Protect yourself if a project doesn’t work out

Freelance projects can go wrong in a number of ways. 

One way is that the project may not be completed, either because the client fails to live up to their obligations or the freelancer is unable to meet them. In this situation, the contract should have clauses that address incomplete and/or failed projects.

One potential problem that can arise if a project isn’t completed, is that the freelancer may not be paid for the work they completed. This can happen if the client terminates the contract for convenience (i.e. they no longer want to work with the freelancer) or for cause (i.e. there was a dispute about the quality of the work). In either case, it's important for you to have a termination clause in your contract so that you’re not left unpaid. For protection, you should include a clause in the contract that says any disputes will be resolved through arbitration or mediation. This way, you can avoid costly and time-consuming legal battles.

Contracts are essential in protecting you from losing money, time, and reputation.

Key terms

• Termination

• Termination for convenience

• Termination for cause

• Kill fee

• Monetary damages

• Restitution

• Specific performance

How does termination work?

Termination is the end of a contract. In a freelance contract, termination usually refers to the end of the relationship between the freelancer and the client.

Some common clauses that include termination address incomplete or failed projects, meaning you can be terminated for convenience or cause. Termination for convenience allows the client to terminate the contract without any consequences, while termination for cause allows the client to terminate the contract only if the freelancer has done something wrong.

Freelancers can protect themselves by having their own contracts with their own termination clauses. 

Protect your bottom line: the kill fee

This is a fee that you'd receive if the project is canceled by the client partway through. A kill fee helps to ensure that you don't lose money on a project that was terminated prematurely. 

An example of this would be the client ending the contract without cause or without giving you a chance to fix the issue. In many situations, this would leave you without work and without payment for the work you have already completed.

Kill fees in freelancer contracts are a form of “liquidated damages,” meaning the contract specifies an amount of money that’ll be paid if the contract is breached, and this amount is intended to compensate the non-breaching party for their losses. Kill fees are typically a percentage of the total contract value and are meant to cover the costs incurred by the freelancer in working on the project up to the point of cancellation.

Remedies

Contract remedies are ways for the client and you to resolve any disputes that may arise. These can include monetary damages, restitution, or specific performance. 

• Monetary damages are usually an amount of money that’s awarded to one party as compensation for losses suffered. 

• Restitution is when the party who breached the contract is made to return any benefits they received from breaking the contract. 

• Specific performance is when a court orders one party to perform their obligations under the contract. This is usually done as a last resort when other remedies have failed.