INDEPENDENT CONTRACTOR AGREEMENT
This Consulting Agreement (the “Agreement”) is made as of [Date], by and between [Company Name], (the “Company”), and [Contractor/Consultant Name] (“Contractor”) (each a “Party” and collectively the “Parties”).
1. Engagement. The Contractor agrees to perform such consulting, advisory and related services to and for the Company (the “Services”) as may be requested from time to time by the Company, including, but not limited to, the services specified on Exhibit A, or any subsequent Exhibits, to this Agreement (each a “Statement of Work”), in accordance with the terms and conditions set forth therein and in this Agreement.
2. Fees. As consideration for the Services to be provided by Contractor and other obligations, the Company shall pay to Contractor the amounts specified in the Statement of Work.
3.1. Early Termination.
3.1.1. Cause For Early Termination. Either Party may terminate this Agreement:
126.96.36.199. Immediately in the event that either Party breaches this Agreement; or
188.8.131.52. At any time upon [15 - 30] days written notice.
3.1.2. Payment Upon Early Termination. In the event of such termination, Contractor shall be paid for any portion of the Services that have been performed prior to the termination in accordance with the Statement of Work.
3.2. Statement of Work. The Statement of Work and the obligations thereunder shall terminate upon Company’s acceptance of all Services and Work Product contemplated therein and full payment to Contractor thereunder. The Parties may enter into any subsequent Statement of Work for additional Services to be performed by the Contractor which shall be subject to the terms of this Agreement, unless otherwise specified.
4. Changes to Services. Any material changes to the Services, including the schedule, deliverables, and related fees, must be approved by the prior written consent of the Party not requesting the change.
5. Independent Contractor Relationship. Contractor’s relationship to the Company shall be that of an independent contractor. Nothing in this Agreement shall be construed to create any partnership, joint venture, employer-employee or agency relationship between Company and Contractor or its Assistants. Contractor shall not represent to any third party that any such relationship exists. The consulting relationship shall be non-exclusive. Contractor shall be free to work with other companies so long as such work does not present a conflict of interest or result in the disclosure of Confidential Information (defined below).
6. Ownership. All deliverables, ideas, inventions, improvements, methods, processes, works of authorship and other forms of intellectual property that the Contractor conceives, reduces to practice or develops during the term of the Agreement, alone or in conjunction with others, in connection with performance of the Services, including designs, data, software code, ideas, inventions, know-how, materials, marks, methods, procedures, tools, interfaces, and other forms of technology as well as any intellectual property rights of any kind therein (collectively, the “Work Product”), will be the sole and exclusive property of the Company. Any and all elements of the Work Product that are works of authorship eligible to be “works made for hire” under the U.S. Copyright Act shall be considered works made for hire with the Company as “author.” Contractor hereby irrevocably assigns to Company all right, title and interest worldwide in and to the Work Product and all intellectual property rights therein.
7. Confidentiality. Contractor may obtain access to information related to Company’s business (including trade secrets, technical information, business forecasts and strategies, marketing plans, customer and supplier lists, personnel information, financial data, and proprietary information of third parties provided to Company in confidence) that Company considers to be confidential or proprietary or Company has a duty to treat as confidential, excluding such information as Contractor can demonstrate existed in the public domain as of the Effective Date (the “Confidential Information”). Contractor will (a) hold all Confidential Information in strict trust and confidence; (b) not use or permit others to use Confidential Information in any manner or for any purpose not expressly permitted or required by this Agreement; (c) not disclose or permit others to disclose any Confidential Information to any third party without obtaining Company’s express prior written consent on a case-by-case basis; and (d) limit access to Confidential Information to employees of Contractor who have a reasonable need to have such access in order to perform the Services and who are bound by obligations to maintain the confidentiality of Confidential Information that are at least as protective of the Confidential Information as the provisions of this Agreement.
8. Performance of Services. Contractor represents that Contractor is duly licensed (as applicable) and has the qualifications, the experience and the ability to properly perform the Services. Contractor shall use Contractor’s best efforts to perform the Services such that the results are satisfactory to the Company. Contractor shall be solely responsible for determining the location, method, details and means of performing the Services.
