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The importance of understanding contracts

When it comes to freelance work, having a freelance contract is essential. The freelancer agreement you will create as you go through this playbook outlines the terms of the agreement between you and your client. From the scope regulation to the details of payment terms, a good contract can help avoid any misunderstandings or disputes later on.

So what should a freelance contract include? There was so much to cover we had to make two playbooks. This first one will cover the basics, including the project description, payment schedule, and deadline. You'll also want to include provisions detailing what happens if either party fails to meet its obligations. In the next playbook, we will cover any nice-to-have additions such as when you might want to charge a late fee for payments made after an agreed deadline.‍

Why do freelancers need contracts?

This step is designed to give you some insight into the terrain and answer that burning question: why is it important for me to learn the basics of general contracting? Unfortunately, many freelancers only apply contract best practices once they've learned the hard way. We’re here to help you get ahead of that.

With this playbook, you will not only leave this playbook with your own contract you've defined and developed, but also background information and an understanding of common sense and custom. In this way, you'll be able to read any unusual or complex contracts with confidence. ‍

Contracts are everywhere 

Even if you don’t sign on the dotted line when you agree to work on a project, you are agreeing to a verbal contract. And if you don’t pay attention to the contract you can set yourself up for unpleasant surprises or leave money on the table. It's "financially wise and foolish" to ignore the strategic security that contracts can provide.

Contracts are all around you, even if you don’t realize it. Various types of business cooperation agreements with sufficiently specific terms, performance expectations, and confidence in the other party's promises are contracts: "I'll be on site on Monday," "We’ll pay you for your work next week”... These are enforceable by law. And you’re probably contracted to some extent all the time without even realizing it.‍

Answer these questions in your workbook:‍

  • Do you know which of your business arrangements can really be said to be legally binding on both parties?

  • Are you in any business or client relationships you’re not sure are covered by contracts?

  • Do you know how you’ll get paid if the client goes out of business before the project ends?

  • Do you know what you agreed to in the last contract you signed? 

  • Do you know whether your client can cancel the contract at any time—and do you know if you have the same rights? 

  • How broad was the scope of the last non-compete agreement you signed? 

  • Do you know whose quality standards are legally enforceable under the contract—are you the expert, or does your client have full authority to decide what “good enough” means?

  • If your work isn’t “good enough”—do you know what you’d do or what recourse you have? 

If these questions make you want to dig back out all of your previous contracts and reread them — you’re not alone!

‍When you are working with a contract that was given to you by a client, make sure you understand each section before signing it. If anything is unclear, ask for clarification from the other party or have an attorney look it over. You should also always keep a copy of the contract for your records.‍

Contracts help you avoid common pitfalls

Having a strong sense of contracts and tools on hand will help you avoid these common freelancing pitfalls: 

  • The client is asking for endless rounds of revisions but isn't paying you for the extra work.

  • It's 60 days past the invoice date, you haven't been paid yet, and no one is responding to your emails.

  • The deadline is moved up a full week without giving you any notice.

  • You're unable to include samples of the work you did in your portfolio because of an NDA.

This playbook will teach you how to prevent these kinds of inefficient or unexpected outcomes and will equip you with your own agreement to cover all your bases.

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