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March 25, 2021

5 Red Flags to Watch For on a Freelance Contract

Jenni Gritters

Look out for these 5 red flags before signing a freelance contract.

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When you start a freelance business, there are many confusing elements — but none that can feel quite as daunting as signing a contract with a new client. What terms should you look out for? What requests should you make?

 

Typically, a larger client will have their own contract for you to sign. While you may be negotiating project terms with a manager at the company, any contract adjustments or requests will likely need to go through the company’s legal representative. If you’re working with another individual or a smaller company, however, you may want to offer a contract of your own for both parties to sign.

 

The benefit of signing a contract is that you’re able to get all the terms out on the table, and both parties can agree to them. Technically, an emailed exchange that details the assignment parameters, payment, and deadline counts as a contractual obligation — and in most situations, it would hold up in court. But signing an official document with your client can add an extra layer of protection, given that you can take the opportunity to discuss issues upfront like payment structure.

 

However, you’ll want to be careful to read the contract before signing it, and for bigger jobs, you may want to bring in a lawyer to consult. (Many universities and law schools have pro-bono lawyers who can help.) Here are some red flags to look for in a new contract:

 

A non-compete clause

Some companies have a standard non-compete clause in their contract. If you sign that clause, you can’t work for another business that offers competing services, which can limit your ability to seek new assignments. For example, some non-compete clauses might limit you from working with individuals in a certain location for 5 years, or you might not be able to do work for a company with a similar mission.

As a freelancer, it’s important to keep your options open. You should always request to have this clause removed or modified. (You can ask for a shortened timeline or a change in the language.)

 

No payment terms

If you’re a freelancer, you know that chasing late payments can be a huge hassle; one of the best ways to prevent this chase is to get payment terms written into your contract. Make sure that the contract in question details:

  1. When you’ll be paid (ideally you want NET30, or payment within 30 days from the point of invoicing)
  2. At what point you can invoice (ideally, negotiate for payment upon approval of the work, not upon publication; this gives you control over when the invoicing process starts, versus you needing to work within the client’s workflow)
  3. How you’ll be paid (direct deposit? Mailed check?)
  4. What happens if a payment is late (try for a late payment structure of 2% of the total payment per day past the NET30 due date)

 

Ownership of your intellectual property

You might also see a clause in the contract that allows the company to take ownership over your intellectual property (IP). If the company is simply seeking ownership over the documents and research you create as part of the project, this might be okay — depending upon the project, of course. Where things can get sticky is a clause that stipulates ownership over all of your IP, which could mean any work you’ve created during your career. Request to have this clause removed or modified, and consult a lawyer as needed.

 

An indemnity clause

If you see a sentence that says that you the freelancer shall indemnify the client for any reason, you’ll want to contact a lawyer to help review the terms. Indemnity is compensation paid by one party to another to cover any damages or losses, and sometimes a client will put all of the liability on the freelancer, rather than taking ownership of any losses themselves. In other words, even if you do your job with accuracy and integrity, you could be liable for any lawsuit or mishap that befalls the company.

This one is complicated, which is why you’ll want to contact a lawyer if it concerns you; it’s worth suggesting new legal language that the client can use to replace this clause if they’re not willing to remove the clause entirely. And in order to protect yourself in any situation, you can consider purchasing a professional liability insurance policy.

 

Rights grabs

Writers and artists will also want to look out for language about rights. If you’re working under work-for-hire terms, you’re producing a product that the company owns. In many cases, this is just fine! But what if you want to use that content in the future? For example, if Netflix contacts you and wants to make a show out of a series of articles you’ve written, but those stories are owned by the publication, you don’t get the money from Netflix — the publication gets the money.

Consider which projects you want to own, sell, or syndicate. Syndication means the publication or client has exclusive rights to that project for a certain amount of time before it’s released back into your care.

 

Contracts can be confusing (and sometimes they’re literally designed to confuse), so it’s worth educating yourself on common terms and agreements. Protect yourself, contact a lawyer or legally-savvy friend if there’s a piece of the contract you don’t understand, and never be ashamed to ask questions. The more you know, the better you can defend yourself.

 

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Written by

Jenni Gritters

Jenni Gritters is a freelance writer and editor based in Seattle. She’s written for the New York Times, the Guardian, Outside magazine, and many other places, and co-hosts the freelance business podcast, The Writers’ Co-op. Read more about her work: http://jennigritters.com/

Banking Designed for Freelancers

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