Work Has Started But There’s No Contractor Agreement - What Now?

You hired a contractor - or maybe you are the contractor - and they’ve started work. You agreed on the basics and swore you’d get around to finalising the agreement, but it’s been six months and nothing has been signed. What now?

Ideally, a Contractor Agreement should be agreed to and signed before any work begins. It gives both sides a clear record of what they’ve agreed to before work, money and intellectual property start changing hands.

However, if the work is already underway, that doesn’t mean you’ve missed your chance. You can still put an agreement in place while the relationship is ongoing. The important thing is working out where things currently stand, clearing up anything that is uncertain and properly documenting the arrangement from here.

Work Out Where The Relationship Currently Stands

Not having a signed Contractor Agreement doesn’t necessarily mean there is no agreement at all.

Contracts do not always need to take the form of one formal document with two signatures at the bottom. Depending on the circumstances, what you have agreed verbally, over email or through quotes, proposals and other communications may all be relevant to working out the terms of your arrangement.

Maybe the contractor sent through a quote, the client approved it by email and work began. Perhaps a price was agreed during a phone call and several invoices have already been paid. Or maybe there is a long trail of messages discussing what needs to be delivered and when.

The first step is getting clear on what has actually happened so far. What work was the contractor brought in to do? What has already been completed? What was agreed around price and timing? Have expectations changed since the project started?

From there, you can formalise the relationship.

A written agreement can reflect the fact that work is already underway, clarify the position where something has been left uncertain and set out how the relationship will operate going forward.

That doesn’t mean one side can simply send over a document containing completely new terms and assume they automatically apply. Both parties should understand and agree to the terms they are putting in place.

Getting everything sorted before the first piece of work is delivered is always easier. But if that didn’t happen, getting it sorted now is still much better than continuing indefinitely without clear terms.

Make Sure It Really Is A Contractor Relationship

Before putting the arrangement in writing, it’s also worth checking that a contractor relationship is still appropriate.

Simply calling someone a contractor, or signing a Contractor Agreement, does not by itself determine their legal status. Depending on the business and circumstances, Australian employment laws may look beyond the label given to the relationship.

This is particularly worth thinking about if the arrangement has changed significantly since it began. Someone might have initially been brought in for a standalone project but, several months later, the way they work with the business may look quite different.

That doesn’t automatically mean they are an employee. However, if there is any uncertainty about the nature of the relationship, it can be worth getting advice before documenting it as a contractor arrangement.

Assuming contracting is the right setup, you can then focus on getting the important parts of the existing relationship clear.

Get Clear On The Work And The Money

Six months into a project, the work might look quite different from what everyone first discussed.

Five website pages may have become eight. Two rounds of revisions may have become six. An estimated completion date might now be treated as a firm deadline. A contractor may think a new request sits outside the original project, while the client thinks it was included from the beginning.

This is where putting the arrangement in writing can be particularly useful.

Rather than simply recreating the original plan, look at where the project stands now. A Contractor Agreement can clarify what has already been completed, what still needs to be delivered, any remaining deadlines or milestones and how additional work or changes will be handled.

Payment should be just as clear.

If invoices have already been issued and paid, there may already be an established way of doing things. However, both sides should still understand what the contractor will be paid for the remaining work, when invoices are due, whether expenses are included and how any additional work will be priced.

That clarity helps both sides. The client has a better idea of what they are paying for, while the contractor is less likely to find themselves doing extra work they never intended to include in the original price.

Sort Out Who Owns The Work

Intellectual property can become particularly important when work starts before the contract is finalised.

Imagine a contractor has already spent several months developing software, designing a brand, creating marketing materials or writing content for a client. The client may assume that because they paid for the work, they own it. The contractor may have a very different understanding.

Businesses shouldn’t assume they automatically own IP simply because they paid a contractor to create it. As a general rule, IP created by an independent contractor may remain with the contractor unless ownership has been dealt with appropriately in the agreement.

For contractors, there can be another side to the issue. You might be comfortable transferring rights in the finished work created specifically for a client, but that doesn’t necessarily mean you want to transfer ownership of your existing templates, tools, processes, code or other materials that you use across your business.

If the relationship has already started, your agreement may therefore need to deal with both work that has already been created and work that will be created going forward.

Depending on what has happened, a separate IP Assignment Deed may also be appropriate where intellectual property rights need to be formally transferred.

The important thing is not to leave ownership sitting on assumptions simply because the project is already underway.

Deal With Information And Access That Has Already Been Shared

By the time everyone realises the agreement is still unsigned, the contractor may already have access to a significant amount of the client's business.

That could include customer information, internal documents, passwords, software accounts, source code, pricing information or commercially sensitive plans. The contractor might also have shared their own confidential processes, templates or other proprietary materials with the client.

A Contractor Agreement can help make it clear what information should be treated as confidential, how it can be used and what happens to that information when the work ends.

If personal information is involved, privacy obligations may also need to be considered. Businesses covered by the Privacy Act 1988 (Cth) should make sure personal information is appropriately protected, including where contractors or other third parties are given access to it.

The exact protections you need will depend on what the contractor actually has access to. The important thing is to look at the relationship as it exists now, rather than relying on what everyone expected when the project first started.

What If You’re Not On The Same Page?

Sometimes, finally putting things in writing reveals that the two sides weren’t quite as aligned as they thought.

Perhaps the client assumed it would own all of the IP, while the contractor never intended to transfer it. Maybe the contractor considers a new piece of work outside scope, while the client thinks it was part of the original fee.

Finding that out now can actually be useful.

Instead of allowing different assumptions to continue for another six months, both sides have an opportunity to clarify what they understand the arrangement to be and agree on how things will work from here.

If one side sends through an agreement and the other objects to an important term, don’t simply assume that term applies because it has been put in writing. Material differences should be worked through and agreed before substantially more work, money or IP becomes tied up in the relationship.

In some cases, the parties may decide that continuing the arrangement no longer makes sense. If that happens, there may still be practical matters to sort out, including outstanding payments, unfinished work, handover of files, IP ownership, confidential information and access to business systems.

Again, having these things set out from the beginning is preferable. But if they weren’t, addressing them now can still make the relationship - or its end - much clearer for everyone involved.

Get It In Writing - Even If You’re A Little Late

Getting a Contractor Agreement in place before work starts is always the better option. But projects move quickly, deadlines appear and sometimes everyone gets started with every intention of sorting the paperwork later.

If that’s where you are now, it doesn’t mean it’s too late.

Whether you’re the business or the contractor, take a look at what has already been agreed, identify anything that is still unclear and document how the relationship will work from here.

If you would like a consultation on getting a contractor agreement, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.