There are often situations where businesses choose to utilize the services of an independent contractor rather than hiring a new employee. In such situations, both parties must make the partnership official by signing a contractor agreement.
That said, contractor agreements often receive scrutiny from government agencies, so it’s critical to write them carefully to ensure legal compliance and get the most out of the agreement.
Read on to learn how to write a contractor agreement and how board management software can help you draft and store this key document, along with other board materials like partnership agreements and indemnity agreements.
What is a Contractor Agreement?
A contractor agreement (also referred to as a consultant agreement, service agreement, or consulting agreement) is a document that specifies the terms and conditions for the working arrangement between an independent contractor and a business. It outlines the scope, obligations, and deadlines of the work and affirms the contractor and the client aren’t in an official employee-employer relationship.
There are several reasons why contractor agreements are important. For starters, the agreement outlines the services the contractor will provide and the project duration. It also includes specifics, such as non-disclosure agreements (NDAs) and payment terms. A contractor agreement typically includes a confidentiality clause if a contractor needs access to the business’s confidential information, such as intellectual property and trade secrets.
The agreement also outlines the dispute resolution mechanisms in case a conflict arises, as well as consequences if either party breaches the contract. The board of directors is responsible for drafting a contractor agreement. When doing so, it’s important they exercise the duty of care to ensure their decisions are in the organization’s best interest.
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How to Write a Contractor Agreement
Consider the 5 steps below for writing a comprehensive contractor agreement:
1. Outline Services Provided
The contractor agreement should list all services the contractor will provide. Be as detailed as possible when outlining the services by including everything the contractor should do to meet your expectations. For repeat contractors, make sure to draft a separate contract each time the contractor takes on a new project.
2. Document Duration of the Work
Specify the duration of the working relationship. Is it a fixed term, single project, or an ongoing work arrangement? Also, be sure to include the notice requirements for either party to terminate the contract.
3. Outline Payment Terms
Your contractor agreement should clearly specify how much you’ll pay the contractor. Will the payment be made in installments or a lump sum? Ensure both you and the contractor agree to the payment terms to avoid problems after the project begins.
4. Outline Confidentiality Agreement
In order to protect your intellectual property, include a confidentiality clause in the contractor agreement to specify how the contractor will handle confidential information. As a best practice, you should also include a non-compete agreement, especially if your contractor will be privy to trade secrets.
5. Consult with a Lawyer
Just like with any other contract, you should consult with a lawyer to ensure your contractor agreement covers all the bases and is legally sound.
Contractor Agreement Template
A contractor agreement should describe the scope of work, contract terms, contract duration, and the confidentiality agreement. It should also include a section for the two parties to sign and make the agreement official. If the contract doesn’t meet these requirements, it may be inadmissible in a court of law.
Here’s a free template to help you draft a good contractor agreement.
Do Boards Need a Contractor Agreement?
Boards usually use contractor agreements to outline the roles and responsibilities of any outside vendors they bring in to supplement the board.
Getting Started with OnBoard
Today’s thriving gig economy makes working with an independent contractor inevitable for most organizations. A contractor agreement protects your organization throughout the contractual relationship and helps both parties get the most out of the partnership.
OnBoard’s board management software allows your company to issue, sign, and store contractor agreements digitally and securely. Our software solution comes with intuitive features to help your board members collaborate from anywhere, build board materials faster, and access key documents from the cloud.
When you partner with OnBoard, you gain access to powerful features, including:
- Zoom Integration: seamless, secure, and integrated for remote meetings.
- Voting and Approvals: Organize, track, review, and approve decisions.
- Board Resolutions: Manage these key documents in a central hub.
- Agenda Builder: Easily create agendas with drag-and-drop technology.
- Secure Messenger: built-in secure chat for 1-on-1 and group conversations
- Minutes Builder: create meeting minutes directly within the platform.
- Meeting Analytics: Generate real-time insights.
- D&O Questionnaires: automated and replicable tool for annual D&O surveys
- Task Management: Manage, organize, and track essential action items.
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Frequently Asked Questions (FAQ)
Is a Contractor Agreement Legally Binding?
Yes. A contractor agreement is a legally binding document between two or more parties that defines and outlines the terms and conditions between the parties. A contractor agreement becomes legally binding when the two parties sign the document. If either party violates the contract, they can be held liable in a court of law.
Can You Write Your Own Contractor Agreement?
There's no requirement stating a contractor agreement must be written specifically by a lawyer. As such, make sure to include essential components such as the scope of work, duration and terms of the contract, and confidentiality agreement. Otherwise, the contract may not hold up in a court of law.
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About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
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