing&ouid=117672233701239441111&rtpof=true&sd=true