Your Legal Companion for Consultant and Independent Contractor Agreements

1. How to Use This Book

• Why Use Written Agreements
• Agreements Contained in This Book
• Putting Your Agreement Together
• Changing the Agreement After It’s Signed

2. Hiring Consultants and Independent Contractors

• Benefits and Drawbacks of Using Independent Contractors
• Workers Who Qualify as Independent Contractors
• Economic Realities Test
• ABC Test
• Special State Rules for Determining IC Status
• Procedures for Working with Independent Contractors
• While ICs Work for You

3. Working as a Consultant or Independent Contractor

• Benefits of Working as an Independent Contractor
• Drawbacks of IC Status
• Who Decides Whether You’re an IC?

4. Enforcing Consultant and Independent Contractor Agreements

• Preliminary Considerations
• Negotiation
• Mediation
• Arbitration
• Litigation

5. General Independent Contractor Agreements

• Agreement for Hiring Firm to Use
• Agreement for Independent Contractor to Use

6. Consultant Agreements

• Consultant Agreement for Use by Hiring Firm
• Agreement for Use by Consultant

7. Agreements for Household Services

• Agreement for Use by Hiring Party
• Agreement for Use by Worker

8. Agreements for Salespeople

• Special IRS Rules for Salespeople
• Agreement for Use by Hiring Firm
• Agreement for Use by Salesperson

9. Agreements for Accountants and Bookkeepers

• Agreement for Use by Hiring Firm
• Agreement for Use by IC

10. Agreements for Software Consultants

• Agreement for Use by Hiring Firm
• Agreement for Use by Consultant

11. Agreements for Creative Contractors

• Agreement for Use by Hiring Firm
• Agreement for Use by Contractor

12. Agreements for Construction Contractors

• Agreement for Use by Hiring Firm
• Agreement for Use by Contractor

13. Agreements for Messengers, Couriers, and Delivery People

• Agreement for Hiring Firm to Use
• Agreement for Use by IC

14. Agreements for Social Media Consultants

• Agreement for Use by Hiring Firm
• Agreement for Use by Social Media Consultant

15. Agreements for Gig Workers

• Agreement for Use by Hiring Firm
• Agreement for Independent Contractor to Use

Appendixes

A: Using the Downloadable Forms

• Editing RTFs
• List of Forms

B: Sample Agreements for Use by Hiring Firm/Client

• Independent Contractor Agreement [for use by the hiring firm/client]
• Independent Contractor Agreement for Consultant [for use by the hiring firm/client]
• Independent Contractor Agreement for Household Worker [for use by the hiring firm/client]
• Independent Contractor Agreement for Salesperson [for use by the hiring firm/client]
• Independent Contractor Agreement for Accountants & Bookkeepers [for use by the hiring firm/client]
• Independent Contractor Agreement for Software Consultant [for use by the hiring firm/client]
• Independent Contractor Agreement for Creative Contractor [for use by the hiring firm/client]
• Independent Contractor Agreement for Construction Contractor [for use by the hiring firm/client]
• Independent Contractor Agreement for Messengers, Couriers, and Delivery People [for use by the hiring firm/client]
• Independent Contractor Agreement for Social Media Consultant [for use by the hiring firm/client]
• Independent Contractor Agreement for Gig Worker [for use by the hiring firm/client] Contract Amendment Form
• Publicity/Privacy Release
• Cover Letter
• Independent Contractor Questionnaire
• Document Checklist

C: Sample Agreements for Use by IC

• Independent Contractor Agreement [for use by the IC]
• Independent Contractor Agreement for Consultant [for use by the IC]
• Independent Contractor Agreement for Household Worker [for use by the IC]
• Independent Contractor Agreement for Salesperson [for use by the IC]
• Independent Contractor Agreement for Accountants & Bookkeepers [for use by the IC]
• Independent Contractor Agreement for Software Consultant [for use by the IC]
• Independent Contractor Agreement for Creative Contractor [for use by the IC]
• Independent Contractor Agreement for Construction Contractor [for use by the IC]
• Independent Contractor Agreement for Messengers, Couriers, and Delivery People [for use by the IC]
• Independent Contractor Agreement for Social Media Consultant [for use by the IC]
• Independent Contractor Agreement for Gig Worker [for use by the IC]
• Contract Amendment Form
• Publicity/Privacy Release
• Invoice

Index

How to Use This Book

This chapter explains how to use this book to put together agreements that will serve your business needs, legally and efficiently.

