Month: November 2016

If you’re a freelancer – or if you’re interested in hiring a freelance worker for some contract work – you may feel somewhat overwhelmed by the prospect of drafting and executing a contract that fully encapsulates all the material terms.

 

Do bear in mind that while you may be able to setup a workable oral contract (so long as the agreement does not require the provision of services for a length of time greater than a year), it is not recommended.  Written contracts provide both parties with shared, foundational understanding of the terms, and serve as evidence in the event of a dispute.

 

As you begin the process of drafting and executing a freelance work contract, there are several different provisions worth keeping in mind to ensure that your interests are protected.  What provisions you choose to include in your contract (and thus give legitimacy to) are subject to the agreement of all involved parties.

 

Consider the following.

 

Setting an Hours Maximum and Deadline

Having an explicit deadline is important for many projects, from the perspective of both the freelancer and the hiring client.  A deadline protects the client, as it ensures that the work will be completed in a time-sensitive manner, and if not, then the client is legally entitled to recover damages based on the resultant breach of contract.  It also protects the freelancer, as it ensures that the freelancer has an anchor with which to resist excessive scope creep and various organizational issues from the client-side.

 

Suppose, for example, that a freelancer has signed onto a project that will take 2 months to complete.  The project requires that the client regularly email certain internal details to the freelancer.  As the contract begins, however, the client fails to open the lines of communication.  The client falls behind and does not regularly relay the necessary details to the freelancer.  In such circumstances, the freelancer can breach the deadline provision, as the client has not done their part.

 

Deadlines are not limiting, though they may appear to be at first glance.  If a deadline must later be changed due to various factors, it can be altered without issue.  Contracts can be modified as circumstances change.

 

Payment Details

Neither clients nor freelancers should accept a wait-and-see approach to payment.  Payment details should be explicitly written into the service contract: pricing, invoice scheduling, and more.  To prevent late payments, some freelancers choose to integrate late fee provisions into their contracts.  This is a fairly common protection – and highly recommended – though most freelancers also give their clients a grace period before the fee is levied.

 

Revision Handling

Revisions to the work-product may be necessary, no matter what type of project the contract governs.  Though many clients are reasonable and will not demand excessive revision of completed work, there will occasionally be very picky – and thus costly – clients.  Freelancers can protect themselves by limiting the number of total revisions allowed, or by charging for additional revisions (perhaps after one or two free revisions).

 

Limiting the Scope of a Project

The client-freelance relationship is unusually vulnerable to the expansion of the original scope agreed to by both parties.  Often, once a freelancer has started to submit work for a client, the client may begin to develop additional ideas regarding the project.  These ideas may expand the original scope of the project, of course, and may require additional time and effort.  Freelancers who have already invested into the relationship may end up feeling squeezed – they would like to continue working with a client, but would also like to avoid doing additional work “for free.”

 

To avoid this situation (and the difficult position that scope expansion requests puts a freelancer in), it is best to clearly define the scope of the project in the contract itself.  The contract can include language indicating that any expansion of scope must be met with a corresponding re-negotiation of the existing payment/scheduling scheme.

 

Confidentiality Provision

Incorporating a confidentiality clause into the freelance service contract is extremely important for clients with valuable technology or processes (or for clients who are working on marketing projects or products whose existence they intend to hide from competitors).  Freelancers – especially those with a particular specialization or focus on the client’s industry –  are likely to work with competitors at some point.  If a freelancer is given access to private technology or processes, then this information could be disclosed to competitors (unintentionally or intentionally), thus hurting the client’s business.

 

To prevent information leakage, you can either incorporate a confidentiality clause into the existing service contract, or draft a separate contract known as a non-disclosure agreement (NDA).  The NDA makes clear that the freelancer Confidential Information – related to the project, technology, processes, and any other covered information – is protected.  Generally, NDAs (and confidentiality clauses) also include indemnification language that requires the freelancer to pay for the losses or expenses suffered by the client as a result of a the disclosure of Confidential Information.

 

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SignatureConfirm provides both freelancers and their clients the tools necessary to draft and execute a comprehensive service contract.  Each party is empowered to enter into a digital contract that has the same effect under the law as a paper contract.  The laws of every state give full legal force to digital contracts.

