How to Write a Freelance Contract: 12 Critical Clauses and Best Practices

What is a freelance contract? 

A freelance contract is a legally binding agreement that includes all of the terms and conditions of the work arrangement with an independent contractor. 

For companies: Contracts protect companies by providing a guarantee that the freelancer will deliver the work according to the agreed-upon timelines and specifications. If the company has any policies relevant to the arrangement that must be upheld (including use of equipment, training, protection, or additional compensation), they can specify that in the contract as well. 

For freelancers: Contracts protect non-payroll workers by providing a guarantee that the company will pay them according to their rates, requested currency, preferred payment method, and designated time frame. It also provides an opportunity for freelancers to clarify their expectations for the scope of work, the approvals process, deadlines, and ownership rights. 

This article is part of our guide on independent contractors’ agreements.

When Do I Need a Freelance Contract?

You can’t know when something might go sour in a freelance relationship. As the company, your freelancer could disappear mid-project, or cause business impact by delivering work late. A freelancer could also change the terms on you, or you could realize there has been a miscommunication where the terms weren’t actually clear enough to begin with. As a result, the answer to when you need a freelance contract is — always. If you’re entering into a relationship with a freelancer for any length of time or any project, it’s always going to be best practice to have a contract in place. 

Think about situations like hiring a photographer to take photos for your website, due to go live within two weeks, or engaging with a freelance web developer to launch your new mobile app. You could hire a freelance social media guru to get your brand identity understood far and wide, or even a freelance CFO to take a look at the accounting books. In all of these cases, you’re going to want a contract in place. 

Common Uses of a Freelance Contract

• Where you need extra legal protection: If you’re working in a highly regulated industry or your freelancers will be handling sensitive information or IP. 
• When you are engaging with a new freelancer: If you don’t know one another, it can add an extra layer of confidence to work with a contract. 
• When the freelancer has specific terms: Laying out payment terms, delivery dates, and expectations on ownership of content can make everything crystal clear. 
• If your company has specific policies: Make sure that your freelancer understands your policies on equipment, working hours, training or any other detail. 

Consequences of Not Using a Freelance Contract

Failing to sign a freelance contract can lead to a range of negative outcomes for both the hiring company and the freelancer. Here are some key consequences:

• Legal disputes: Without a formal agreement, misunderstandings can escalate into legal battles. The absence of clearly defined terms and conditions leaves both parties vulnerable to disputes over scope of work, payment, and ownership of deliverables.
• Unclear payment terms: Freelancers may experience delays in receiving payments or may not get paid at all if payment terms are not explicitly stated. Similarly, companies might face unexpected demands for additional payments or find themselves paying for substandard work.
• Scope creep: Without a contract outlining the project scope, freelancers may find themselves doing more work than initially agreed upon without additional compensation. Conversely, companies may end up receiving less than what they expected, impacting project timelines and quality.
• Intellectual property issues: The ownership of work produced by freelancers can become contentious if not predefined. This can lead to legal complications if the freelancer decides to use or sell the work elsewhere, or if the company assumes ownership without formal agreement.
• Lack of accountability: A contract ensures that both parties understand their responsibilities. Without one, there may be a lack of accountability, leading to missed deadlines, poor quality work, or even abandonment of the project.
• Compliance risks: In regulated industries, not having a contract can result in non-compliance with industry standards and laws, which can lead to fines, legal action, or damage to reputation.

How to Write a Freelance Contract: 12 Key Clauses

Now that you understand the basics, what should go inside a freelance contract? Here are the 12 components of the freelance contract anatomy. 