If you need some legal background on hiring independent contractors, refer to Chapter 2. If you’d like an introduction to the legalities of working as a consultant or IC, refer to Chapter 3.

RESOURCE
This book is intended to serve as a supplement. For detailed guidance on all the legal issues involved in working as an independent contractor, see Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Gig Workers of All Types by Stephen Fishman (Nolo).

Why Use Written Agreements

Using written independent contractor or consulting agreements benefits the independent contractors and consultants, as well as the clients who hire them. For the sake of simplicity, the terms “consultant,” “contractor,” and “IC” are often used interchangeably in this book. People who hire ICs are referred to as “clients” or “hiring firms.”

RESOURCE
For detailed guidance on all aspects of contract law, refer to Contracts: The Essential Business Desk Reference, by Richard Stim (Nolo).

Oral Agreements Are Legal but Dangerous

Most contracts don’t need to be written to be legally valid. (For exceptions to this general rule, see “Some Agreements Must Be in Writing,” above.) For example, a client and an IC can enter into a contract over the phone or during a lunch meeting at a restaurant. No magic words need be spoken, and nothing has to be written on a piece of paper. They just have to agree that the IC will perform services for the client in exchange for something of value—usually money. Theoretically, most oral agreements are as valid as a 50-page contract drafted by a high-powered law firm.

Example: Gary, a freelance translator, receives a phone call from a vice president of Acme Oil Co. She asks Gary to translate some Russian oil industry documents for $2,000. Gary says he’ll do the work for the price. Gary and Acme have a valid oral contract.

In the real world, however, using oral agreements is like driving without a seatbelt—there’s no problem as long as you don’t have an accident, but if you do have an accident, you’ll wish you had buckled up. An oral IC agreement can work just fine provided that you and the other party remember the contract’s terms in the same way and fulfill them as expected by the other party.

Unfortunately, things don’t always work out. Courts are crowded with lawsuits filed by people who entered into oral agreements with each other. Costly misunderstandings can develop when an IC performs services without a clear written description. Such misunderstandings are often innocent— you and the other party might have misinterpreted each other or failed to listen carefully. But sometimes they can be purposeful—and without a written document to prove otherwise, the other side can claim that you orally agreed to anything.

A properly drafted IC agreement is your legal lifeline. It will help prevent disputes by making clear exactly what’s been agreed to. It will provide ways to solve any problems that develop. And, if you and the other party end up in court, it will establish your legal duties to each other.

Advantages of Written Agreements

Written agreements do more for you than help to avoid misunderstandings or dishonest dealings. Practically speaking, a written IC agreement signed before work begins also:

• Defines the project. The process of deciding what to include in an agreement forces both the IC and the client to think carefully about exactly what the IC is supposed to do. Previously hazy or ill-defined expectations are clarified when they’re negotiated and put in a writing that specifically describes the work that the IC will perform. The agreement gives both sides a yard- stick by which to measure the IC’s performance, and is the best way to avoid later disputes.
• Establishes IC status. A well-drafted IC agreement helps establish that a worker is an IC, not the client’s employee. This is vital both for the client and the However, a written IC agreement is not a magic legal bullet. It will never by itself turn an employee into an IC. What really counts is how the worker is actually treated. (See Chapter 2 for a detailed discussion of the importance of distinguishing employees from ICs, along with information on how to treat a worker like an IC.)
• Clarifies payment terms. If you’re an IC, a written agreement clearly setting out your fees helps prevent disputes about how much the client agreed to pay If a client fails to pay and you have to sue for your fee, the written agreement will be proof of how much you’re owed. Relying on an oral agreement with a client can make it very difficult for you to get paid in full—or at all. Conversely, clients will want a clear fee understanding to avoid claims of underpayment.

Agreements Contained in This Book

This book contains a number of consultant and independent contractor agreements you can adapt to fit your needs. It includes:

• two general-purpose IC agreements that can be used by almost anyone who hires an IC or works as one (see Chapter 5), and
• several different agreements tailored to specific kinds of work ICs commonly perform, including:
  • independent consulting (see Chapter 6)
  • household work (see Chapter 7)
  • sales (see Chapter 8)
  • accounting and bookkeeping (see Chapter 9)
  • computer software consulting (see Chapter 10)
  • creative work, such as writing, illustration, graphic design, and music composition (see Chapter 11)
  • construction (see Chapter 12)
  • messenger, courier, and delivery services (see Chapter 13)
  • social media consulting (see Chapter 14), and
  • gig workers (see Chapter 15).