When including an arbitration clause in a contract, try to be as explicit and specific as possible. At the very least, your arbitration clause should include whether the arbitration is to be binding or non-binding, the jurisdiction (i.e., state or country) under which the arbitration will be conducted, and information regarding confirmation of an arbitration decision/award.

Standardized, form arbitration clauses will be sufficient for most contracts – and can be modified to suit the particular circumstances of your contract – but if you believe that you will require a more complex arbitration clause, it is recommended that you seek the counsel of a qualified attorney.

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Arbitration is an effective, alternative means for resolving contract disputes that avoids the inefficiencies, expense, and frustrations commonly associated with the traditional litigation process. To make use of either binding or non-binding arbitration, just include a proper arbitration clause in your SignatureConfirm contract – do discuss this decision with the other contracting parties to ensure that arbitration is acceptable to all parties.

An arbitration clause covers only those claims arising from or related to the content of the contract itself. An arbitration clause in a contract governing home renovation, for example, would likely not apply to potential personal injury claims between the contracting parties.

For those claims covered by the arbitration clause, there are a number of benefits afforded by arbitration. Arbitration is generally fast, cheap, low conflict, and flexible as compared to traditional litigation. For those with privacy concerns, arbitration is far superior to traditional litigation. Arbitration is a private matter, and the content of an arbitration is also deemed private (and parties typically sign a confidentiality agreement). With court litigation, on the other hand, the content of the lawsuit may be accessible to the public.

Contracting parties may also feel that having an informed, neutral arbitrator is better than having an uninformed judge. If the contract is related to a specific industry, technology, or service, the parties select an arbitrator with experience in such matters.

When including an arbitration clause in your contract, the parties may choose between two different forms of arbitration: binding and non-binding.

Binding arbitration is perhaps the most common form. A binding arbitration forces the parties to accept the decision of the arbitrator as the final, legally applicable decision. The decision in a binding arbitration cannot be appealed. After binding arbitration has completed, a court of law is required (assuming that the contract itself is valid) to enforce the decision made by the arbitrator.

Nonbinding arbitration gives the involved parties the option of accepting an arbitrator’s decision. If one of the parties is unhappy with the decision of the arbitrator and would like to proceed with court-based litigation, they are free to do so.

For contracting parties looking to minimize uncertainty, binding arbitration is generally a better choice (as non-binding arbitration may end up being quite costly due to the added costs of arbitration + traditional litigation).

As an initial matter, it is worth keeping in mind that arbitration is a choice open to all involved parties at any point in the dispute process (pre-dispute or otherwise!) so long as they agree to it. It is much safer to include an arbitration clause in the contract to force arbitration in the event of a dispute, but in the event that no arbitration clause has been written into a contract, the involved parties can still agree to arbitration if they prefer it.

If you are setting up a contract for which you’d like to avoid a potentially high-conflict, lengthy process of litigation (in the event that the contractual relationship breaks down), it’s worth including provisions that govern alternative dispute resolution. Specifically, you’ll want to consider writing a contract that explicitly references an arbitration strategy.

Don’t be alarmed by the unfamiliar terminology! These concepts are actually quite easy to understand, so let’s break them down.

Across the United States, the process of civil litigation – in which a lawsuit is filed, the plaintiff and defendant assert their claims and counterclaims, a judge presides, and the court (typically a jury) comes to a decision based on the weight of the evidence – is the default process for resolving a contractual dispute. The problem with litigation is that it can be a lengthy, expensive process that takes several years to resolve, and pits the involved parties against each other, thus escalating existing tensions.

In recent times, however, many savvy businesses and contracting individuals have realized that pushing a dispute through litigation can lead to a lose-lose situation for both parties. The expense, delay, and conflict typical of civil litigation may damage the position of both parties in the long run. Instead, parties often choose to engage in alternative dispute resolution.

Arbitration is a form of alternative dispute resolution that sidesteps the civil litigation process, and is an excellent choice for parties that would like to hold each other to their agreements without having to risk the potential expense, delay, and adversarial conflict inherent to formal civil litigation.

When a contractual dispute is being arbitrated, a neutral arbitrator (often a lawyer or judge specializing in arbitration) is brought in to examine the evidence and hear each side’s arguments, and is subsequently empowered to make decisions regarding the associated claims.