8.1. Assistants. Contractor may, at Contractor’s own expense, employ or engage the services of such employees, subcontractors, partners, as Contractor deems necessary to perform the Services (collectively, the “Assistants”). The Assistants are not and shall not be employees of the Company, and Company shall have no obligation to provide Assistants with any salary or benefits. Contractor shall be wholly responsible and shall remain liable for the performance of the Services by the Assistants in a manner satisfactory to the Company. Contractor shall expressly advise the Assistants of the terms of this Agreement, and shall require each Assistant to execute and deliver to the Company a Confidential Information and Invention Assignment Agreement substantially in the form attached to this Agreement as Exhibit B hereto (the “Confidentiality Agreement”).
8.2. No Authority to Bind Company. Contractor acknowledges and agrees that Contractor and its Assistants have no authority to enter into contracts that bind the Company or create obligations on the part of the Company without the prior written authorization of the Company.
8.3. No Benefits. Contractor acknowledges and agrees that Contractor and its Assistants shall not be eligible for any Company employee benefits.
8.4. Taxes; Insurance. Contractor shall be paid pursuant to IRS Form 1099, and shall have full responsibility for applicable taxes for all compensation paid to Contractor or its Assistants under this Agreement, and for compliance with all applicable labor and employment requirements with respect to Contractor’s self-employment, sole proprietorship or other form of business organization, and with respect to the Assistants, including payroll deductions, worker’s compensation insurance and any U.S. immigration visa requirements. Contractor shall maintain appropriate and adequate insurance with coverage and limits acceptable to the Company to cover any claims which might arise in connection with Contractor’s provision of Services.
9.1. Limited Activities. During the term of this Agreement and for a period of six (6) months thereafter, the Contractor shall not engage in any activity that constitutes a conflict of interest with the Company, including any competitive employment, business, or other activity involving the disclosure of Confidential Information.
9.2. Nonsolicitation. During the term of this Agreement and for a period of twelve (12) months after the termination of this Agreement for whatever reason, Contractor agrees not to attempt to divert or interfere with the development of the Company’s business by soliciting, hiring, contracting, communicating with any employee of the Company.
10. Indemnification. Contractor will indemnify and hold harmless Company and its affiliates, employees, and agents from and against any and all liabilities, losses, damages, costs, and other expenses (including attorneys’ and expert witnesses’ costs and fees) arising from or relating to any breach of any representation, warranty, covenant, or obligation of Contractor in this Agreement or any intentional misconduct or negligence by Contractor or any of its Assistants. In the event of any third-party claim, demand, suit, or action, including third party claims that Contractor is an employee or agent of the Company (a “Claim”), for which Company (or any of its affiliates, employees, or agents) is or may be entitled to indemnification hereunder, Company may, at its option, require Contractor to defend such Claim at Contractor’s sole expense. Contractor may not agree to settle any such Claim without Company’s express prior written consent.
11. Limitation of Liability. In no event will Company be liable for any consequential, indirect, exemplary, special, or incidental damages arising from or relating to this Agreement. Company’s total cumulative liability in connection with this Agreement, whether in contract or tort or otherwise, will not exceed the aggregate amount of Fees owed by Company to Contractor for Services performed under this Agreement.
12. Contractor’s Representations and Warranties. Contractor represents, warrants, and covenants that (i) neither the Work Product nor the Services will infringe or misappropriate any intellectual property right of any person or entity; (ii) Contractor has not and will not grant any right or interest in the Work Product to any person or entity other than the Company; (iii) the Work Product is not subject to any lien, encumbrance, or other restriction on its transfer; (iv) Contractor has the full power and authority to enter into this Agreement; (v)Contractor has obtained and will obtain any and all assignments necessary to satisfy its obligations under this Agreement; and (vi) Contractor will comply with all laws in performing its obligations under this Agreement.
13. Work Product Conformity. Contractor further warrants that the Work Product will fully conform to the specifications, requirements and other terms set forth in this Agreement (the “Specifications”) and the attached Exhibit A. If the Company determines in its sole discretion that the Work Product does not conform to the Specifications, the Company shall inform the Contractor of such nonconformity and the Contractor will repair or replace the Work Product so that it conforms to the Specifications within ten (10) days of such notice (the “Cure Period”). The Cure Period may be extended at the Company's sole discretion. If the Contractor does not effect such conformity by the expiration of the Cure Period, Contractor shall refund all fees and costs and the Company may elect to terminate this Agreement upon written notice to Contractor without further liability to Contractor.
14.1. Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company.
14.2. Sole Agreement. This Agreement, including the Exhibits hereto, constitutes the sole agreement of the parties and supersedes all oral negotiations and prior writings with respect to the subject matter hereof.