1. Contact details for the freelancer and client. This includes the full names, phone numbers, and email addresses for both parties. Additional information like the freelancer’s EIN or business number and the company’s mailing address are also usually included. 
2. Project scope. Here, you should describe the work you are hiring the freelancer to do. You’ll want to cover the purpose of the project, the length of time it will take, and the number of hours the freelancer is expected to work. You may also outline expectations for communication, what the feedback process will look like, and who in the company will be involved in approvals and signing off on work.
3. Equipment and expenses. Freelancers who are hired to do certain types of work may need to purchase specific tools, software, equipment, or training. In the contract, you should spell out who is responsible for bearing those costs — your company or the freelancer.
4. Deliverables. Clarify exactly what the freelancer is expected to complete or produce.
5. Pricing and rates. In this section, you will specify how much the freelancer will be paid, and if they charge a fixed cost, hourly rate, a retainer, or another type of payment arrangement. 
6. Payment schedule and options. Here, you will define the payment method, timeline, and currency for paying the freelancer.
7. Deadlines and timeline. In many cases, it’s difficult to plan exact deadlines in advance. However, it’s still a good idea to include in the contract when the work relationship begins and when you expect the work to be done. You may also want to note whether or not deadlines are flexible, and if there are any repercussions for missing them. 
8. Ownership/copyright. This clause clarifies who actually owns the work after the freelancer completes it. In most cases, the freelancer retains the rights to the work until you pay them for it. Once the freelancer receives the payment, he or she cannot use or resell the work to anyone else. 
9. Legal terms. Define important legal terms and conditions to ensure both the freelancer and hiring manager understands their legal obligations.
10. Early termination and kill fee. In this section, you should outline terms and agreements in the event you  need to cancel the project before it is finished. For example, you should cover how you will compensate the freelancer for the work they did so far, in what form they should deliver what they completed, and whether or not the work engagement is formally ending. 
11. Dispute reconciliation. Here, you should add a jurisdiction or arbitration clause that defines what legal action will be taken in the event that either side claims there was a breach of the contract. This is especially important if you are working with freelancers who are based in other states or countries, where dealing with the legal process may be more complex and expensive.
12. Signatures. Both parties must sign the contract in order for it to become a binding legal document. In other words, the contract is only valid if both parties sign.

When Should You Use a Freelance Contract Template?

Using a freelance contract template can streamline the process of creating comprehensive and legally sound agreements. Here are instances when a template is particularly useful:

• For standard projects: When the work involved follows a routine structure and scope, such as graphic design or content writing, a contract template ensures all necessary components are included without starting from scratch.
• When hiring multiple freelancers: For businesses frequently engaging freelancers, a template provides a consistent foundation that can be quickly customized to suit individual projects, saving time and reducing administrative burden.
• For short-term projects: For projects with a limited duration, a template allows for quick and efficient contract creation, ensuring that essential terms are clearly outlined from the start.
• When operating under tight deadlines: Templates are invaluable when time is of the essence, allowing companies to rapidly generate contracts without compromising on legal safeguards.
• For new or small Businesses: Smaller businesses or startups may lack the legal resources to draft custom contracts. Templates offer a cost-effective solution to protect their interests and establish clear working relationships with freelancers.

Freelance Contract Sample

Here is an example of what a freelance contract might look like. Remember, you can add or remove clauses to make it suit your business, but make sure to take legal advice before you hit send. 

See a full freelance contract example provided by Legal Templates.

Image credit: Legal Templates

What Are the Benefits of Drafting a Freelance Contract?

There are four important benefits of signing contracts with all of your freelancers that help you avoid conflicts and reap the most value from their talents. 

1. Avoid misunderstandings. The act of clearly articulating both parties’ expectations and requirements helps everyone involved understand exactly what the work engagement should entail. With this understanding, you can avoid unpleasant misunderstandings that can jeopardize the work relationship, such as who is responsible for covering expenses or how flexible deadlines are. A clearly written contract eliminates the chances of ambiguity and misunderstanding. 
2. Gain legal protection. An agreement that is signed by two parties is a legally binding document, which means it can be used in court should one party breach its terms. This helps ensure you are covered in the event that the freelancer doesn’t deliver the work. It also ensures that you pay the freelancer for their service. 
3. Show that you work “by the book.” Not only do contracts help you build more successful work relationships with independent contractors, but they also show external stakeholders (like investors) that you are doing everything legally and in an orderly manner. Should you undergo a due diligence audit, you can expect that all of your freelance contracts will be reviewed. 
4. Stay in compliance with labor laws. In many US states and countries, it is illegal to work with a freelancer without signing a contract. Some laws, such as New York’s Freelancing isn’t Free Act of 2016 or the Philippines’s freelance protection law , were enacted to protect freelancers from withheld payments and exploitation. 

