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Building a successful career as a freelancer is about more than acquiring clients; it's no different than building a successful business.

Contracts, of course, are a necessity for every business. Yet when it comes to contracts, freelancers often make plenty of mistakes, some of which can carry huge costs. Here are eight of those mistakes...

Not getting it in writing.

Not having a contract is probably the biggest mistake a freelancer can make, for obvious reasons.

Assuming that there will never be a dispute.

One of the biggest reasons that freelancers don't sign contracts (or sign really bad ones) is that they assume there will never be a dispute. Unfortunately, the reality is that disputes can pop up in the most unexpected of circumstances and they're exponentially more costly to resolve when no contract was in place.

Fearing negotiation.

Being a freelancer can be tough, and one of the toughest things can be finding good clients. For this reason, many freelancers will be afraid to negotiate the terms of a contract.

Inexperienced freelancers in particular often believe that negotiating the terms of a contract will send a potential client running the other way. It could, yet a client acquired by agreeing to bad terms is never a good client; signing a poorly-written or one-sided contract can easily end up costing you lots of time and money if something goes sour.

Remember: a contract a potential client presents to you will typically contain boilerplate language written specifically for a party in the client position
. This language is therefore, for obvious reasons, far more likely to contain terms unfavorable to you. An unwillingness to negotiate in turn means that you're not protecting your interests at all, and in the worst cases, may even be creating significant potential liabilities that far outweigh what you might earn from the gig.

Ignoring intellectual property terms.

Most clients want the rights to the intellectual property you produce for them, and most contracts address the subject of intellectual property ownership. Yet making sure that a client 'owns' the work product you produce can be a tricky subject. Two examples:

  • Are you agreeing to a work for hire, or are you assigning your work product? One of the biggest general mistakes freelancers can make is not considering the implications of how and when intellectual property rights are transferred to a client. The advice of an attorney is desirable here given the potential complexities, but in my opinion there is one term a freelancer should always insist upon: intellectual property rights are not transferred until the full amount due under the contract has been paid.
  • Is the client asking you to assign work product, or much more? Be careful freelancers: clients may ask you to assign 'intellectual property' that isn't even really defensible intellectual property (eg. "ideas").

In short, intellectual property is everything in many industries, and freelancers can't underestimate the importance of making sure that their interests here are being protected even if the intellectual property they produce is being paid for by the client.

Not defining scope

Scope can be a freelancer's best friend, or worst enemy. When it's the latter, it's usually because it isn't well defined. And when scope isn't defined, a freelancer can find himself or herself doing far more work than anticipated (and possibly not being paid for it) or stressing over uncomfortable client interactions.

Problems with scope, of course, often arise because clients don't know exactly what they want, or they're incapable of detailing explicitly what they want. Freelancers have several different options for dealing with this:

  • Requiring the client to better define the scope so that the freelancer feels comfortable taking on the work at a fixed price.
  • Billing the client on an hourly or daily rate if the client is unwilling or incapable of defining scope.
  • Assisting the client in determining what he or she wants, and working with the client to articulate it in a formal requirements document. The client should, of course, pay for this work.

Asking little to nothing of the client.

In many cases, freelancers sign contracts under which they have all the obligations and, outside of payment, the client has few. This is, not surprisingly, very common when a prospective client provides a contract. But every freelancer knows that a project can't be completed without a willing partner in the client.

A hypothetical example that will sound familiar to every veteran freelancer: you agreed to deliver a project by the end of the month. The end of the month is two weeks away. The project can't realistically be completed by then because the client has not provided feedback and source materials in a timely manner.

Unfortunately, it's far easier to find a freelancer who is contractually bound to deliver a project by a specific deadline than it is to find a client who is contractually bound to, say, provide feedback to a consultant a timely manner so that the consultant can actually meet that deadline.

Don't make this mistake: make sure that what you need from the client is something the client is contractually obligated to give you within a reasonable timeframe.

Agreeing to poor payment terms.

