An independent contractor agreement is a legally binding contract between an independent contractor and a client. This agreement is executed before the contractor begins work and it describes the work or services to be rendered, the price for services, and the rights and obligations of each party throughout the business relationship.
What is an Independent Contractor Agreement Review?
A contract review involves carefully reading and analyzing the terms of the contract, language used, how certain words are defined. This allows both parties to clarify any ambiguities and ensure the terms are fair, reasonable, and comply with all applicable laws.
To begin reviewing an independent contractor agreement, follow these steps:
- Carefully read the entire agreement beginning to end.
- Make note of any language or terms that may be ambiguous or need additional clarification.
- Ensure that the contract complies with all applicable laws, regulations, and industry standards.
- Check that all key provisions are included like scope of work, payment terms, liability, and termination clauses.
- Seek legal advice if you have questions.
If you have any concerns about the contract, it is recommended that you contact a lawyer to complete the contract review. A lawyer will ensure that the contract complies with local and state laws that regulate business contracts and protects the contractor and the client throughout the business relationship.
A lawyer can also help clarify any terms that either party may not understand and can help a party negotiate better terms to ensure that the contract is in the party’s best interest.
Why Use an Independent Contractor Agreement?
An independent contractor agreement should be used any time a customer hires a contractor to complete a job or service because it provides both parties with legal protection. Without a clear contract that defines the roles of each party, either party could be open to significant legal or financial repercussions in the event of an accident or contract breach.
A contractor agreement provides parties with the following benefits:
- Clarity and understanding. A well drafted and reviewed contractor agreement will inform both parties of their rights and obligations under the contract. This will help avoid disputes or misunderstandings throughout the business relationship.
- Legal protection. A contract memorializes the deal made between the parties and serves to hod the parties accountable under the contract terms. If either party breaches the contract, the nonbreaching party will have options to remedy the situation.
- Risk mitigation. Some independent contractor jobs involve inherent risks like construction work. The contractor agreement can require that contractors carry certain insurance coverage and it can define which party will be liable for accidents or issues during the project.
- Confidentiality. Depending on the industry, confidentiality can be a big concern for clients. An IT consultant working as an independent contractor will have access to private client lists or intellectual property while working with a company. A valid agreement will prohibit the contractor from sharing company information and protect the company’s business interests.
- Dispute resolution. Unfortunately, is not uncommon for disputes to arise during a job or project. Your independent contractor agreement should include clauses related to dispute resolution to serve as a guide for parties to resolve issues without going to court.
Key Elements of an Independent Contractor Agreement
Independent contractor agreements will vary depending on the industry, the work to be performed, and the needs of the client.
It is common to find the following provisions in a basic independent contractor agreement:
- Party information. The names and contact details of each party entering the contract. This should also clearly state which party is the contractor providing services and which party is the client who will be responsible for payment of services.
- Scope of work. The work or specific services the contractor agrees to perform under the contract including timelines for project completion and any deliverables. This section may also include exceptions for work that the contractor has not agreed to perform.
- Payment terms. Cost of services, payment schedule, method of payment, invoicing procedures, and any additional fees or expenses that may be applicable.
- Dates when work is expected to be completed and when the client is expected to pay.
- Independent contractor definition. All contracts should include a section that defines the role of the independent contractor and declares that the contractor is not an employee of the client and is acting as a private entity.
- Confidentiality and nondisclosure. Requires both parties to maintain confidentiality pertaining to the work or job completed. This clause is especially important if the independent contractor has access to sensitive business information like intellectual property or trade secrets.
- Indemnification and liability. Clauses that specify the responsibilities and liabilities of each party in case of damages, losses, or legal claims arising from the work or services provided. This section may also dictate the type of level of insurance that the contractor must carry to perform the job.
- Termination information. How the parties may terminate the agreement, including notice periods, grounds for termination, and any remedies or liabilities in case of breach or non-performance.
If you are unsure what provisions should be included in your contract, it is recommended that you seek the advice of a knowledgeable attorney. Leaving out an important clause could lead to legal consequences. An attorney will know what the contract should include and how to best protect the rights of both parties.
What is an Independent Contractor?
Independent contractors, also called freelancers or consultants, are individuals or business entities that are self-employed, provide a specialized service to clients, and do not work as an employee for any company.
According to the IRS, a person is an independent contractor if “the payer has the right to control or direct only the result of the work and not what will be done and how it will be done”. This means that the services performed by an independent contractor are not controlled by the client or person who hired the contractor. The contractor decides how and what work will be completed and is paid directly by the client.
An independent contractor is responsible for paying their own taxes and will not receive any employment benefits from the companies for which they work. An independent contractor will be required to have their own insurance policies and could be personally liable for any damage or injury that may occur during the course of services.
Why Use a Lawyer to Review an Independent Contractor Agreement?
A lawyer should be used to review an independent contractor agreement because a lawyer has specialized legal knowledge and will know what elements must be included in the contract to protect the client’s rights.
Depending on the industry, each independent contractor agreement will require different clauses and protections. A contractor that provides construction services will need different protections and indemnification than a contractor that serves as an IT consultant.
When you hire a lawyer to review your contract, you ensure that your contract protects your interests and your business as an independent contractor.
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