Contractual Obligation: Everything You Need to Know
Contractual obligation is a duty that each party has under a contract, the contract itself will specify the rights and obligations of both parties.3 min read
If entering into a contract for hire agreement, you should understand what it is, how it can benefit you, and when to use one. Under the Copyright Act, which can be found in 17 U.S.C. § 101, work for hire is a term used for a piece of work such as a software program that is created by someone who is either an employee or independent contractor of your company.
For example, if you want to hire a third-party contractor to create a website for you, but you want to retain all rights to the website, then you might consider entering into a contract for hire agreement with that third party. Even if you have employees creating new methods and systems, you’ll want to be sure that your company maintains ownership rights over such creations. However, with that said, the statute itself narrowly defines what type of work created by such contracts constitutes work for hire.
Contract for Hire: An Overview
Companies spend a lot of time coming up with new ideas and products. In fact, businesses almost always look to their own employees to come up with new products, ideas, systems, logos, and other creations that can help a business thrive and grow. After creating such products and systems, businesses will want to ensure that their employees, whether full-time or contractors, do not take these new inventions to another business when they leave the company. This is where a contract for hire agreement comes in.
With regard to full-time employees, the employer owns all rights to the work created by the employee on behalf of the business.
But in cases regarding freelance work, i.e., independent contractors, the contractor is usually the owner of the work that he or she creates. Therefore, businesses should always pay special attention when hiring such contractors to avoid any legal disputes regarding ownership over the work itself.
Elements of Contract for Hire
A work is considered a contract for hire if the following elements are met:
1.The contract was entered into before the work was conducted.
2.The parties agree in the written agreement that the work is considered work for hire.
3.The work itself meets the statute’s requirements.
As noted above, according to copyright law, if a work is ‘made for hire,’ then the employer will be the true owner of the work. But the work must fall into the statute’s categories of works. For example, the works that don’t generally fall within the categories identified in the statute include software programs and logos. It is important to first check the statute to identify what types of works are included in a work for hire agreement.
Businesses should also ensure that a well-drafted written agreement is provided to the contractor so that all parties fully understand their rights and duties under the contract. This document will be legally binding and will be used in the event that a legal suit arises. The agreement should also include terms that protect both parties, such as the work obligations, responsibilities, and payment to be made to the contractor.
When to Use a Contract for Hire Agreement
You should use this type of agreement in any one of the following circumstances:
1.You are hired as an independent contractor to complete a project for a company
2.You are a company that wants to hire an independent contractor to complete a project
3.You want to be sure that the independent contractor has no rights over the work he or she created for your company
Advantages of a Contract for Hire Agreement
There are some advantages to this type of agreement, particularly for businesses. Most contractors who create work for a business might assume that it is theirs. However, with this agreement in place, the contractor will understand that he or she has no legal ownership rights to the work that is created for the business. This is important because you might not want the independent contractor to take the work created to another business who might utilize it, especially if that other company is a competitor.
If you need help learning more about a contract for hire agreement, or if you need legal help drafting such an agreement, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.