I have personally met numerous freelancers who don't ask for a deposit, who agree to perform a significant amount of work before they receive a significant payment, or who don't seem to care that Net 45 means they might not get paid for a month and a half once they send an invoice.

Cash flow can make or break a freelance career, and serious clients understand that the only freelancer who delivers is the one who can pay the electricity bill. As such, the payment terms contained in a contract should never be ignored and are almost always worth pushing hard on when necessary.

Not having an attorney on your team.

A good attorney is hard to find, and doesn't come cheap. But every freelancer should have one, even if only for the purpose of being able get a professional explanation when in doubt.

Photo credit: B Rosen via Flickr.

Patricio Robles

Published 19 May, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2402 more posts from this author

Comments (3)

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Rob Watson

Hi, great article. This is a subject I know quite well because in my last salaried job I dealt with liability insurance for freelancers and I knew some of the lawyers that used to defend claims when people got sued.

One comment I would add is to also make sure you document absolutely anything that might modify or change the scope of the original contract. What do I mean by this? Well, how many projects do you work on that end up exactly how both parties envisaged them at the outset? Pretty much none is my guess for most people.

Well, as and when things inevitably change it's really important to cover yourself by following up with an email or fax or whatever to say something like "as agreed, I will now be doing X instead of Y..." so that there is something on the record to show that the client agreed to, or even suggested a change of scope. It all feels a bit "jobsworth" doing this, but it's worth it.

I also think insurance is well worth considering once you start to make a decent amount of money. This isn't a plug for a past employer, honestly - Blyth Valley and Simply Business both offer suitable insurance for marketing and digital marketing consultants and the company I worked for regularly used to miss out on business to both of them so they must be good! It's much cheaper than getting a lawyer at the last minute if you get sued.

over 6 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Rob,

Your point about insurance is a good one. Some contracts, of course, will require an independent contractor to carry some form of insurance, but even for freelancers who haven't encountered that requirement in a contract, insurance is well worth a look given the potential liabilities freelancers in service industries can potentially be subject to.

over 6 years ago

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Charlotte Winton, Solicitor, Managing Director at Winton & Winton Limited

"Not having a contract is probably the biggest mistake a freelancer can make, for obvious reasons." Actually I think that the reasons are not quite so obvious. Arguably, if there hardly any terms of the contract at all, and you are being paid daily or weekly then you might not be in such a terrible place. As a general rule, as a freelancer for code you will own the intellectual property in your endeavours (NB this is the position in England - and note may not be true if you are a graphics artist and have been commissioned to design something specific for the client see: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWCA/Civ/2005/11.html&query=airwair&method=boolean). Secondly, if you are being paid daily/weekly then you only have a limited amount of pay at risk (provided that you do your job perfectly). The non-obvious risk is this - if you are a freelancer to an organised corporate then they are likely to have a standard form of contract for engaging freelancers. It might have not been so clear when you started that you were going to work for them on the terms of that contract - but if there is a dispute then I will bet my second to last dollar that this contract will appear in a flourish, and I will bet my last dollar it will contain terms which you won't like. To wit, I need to add a 9th contract mistake often made. In a contract that is written in favour of the corporate client it is likely that their liability for failure is limited and there is no language protecting you from unlimited liability. A contract that is drafted in your favour will limit your liability to a sum that is a multiple (say 1 to 2) of your fees (or your fees in the last year) together with a complete bar on "consequential loss and damage." I need to show my hand, I am a lawyer (disclaimer - this is not legal advice), and so I am slightly suspicious of the value of insurance. I defer to Rob above who knows more about insurance than I do, but if you are signed up to an unfavourable contract, then absent a breach by the other guys - I don't believe that there is any amount of affordable insurance will save you. Quick read summary: if they won't let you do the work on your standard form contract (not uncommon), ask for their contract, read it, get bits you don't like changed. Definitely do this if (a) the work you are doing is valuable and could go wrong causing them loss; or (b) the work you will do is something you do for lots of clients so there is intellectual property that you need to keep/cannot afford to dispose of; or (c) any of your pay is contingent on a future event and you are not just paid time and materials.

over 6 years ago

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