Drafting the Contract

There are a few types of contracts frequently used by freelancers and small business owners:

  • Non-disclosure Agreement (“NDA,” sometimes also called “Confidentiality Agreement”) – used to protect confidential information shared by one or both parties. An NDA can be unilateral, meaning that one party promises to keep the other party’s information confidential, or bilateral, meaning that both parties promise to keep the other party’s information confidential. The NDA is often signed at the start of business conversations. The NDA does not cover the sale of goods or the provision of services; those types of transactions are covered by different contracts. NDAs are not always necessary. If no confidential information is being shared by either party, you can skip the NDA. Also, most contracts for the sale of goods or the provision of services include confidentiality language which covers the exchange of confidential information, so if the parties are ready to negotiate that contract, the NDA becomes unnecessary.
  • Services Agreement – covers the services provided by one party to the other party. This agreement usually sets out the term (duration) of the engagement, the services provided (along with any work product created), the fee charged for the services and work product, the rights of each party to terminate the agreement, and any other relevant details of the engagement. This can be done as a one-time agreement covering a single engagement, or as a master agreement covering a long-term engagement. In the case of a master agreement, the parties usually sign a new statement of work (SOW) or work order for each new work engagement or project. The SOW or work order has the details of that particular project and the master agreement has the standard terms that govern each SOW or work order.

Assuming the contracting parties are not operating in highly-regulated industries and there is no strict set of requirements for their contracts, many commercial services agreements in the U.S. are based on the same skeletal structure. Most services agreements include the following key sections:

  • A description of the products or services to be provided by each party along with any other obligations of each party; 
  • The cost or fees of the products or services to be paid by the parties; 
  • The term (or duration) of the contract and termination rights of the parties; 
  • Ownership rights of the parties to the work product created under the contract;
  • Confidentiality obligations of the parties;  
  • Representations and warranties of the parties (provisions in which the parties make certain representations about their businesses, products, or services); and
  • General miscellaneous provisions like governing law, assignment, and amendment provisions.

In many cases, sections on limiting liability between the parties, indemnification, force majeure, and disclaimers of other representations are also included. It is also important to note that there are many different types of contracts and not all contracts follow this structure. Confidentiality agreements (also called non-disclosure agreements) have a different structure. That said, this general structure can be adapted to suit a variety of relationships. For example, this services contract structure could also be used for partnerships between companies.

The name of the contract is not too important. The name provides clarity for both sides to understand the type of contract and the nature of the relationship, but the name of the contract can vary across industries and locations. Usually, the name of the contract reflects the nature of the relationship (“Independent Contractor Agreement” is sometimes used in freelancing because freelancers are typically engaged as independent contractors).

Once the basic framework is set, the parties customize and negotiate the contract. It can be useful to develop a handful of contract templates written the way you want them to be written, favoring your business and emphasizing the points you feel are most important to your business. You might not always be successful in getting the other party to sign your contract, but maintaining a few contract templates is a great place to start and can be useful even when using the other party’s contract template.