What’s the Difference Between Contracting as a Freelancer and Contracting as an Employee?

Employment Status

Freelancers operate as independent contractors, responsible for their own taxes, benefits, and business expenses. They are not on the company’s payroll and typically receive payment through invoices. In contrast, employees are on the company’s payroll, and their taxes and benefits, such as health insurance, retirement plans, and paid leave, are managed by the employer.

Autonomy

Freelancers generally have more control over their work schedules, methods, and locations. They can choose their projects and often work for multiple clients simultaneously. Employees, however, usually have set schedules, work at the employer’s premises, and must adhere to company policies and procedures. Their work is often closely monitored and directed by supervisors.

Job Security

Employees enjoy greater job security and continuity, with a steady income and long-term employment prospects. They are typically protected by labor laws that guarantee minimum wage, overtime pay, and other employment rights. Freelancers, on the other hand, work on a project-by-project basis, facing fluctuating workloads and income. Their job security is dependent on continuously securing new contracts.

Payment Structure

Freelancers are paid per project, per hour, or through a retainer arrangement, issuing invoices for their work. Their income can vary widely based on the number of projects they secure and their rates. Employees receive regular salaries or hourly wages, processed through the company’s payroll system. This provides a stable and predictable income, often with additional benefits like bonuses or profit-sharing.

Work Relationship

The relationship between a freelancer and a company is typically transactional and project-specific. Freelancers are hired for their expertise to complete specific tasks within a defined timeframe. In contrast, employees are integral to the organization, often engaging in a broader range of duties and contributing to the company’s long-term goals. They participate in team activities, benefit from professional development opportunities, and are subject to performance evaluations and career progression within the company.

Why General Contracts Aren’t Enough

When first learning how to write a freelance contract, you may think the agreement is comprehensive enough to secure you and the freelancer in the work engagement. However, that’s usually not the case.

As the hiring company, you (and your legal/security teams) will want the opportunity to elaborate further on policies, rules, and obligations related to security, compliance, and intellectual property. For that, you need both parties to sign the following legal documents:

• Non-disclosure agreement: An NDA (also referred to as a confidentiality agreement), is a legally binding contract that establishes a confidential relationship between your company and the freelancer. By signing an NDA, the freelancer is legally forbidden from sharing any sensitive information they may obtain with individuals outside of your company.
• Intellectual property (IP) agreement: An IP agreement establishes the transfer of intellectual property rights from one party to another. When hiring freelancers, the most common reason for an IP agreement is for the company to gain the IP rights of the work from the freelancer. 
• Non-compete agreement: This agreement is a contract in which the worker agrees not to work with other companies that are considered competitors of the hiring company for a specified period of time after the work relationship ends. Non-compete agreements also prohibit the worker from revealing proprietary information or company secrets to anyone outside of the hiring company.
• Data protection agreement: Often, a freelancer will need access to sensitive company data in order to complete their work. In this case, you will want them to sign an agreement that compels them to comply with your company’s data secrecy and security policies.

Don’t Overlook Contract Archiving

There’s one more important part of freelance contracts we need to cover before we go — archiving. 

Unless all of the necessary stakeholders can easily access and review the signed contracts, it will be difficult to enforce them.

Today, many companies continue to rely on outdated methods of archiving contracts, such as with emails and Excel spreadsheets. One of the main issues with this approach is lack of organization. 

For example, only email recipients have access to contracts and information that are shared back and forth. And, as time goes by, digging through old email chains to locate information can be a pain. Excel spreadsheets offer marginally better organization, but fail to centralize access, and require manual updating.

Fortunately, there are solutions available that make contract archiving and managing simple. A freelance management system (FMS) is designed to make sure both parties sign freelance contracts promptly and keeps them centralized and accessible to all relevant stakeholders. 

Do you have more tips for writing freelance contracts and getting the most out of your non-payroll workforce? Leave us a comment below!

If you’d like to discuss creating smart contracts that protect both you and the freelancer, and using a FMS to supercharge the way you work with freelance talent, you can reach out to schedule a 30-min call with one of our legal experts. 

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