You’ll find two different agreements for most of the above categories—one for use by the hiring firm and another for use by the IC. Although neither form is unduly one-sided, you’ll want to use the form that best protects your interests.

Each chapter contains a detailed description of all the provisions in the agreement it covers. Be sure to read the instructions carefully as you complete your agreement: Many of the provisions contain alternatives you can choose from, such as whether the IC will be paid by the hour or with a fixed fee, or they might require you to provide additional information, such as names, dates, and addresses.

FORM
Finding and using the forms. All of the forms and agreements in this book are available in electronic format so you can customize them for your needs—see Appendix A for instructions on how to download them. You can also find full copies of the forms in Appendices B and C: Appendix B contains copies of all the forms that a hiring firm (client) would use, and Appendix C contains copies of all the forms that an independent contractor would use.

Putting Your Agreement Together

If your agreement isn’t signed and compiled properly, it might not be legally valid. This section provides all the instructions you need to get it right.

Signatures

Although not always legally required, it’s best for both parties to sign the agreement. The two of you need not be together when you sign, and it isn’t necessary to sign at the same time. Customarily, signatures are placed at the end of the agreement to signify that both parties have read and agreed to the entire document.

Incorrect signatures can have drastic consequences. How to sign depends on the legal form of the businesses entering into the agreement.

Sole proprietorships

A sole proprietor is someone who runs a one-person business and hasn’t incorporated or formed a limited liability company. A sole proprietorship, unlike a corporation or partnership, isn’t a separate legal entity from the person who owns it. The vast majority of ICs and consultants are sole proprietors, as are many clients.

If you or the other party is a sole proprietor, you can each simply sign your own name and nothing more. For example, if Susie Davis is a sole proprietor who runs custom shopping tours for wealthy tourists, she would simply write “Susie Davis” on the signature line of her agreements.

On the other hand, if you’re a sole proprietor who uses a fictitious business name, it’s best for you to sign on behalf of your business.

EXAMPLE: Chris Kraft is an IC sole proprietor who runs a marketing research business. Instead of using her own name for the business, she calls it AAA Marketing Research. She should sign her contracts like this:

Partnerships

If either individual signing the agreement represents a partnership, they must sign the agreement on behalf of the partnership. The partnership must be identified in the signature block.

Identifying the partnership is very important: If a partner signs individually without mentioning the partnership, the partnership won’t be bound by the agreement—only the single partner will be bound. This means that you couldn’t go after the partnership’s money or assets if the signing partner breaches the agreement. Instead, you could obtain only the signing partner’s assets, which will likely be less than the partnership’s.

Conversely, if you’re a partner in a partnership and mistakenly sign an agreement as an individual, you’re setting yourself up as the target if something goes wrong. Because the other side won’t be able to sue the partnership, it will look solely to you for legal recourse.

Which partner should sign? If the partnership is a general partnership (every partner invests and participates in managing the business), any partner can sign. But some partnerships are limited partnerships, which means that not all partners can act on behalf of the partnership: “limited” partners invest in but don’t participate in the business. Limited partners should never sign agreements—by law, they have no authority to bind the partnership. The agreement should always be signed by a general partner.

Only one partner needs to sign. The signature block for the partnership should state the partner- ship’s name and the name and title of the person signing on the partnership’s behalf.

EXAMPLE: The Argus Partnership contracts with Sam for marketing research. Randy Argus is one of the general partners. He signs the contract on the partnership’s behalf like this:

Sometimes, a person who isn’t a partner legally can sign on behalf of a partnership. In this circumstance, the signature should be accompanied by a partnership resolution—a document signed by one or more of the general partners stating that the person named has the authority to sign contracts on the partnership’s behalf. Attach the resolution to the end of the agreement.

Corporations

If either party is a corporation, the agreement must be signed by someone who has authority to sign contracts on the corporation’s behalf. The corporation’s president or chief executive officer (CEO) is presumed to have this authority.

If someone other than the president or CEO signs—for example, a vice president, the treasurer, or another corporate officer—ask to see a board of directors’ resolution or corporate bylaws authorizing that individual to sign. If the person signing doesn’t have authority, the corporation won’t be legally bound by the contract.

Attach the resolution to the end of the agreement. Keep in mind that if you own a corporation and you sign personally instead of on your corporation’s behalf, you’ll be personally liable for the contract. You probably formed a corporation to avoid such liability, so signing improperly is self-defeating.

The signature block for a corporation should state the name of the corporation and the name and title of the person signing on the corporation’s behalf.

