If your business engages contractors, it’s a good idea to have a Contractor Agreement in place. But, what is a contractor?

A contractor will usually run their own business whilst providing services to others using their own resources, tools and more to complete the work. Contractors come in all shapes and sizes, ranging from sole traders to conglomerates working in construction and trades, to graphic design and software development.

Why Do I Need A Contractor Agreement?

For businesses engaging contractors, whether you’re running a lean business or simply aren’t specialised enough, hiring contractors over permanent part-time or full-time employees can often be a smart, cost-efficient business choice. Some businesses even engage overseas contractors, although this is subject to certain considerations.

However, before entering into a contractor agreement, be sure you understand the differences between an employee and contractor.

What Is A Contractor Agreement And What Is In It?

A contractor agreement is a contract that sets out the terms and conditions between a business and a contractor to provide services. 

Scope Of Services

Defining and clarifying the scope of services to be performed is key to any commercial contract. By spelling out what each party expects from each other, it not only prevents misunderstandings and disputes, but also allows each party to comfortably continue the commercial relationship with peace of mind. 

Liability Protections

Another advantage of having a contractor agreement is clearly spelling out each parties respective liability under the service and ensuring you’re protected if something goes wrong.

Intellectual Property Ownership 

It’s always important to draft a customised clause to your situation and clarify who actually owns the Intellectual Property. Having a contractor agreement ensures IP ownership is transferred from the independent contractor to your business.

Payment 

Depending on the arrangement you have, payment terms can cover when payment is to be made, the process of making payments and what happens if there are late payments.

Confidentiality

Moreover, having a Confidentiality Clause safeguards your business’ confidential and sensitive information when you bring external stakeholders, such as contractors, onboard. 

Termination

Clarifying terms and conditions and how a service can be terminated is crucial to maintaining a commercial relationship whilst ensuring the scope of work is actually completed and paid for. This can involve including notice of termination, addressing outstanding fees and any partially completed work.

A Contractor Agreement may also cover some more general things, such as the contractor’s duty to manage their own tax obligations. Further, contractors are not entitled to the same things as employees (such as minimum wage), so it’s important that your Agreement covers details around this. 

What To Take Away

Regardless of whether you’re engaging a contractor or not, it’s always best practice to formalise an arrangement in writing to ensure you’re protected and understand core terms of an arrangement. If you need help with putting together a contractor’s agreement, feel free to get in touch!

You can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

About Sprintlaw

Sprintlaw is a new type of law firm that operates completely online and on a fixed-fee basis. We’re on a mission to make quality legal services faster, simpler and more affordable for small business owners and entrepreneurs.

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