An independent contractor agreement is a written agreement in which one party hires another party to complete a specific short term task.
The basics of an independent contractor agreement
An independent contractor agreement is a written agreement in which one party hires another party to complete a specific short term task. This is not the same as an employment contract and the independent contractor agreement has to specifically explain why the person hired is not a regular employee.
An independent contractor agreement has to contain the following basic information:
- Hiring party (person or entity in need of special services)
- Contractor (person or entity hired for a project/task)
- Services (specific description of the services to be provided by the contractor)
- Compensation (how much and how often the contractor is paid)
- Effective date (Date when the agreement comes into effect and the job starts)
- Termination (provisions on whether and under which circumstances the agreement can be terminated)
- Fringe benefits (independent contractors can not benefit from pensions, bonuses, sick leave pay etc.)
- Assistants (contractors can hire assistants but have to form their own agreements with them)
In addition to the basic contents the following details may be addressed in an independent contractor agreement:
- Assignments (neither party is allowed to transfer their obligations to a third party without written permission)
- Binding effect (the agreement is not terminated if either party is taken over by a third party)
- Entire agreement (previous agreements are no longer valid and any future changes to the agreement have to be made in a written amendment)
- Expenses (unless otherwise agreed, each party is responsible for their own expenses in connection to the project/job)
- Governing Law (serves to determine under which legislation possible disputes will be tried, especially relevant if both parties are located in different countries)
- Indemnification (the contractor has to defend the hiring party, should any issues arise)
- Insurance (the contractor is not covered by the hiring party’s insurance)
- Notices (all communication has to be written and properly delivered)
- Representations (both parties can enter a binding agreement without needing legal representation)
- Severability (if one part of the agreement is invalid, the rest of the agreement still remains intact)
- Waiver (waiving a claim or right guaranteed through the agreement has to be done in writing)
- Warranties (the contractor is responsible for having all the necessary rights, licenses and registrations to be allowed to complete the task)
For many tasks completed by independent contractors the hiring party may have to disclose certain business secrets. Most independent contractor agreements contain non-disclosure clauses, otherwise the contractor may be asked to sign a separate non-disclosure agreement. This holds the contractor responsible for sharing any information regarding the task or the hiring company that is not publicly accessible.
Commonly, the hiring company owns the copyright of an independent contractor’s work and the contractor is not allowed to distribute, monetize or use it in any other way after the job is completed. However, sometimes a contractor may be the owner of their work and grant the hiring company the right to use it for a specified period of time.