Example: Emma Steinberg is the president of Kiddie Krafts, Inc. Because she’s the president, any contracts signed by her need not be accompanied by a corporate resolution showing she has authority to bind the corpo- ration. The signature block for contracts she signs should look like this:

Limited liability companies

The owners of limited liability companies are called members. Members may hire others, called managers, to run their company for them. An agreement with a limited liability company should be signed by a member or manager.

Example: AcmeSoft LLC, a limited liability company, hires Sally to perform freelance programming services. The contract is signed on AcmeSoft’s behalf by Edward Lee, the company’s manager. The signature block should appear in the contract like this:

Dates

When you sign an agreement, include the date and make sure the other party does, too. You can simply put a dateline next to the place where each person signs. For example:

Both parties don’t have to sign on the same day. However, unless the agreement provides a delayed starting date, it goes into effect on the date it’s signed.

Neither party is bound by the agreement until it’s signed by both parties, so when the parties sign on different dates, the agreement begins on the date the last person signed.

Attachments or Exhibits

To keep your IC agreement focused on just the essential aspects of your arrangement, use attachments (also called exhibits) to list lengthy details, such as performance specifications. You can also use attachments (such as the partnership resolution discussed above) to reference supplemental information. Putting practical details in a separate but attached document makes the main body of the contract shorter and easier to follow.

If you have more than one attachment or exhibit, they should be numbered or lettered— for example, Attachment 1 or Exhibit A. The attachments don’t have to be dated or signed, but be sure that the main body of the agreement mentions that the attachments or exhibits are included as part of the contract.

Altering the Agreement

Sometimes it’s necessary to make last-minute changes to a contract just before it’s signed. If you use a computer to prepare the agreement, it’s best to make the changes on the computer and print out a new agreement.

However, it’s not legally necessary to prepare a new contract. Instead, you can handwrite or type the changes onto all existing copies of the agreement. If you use this approach, be sure that both parties signing the agreement also sign their initials as close as possible to the place where each change is made. If everyone who signs the entire document doesn’t also initial each change, questions might arise as to whether both parties really agreed to the change.

Copies of the Agreement

Prepare at least two copies of the agreement that include all the needed exhibits and attachments. Each party should sign both copies—and each should keep one signed original. Each copy constitutes an original contract.

Be sure to keep your copy of the agreement in a safe place. If you’re hiring an IC, set up a separate vendor file for the IC. In this file, keep the IC agreement, the IC’s invoices, copies of IRS Form 1099, and any other information that shows the worker is operating an independent business. Don’t keep independent contractor records with your employee personnel records. (See Chapter 2 for more information.)

Using Electronic IC Agreements

A written IC agreement doesn’t have to be on paper to be valid. Many hiring firms and contractors use electronic IC agreements—contracts created and “signed” in electronic form. For example, you draft an IC agreement on your computer and email it to the other party, who then emails it back with an electronic signature indicating acceptance.

Electronic contracts and electronic signatures are just as legal and enforceable as paper contracts signed in ink—their validity is guaranteed by a federal law known as the E-SIGN Act. In addition, all states have adopted the Uniform Electronic Transactions Act (UETA). The UETA establishes the legal validity of electronic signatures and contracts in a way similar to the E-SIGN Act and ensures that electronic contracts and signatures will be valid in all states, regardless of where the parties live or where they execute the contract.

Depending on the format of the electronic agreement, you might be able to sign it by:

• typing your name on the signature line
• uploading and inserting a scanned version of your signature, or
• clicking an “I Accept”

Many electronic signature programs use cryptographic “scrambling” technology to ensure that the electronic signature really belongs to you.

Any of these methods is perfectly legal so long as the party electronically signing the agreement did so to indicate acceptance of the agreement.

Cover Letter

As a client, it can be helpful (though not required) to include a cover letter when you send the agreement to the independent contractor to sign. You can see a sample of such a letter below. It reminds the IC that they are not entitled to unemployment or other employee benefits and should never refer to themselves as your employee. Ask the IC to sign the letter along with the independent contractor agreement and return both to you.

Sample Cover Letter to Independent Contractor

FORM
Finding and using the cover letter form. You can download a customizable cover letter (Cover_ Letter.rtf) from Nolo.com. For download instructions, see Appendix A. You can also find a copy in Appendix B.

Changing the Agreement After It’s Signed

No contract is engraved in stone. You and the other party can always modify or amend your contract if you both agree to the changes. You can even agree to call the whole thing off and cancel your contract.

