Last updated on September 30th, 2020 at 10:18 am
Summary and significance of the clauses
This clause sets out the duties the consultant is contracted to perform, including certain specific services detailed in a schedule, minimising the room for dispute on this matter.
It also sets out the manner in which the freelancer is to carry these services out and what happens in cases of illness of injury. References to holidays or annual leave are not contained, as these would be indicative of employee or worker status.
An important indicator of genuine self-employment status, the clause allows the consultant to appoint a third party substitute to step in and perform their services, and in doing so comply with the same agreement.
This clause sets out any time period during which the freelancer will be expected to provide their services to the company, as well as providing a timetable in respect of the work to be carried out.
Fees and Expenses
Fees payable to the freelancer for their services will be clearly stated in this part of the agreement, including how regularly payments are made. A typical freelance will pay in accordance with the time spent in providing services, as opposed to fixed payments, which are more typical of employment contracts.
All expenses that the company is obliged to reimburse the freelancer for in relation to, for example, travel, are again a provision that distinguishes the agreement from an employment contract, as the freelancer is expected to organise these independently.
Finally, where the freelancer owes money to the company, this clause grants the company permission to deduct sums payable to the freelancer.
This clause almost reflects what would be termed a restraint of trade clause in an employment contract. However here it allows the freelancer to do business with others whilst they provide services to the client company, so long as these other businesses do not directly compete with the company. Where this is the case, written consent would need to be granted by the company to give the freelancer permission to pursue this. This is to avoid the company from being in a situation where their competitors are using the same freelancer for the same work, which may in turn result in the same end results, preventing them from differentiating their business from that of their competitor.
Confidential Information and Company Property
This clause is particularly important to incorporate into the agreement, as a freelancer does not have an implied duty of confidentiality to its client company, in the same way that an employee would. Therefore without expressly providing for this, the company risks the security of information and trade secrets that may be exposed to the freelancer.
This clause will echo provisions of the Data Protection Act 1998, in which the freelancer is to deal with information relating to all those that the company works with (employees, customers, suppliers etc.) “fairly and lawfully”.
The freelancer also agrees to their information being used by the company.
Within this clause, the freelancer essentially gives up any IP rights that they would have in relation to the work that they produce as part of their services to the company, although the parties may agree that some IP remains owned by the freelancer subject to the freelancer granting the company a non-exclusive, royalty free, perpetual and global licence for the company to use such IP.
This clause is particularly important as without it the freelancer will be deemed to own any work they produce, regardless of whether the company has paid for it or not.
Insurance and Liability
The prime purpose for the inclusion of this clause is to ensure that the freelancer takes responsibility for the services they offer. This way the company avoids facing liability for any substandard work performed by the freelancer. In addition, the freelancer is required to take out an insurance policy to ensure they can compensate for any damage they are responsible for, the shortfall of which they will usually personally be liable to pay for.
This clause acts in favour of the company by allowing them in certain cases to terminate and/or rescind the agreement at any time and without having to provide any prior notice. The freelancer on the other hand may only terminate having provided 2 weeks written notice and on the basis that they have completed their work and paid any outstanding amounts due.
Finally, to protect the company, the freelancer is forbidden from working with any of the company’s clients for two years post termination. Two years is often viewed in judgments to be the maximum term allowed for a restrictive covenant to be enforceable without it being a restraint of trade.
Obligations On Termination
It is important to ensure that the freelancer is not able to exploit any information they have been given access to during their work for the company. Therefore, this clause sets out that any material, including physical documentation and that stored on a computer must be returned and/or deleted post termination.
As a way of attracting and securing future projects, it is not uncommon for the freelancer to want to include information of their work for previous companies, for example on their websites or in brochures. This clause ensures that the freelancer gets written permission from the company before they are able to use such information as a personal marketing tool.
Status and Taxation
This clause simply reiterates the fact that the agreement is one for services rather than employment. Although in court this may simply be seen as a ‘label’, and the courts will look to the substance of the agreement to determine the nature of it, this clause will indicate what the parties’ intention was right from the outset.
The freelancer will be responsible for indemnifying the company for sums that they may have to pay in relation to any claims brought against the company as to the worker status of the freelancer. As with the ‘Fees and Expenses’ clause, these sums can be deducted by the company from any amount that they owe to the freelancer. This clause protects the company from having to pay any money that they could have avoided paying.
Variation and Third Party Rights
To avoid either of the parties to the agreement being subject to any terms that they did not initially agree to, this clause stipulates that any variation to the terms must be agreed in writing.
This clause sets out an agreed method of communication between the parties for any formal notices given. In doing so, it will prevent any dispute over how and where notices should have been expected.
This is a standard clause recognising the fact that certain events may occur that are out of the control of either party, and if this is the case, neither one is to be held responsible for such occurrences.
Governing Law and Jurisdiction
Again, this is another standard clause that states that any disputes will be governed and resolved under English law.