Do you hire contractors to help out around your business or to fulfil important roles? Do you know what you’re doing when it comes to avoiding any legal issues or protecting your business from legal risks?

Whether you are just starting your business, or you have been in business for years, having an Independent Contractor Agreement in place is a must. An Independent Contractor Agreement outlines the terms and conditions of the working relationship between you and your contractor. It’s important to have a written agreement in place before work begins so that both parties are clear on the expectations and responsibilities.

As a business owner, it is important to protect yourself by having an Independent Contractor Agreement in place as it will help to minimise the risk of any legal issues down the road.

Thus, having an Independent Contractor Agreement in place is a key part of running a successful business.

This blog post will discuss some of the key points to consider when drafting an independent contractor agreement.

What is an Independent Contractor?

Independent contractors are individuals who provide services to businesses under the terms and conditions specified in an Independent Contractor Agreement. These working arrangements are usually flexible, and fees are often negotiable. Independent contractors are typically self-employed and work on a freelance basis. Find out more about the difference between contractors and employees here.

Some benefits of employing an independent contractor include:

  • You are not responsible for their taxes and expenses
  • They are not entitled to benefits such as sick leave or vacation pay
  • Engaging an independent contractor can help you save on costs and avoid the hassle of dealing with employee-related issues.

The components of an Independent Contractor Agreement

An independent contractor agreement should set out key clauses such as payment, services to be provided, intellectual property rights, indemnity, confidentiality, insurance, exclusivity, subcontracting agreements (if any), and a restraint of trade clause. The contract should also make clear who is responsible for faulty or incomplete work and who is liable for any loss or damage arising from such work. The agreement should also set out the complete terms and dispute resolution procedure.

Here are some of the important components that should be included in your contractor’s agreement:


Consider if any amount will be paid upfront or in instalments. Does the contractor charge on an hourly or daily basis or take any deposits? If the contractor will be engaged on a long-term basis, then consider including a review clause that allows for the review of fees at a certain point in the project.


The description of the services provided should be as thorough and explanatory as possible and cover all the work within the scope of work to be provided by the contractor.

Additionally, consider where the work will be undertaken, the beginning and end dates of the term the services is to be provided, and if different services are to be performed at different locations or times.

Intellectual property rights

Depending on the nature of the work to be completed by the contractor, a contractor may create intellectual property (IP) in the course of supplying goods and services to you such as website design, for example.

The creator of the IP will most often be the owner of the IP and for you to legally use their IP (even if it was created for your use and during the provision of the contractor’s services to you), their intellectual property rights to the IP will have to be licenced or sold to you.

Thus, when drafting an independent contractor agreement, consider what IP you may require sold or licensed during the term of the agreement.


If you are a business owner you will likely have confidential information that you will want to protect such as trade secrets, recipes, and especially client information.

Therefore, it is worth including a clause in the independent contractor agreement that protects such information and sets the expectations as to what amounts to confidential information and what actions are to be taken if you or the independent contractor is exposed to confidential information belonging to you.

 Exclusivity and break-free clauses

As a business, it is important to remain competitive in the market. You may include an exclusivity clause in the agreement whereby the contractor is restricted from entering into contracts with other clients, for example. Should you wish to include an exclusivity clause be mindful of compensating the contractor fairly and the geographic area, and the period of time applicable to the clause. Just remember not to be unreasonable about it.

A break-free clause will allow a contractor to recover all or some of its losses if the project falls through to is cancelled before it is completed. A reminder to contractors: you’ll need to provide evidence of your losses in such as case.

Subcontracting agreements

Sometimes a subcontractor may need to be engaged to help complete a service. Discuss the possibility of subcontracting with the contractor and clearly state if subcontracting is accepted under the agreement and, of so, whether certain or all jobs within the service are agreed to engage a subcontractor.

Remember to amend liability, confidentiality, etc clauses of engaging a subcontractor is accepted under the independent contractor agreement.

Restraint of trade

If you are concerned about a contractor stealing your clients during the term of the agreement, a restraint of trade clause is an ideal inclusion in an independent contractor agreement because it effectively states that the contractor is not allowed to trade with your clients during the term and/or during a certain period after the term.

State these timeframes clearly.

Responsibility for Faulty or incomplete work

The inclusion of a clause in the agreement acts to clarify who is responsible for fixing any faulty or incomplete work and the timeframe for fixing the work. This gives the contractor the opportunity to fix the fault or complete the work before they seek remedies for a breach of the contract.

Dispute resolution

A dispute resolution clause sets forth the process for resolving disputes that may arise between you and the contractor. The clause may provide for mediation or arbitration, or it may require the parties to submit their dispute to a court for resolution.

Including a dispute resolution clause in an independent contractor agreement can help to avoid costly and time-consuming litigation.


This clause allows for changes to be made to the scope of work or the terms of the agreement, provided that both the contractor and the client agree to the changes.

By including a variation clause in an agreement, both parties can have peace of mind knowing that they can make changes as needed without voiding the agreement.

Key Takeaways

If you hire contractors in your business, don’t wait for an issue to arise.

Protect yourself and your business by having a legally binding, clear-cut agreement in place from the outset. It’s important to have a clear understanding of each party’s responsibilities before entering into an Independent Contractor Agreement, as this will help to avoid any misunderstandings or disputes down the road.

You can read more information about Independent Contractor Agreements and frequently asked questions here or take a look at this list of really useful resources on how to deal with external contractors and suppliers.

Hopefully, this article makes it clearer why employment documents such as Independent Contractor Agreements are so important.