The key to changing a contract is cooperation. Neither party is ever obligated to accept a pro- posed modification to a contract. Either of you can say no to the proposed change and accept the consequences—for example, the other side might go ahead with a unilateral change or stop performing altogether. Either way, you might end up with a court battle over breaking the original contract. You’re usually better off reaching some sort of accommodation with the other side, unless the person is totally unreasonable.

An amendment doesn’t replace the whole original contract, just the part that’s specifically changed (for example, the delivery date or payment terms).

If your agreement requires extensive changes, it’s best to avoid confusion by creating an entirely new agreement. The new agreement should include language indicating that it replaces the old agreement in its entirety.

Oral Amendments

Unless your contract is one that must be in writing to be legally valid—for example, an agreement that can’t be performed in less than one year—it usually can be modified by an oral agreement. In other words, you need not write down the changes.

Example: Art signs a contract with Zeno, who will build an addition to his house. Halfway through the project, Art decides that he wants Zeno to do some extra work not covered by their original agreement. Art and Zeno have a telephone conversation in which Zeno agrees to do the extra work for extra money. Although nothing is put in writing, their change to their original agreement is legally enforceable.

Written Amendments

ICs and their clients change their contracts all the time and never write down the changes. The flexibility afforded by such an informal approach to contract amendments might be just what you want.

However, written amendments—like written agreements in general—have many advantages over oral amendments. First of all, you’ll have to write out an amendment if your original written agreement includes a clause requiring all amendments to be in writing. (This is an optional clause contained in the agreements in this book.) Such clauses aren’t always enforced by courts, but if your contract has one, a party seeking to enforce an oral amendment will face an uphill battle in court. Secondly, writing down your changes helps avoid misunderstandings as to what was agreed to.

The written amendment can be informal. For example, following a telephone call or email exchange with the other party, you can simply send a confirmation letter or email summarizing the agreed-upon changes. If the other side doesn’t correct your written confirmation with a letter or email of its own, the existence of your written confirmation creates a legal presumption that your version of the contract change is correct. This will be very helpful if the other side later claims they never agreed to the change or that the change is set forth incorrectly in your letter or email. Be sure to keep a copy of your letter or email confirming the amendment.

Example: Janet, a much sought-after editor, agrees to perform editing services for Steve. Her written agreement with Steve provides that her work will be completed by April 1. However, Janet finds the project more time- consuming than she anticipated. She emails Steve and asks him for an extension. Steve agrees to give Janet until May 1 to complete the work. But in return, Janet agrees to a 5% reduction in her fee for the work. Janet sends Steve the following confirming email setting forth this contract change.

Drafting Written Amendments

If the change involves a very important contract provision, it’s wise to insist on a written amendment signed by both parties. The amendment should set forth all the changes and state that the amendment takes precedence over the original contract provision. For example, an amendment specifying that payment will be by the piece instead of by the hour should state that the new arrangement replaces the original understanding.

TIP
Finding and using the Contract Amendment Form. You can download a customizable Contract Amendment Form (Contract_Amendment.rtf) from Nolo.com. For download instructions, see Appendix A. You can also find copies in Appendixes B and C.

There are three different ways you can draft your amendment using the contract amendment form.

Method #1: Redlines and strikethroughs. With this method, additions and deletions to the contract are shown visually, with additions underlined and deleted text crossed out. (Most word processing programs allow you to either track changes or choose a “strikethrough” font.) A statement describing the process used to draft the amendment commonly precedes the amendment itself.

Method #2: Clause is replaced in its entirety. With this method, simply state that a whole clause has been replaced, and provide the new clause. Here’s how it looks.

Method #3: Description of the amendment. Writing out a description of the change is often shorter, but requires the parties to check against the existing text of the contract.

You can choose whichever method suits you or combine them if you wish. The important thing, as with all contract drafting, is that your intentions are clear to all parties as well as to third parties reading the amendment. In addition, be sure to change any cross-references, if necessary.

---

We hope you enjoyed this sample chapter. The complete book is available for sale here at Nolo.com.

This Book Comes With a Website

Nolo’s award-winning website has a page dedicated just to this book, where you can:

Download Forms: All of the forms in this book are accessible online. After purchase, you can find a link to the URL in Appendix A.

And that’s not all. Nolo.com contains thousands of articles on everyday legal and business issues, plus a plain-English law dictionary, all written by Nolo experts and available for free. You’ll also find more useful books, software, online services, and downloadable forms.