14.3. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by email or fax (upon customary confirmation of receipt), or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address or fax number as set forth on the signature page or as subsequently modified by written notice.
14.4. Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of [Company Home State], without giving effect to the principles of conflict of laws.
14.5. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
14.6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
14.7. Advice of Counsel. EACH PARTY ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
14.8. Dispute Resolution. Any disputes concerning this Agreement will be submitted to binding arbitration under the rules of the American Arbitration Association.
[Signature Page Follows]
In Witness hereof, the Parties have executed this Consulting Agreement as of the date set forth above.
Signed: _____________________________ Sign Here
Name: [Company Representative Name]
Title: [Company Representative Name]
Signed: _____________________________ Sign Here
Name: [Contractor Name]
Address: [Contractor Address]
EXHIBIT A: Statement of Work
I. Payment Terms
[ ] Contractor shall be paid at an hourly rate of $ [Rate]/hr.] in accordance with the completion of Services detailed in Section II. The Company shall be invoiced every [Invoicing Time] week(s) for payment to the Contractor.
[ ] Contractor shall be paid in accordance with the completion of the tasks and milestones set forth below in Section II.
II. Description of Services
[Estimated Completion Date]
The first completion date shall be [First Completion Date]. The Services shall be repeated every [Repeated Weeks/Days] until [Final Completion Date]
[Agreed Upon Sum]
The Board shall recommend that the Contractor be granted an option to purchase [# Shares] shares under the Company's [Equity Incentive Plan Name].
Add milestones as necessary.
III. Maintenance, Repairs and Additions (if applicable)
[ ] Additional charges will be assessed by the Contractor on a per-project or hourly basis, depending on the complexity and time required. Additional charges must be agreed to in writing by the Company or added through an amendment of this agreement.
[ ] Reasonable maintenance and repair will be included with the Services and shall not exceed [max hrs] and will be in accordance with the following estimates:
Milestone or Task
Allotted Maintenance/Repair Hours
Total Maintenance Hours
IV. Reimbursable Expenses
[ ] Contractor shall not be authorized to incur on behalf of the Company any expenses and will be responsible for all expenses incurred while performing the Services.
[ ] The Contractor may incur expenses as expressly specified below which will be reimbursed by the Company.
In Witness hereof, the Parties have executed this Statement of Work as of the date set forth above.
Signed: _____________________________Sign Here
Signed: ___________________________ Sign Here
EXHIBIT B: Assistants Confidentiality And Invention Assignment Agreement
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What Is an Independent Contractor Agreement?
Independent contractor agreements are used to determine the terms of temporary contracts between a company and a contractor. An independent contractor is a person who performs jobs for various clients on a freelance, project-to-project basis. For companies, the main benefit of hiring independent contractors for companies is that they will only pay upon the completion of the project and obtaining the desired outcome defined in the independent contractor agreement.
An independent contractor agreement defines the project terms and parties' responsibilities, such as:
- The services provided by the contractor.
- The fee paid by the company to the independent contractor for delivering the project.
- Terms and conditions, including the rights of termination.
- Provisions related to confidentiality and legal rights.
- The identification of the governing law that applies to the contract.
Unlike employees, independent contractors do not get employment benefits. Independent contractors areusually hired for a short period of time, pay their own health insurance, use their own tools, and are responsible for paying their income tax.
Independent Contractor Agreements: What Are They Used For?
Independent contractor agreements are drawn up by parties to protect the rights of the contractor and the client at the same time. They provide a clear description of the project that needs to be delivered (and the outcomes). They also highlight the responsibilities of the contractor and the client with regards to deadlines, quality, and payments.
The classification of independent contractors is sometimes problematic, and worker classification tests need to be conducted. The two main tests that are run, based on the Fair Labor Standards Act (FLSA), are the "right to control test" and the "economic realities test." The tests are designed to clarify the relationship between the contractor and the company and prevent clients from using independent contractors on a permanent basis for essential services performed by the company instead of employing full-time workers.
Independent contractor agreements also include clauses related to
- Intellectual property (transfer to the client)
- Supplies and equipment used by the contractor
- Training requirements
- Period of the contract
Why Is an Independent Contractor Agreement Important?
Having an independent contractor agreement in place provides protection for companies and workers as well.
Contractors are informed about the terms of the agreement, duration of the project, and the compensation. Contracts also contain the payment schedule and the detailed requirements of the project.
Companies can fill positions that are only temporary, without having to recruit a full-time or part-time employee. If the job or project is temporary, they will save money by contracting a person who already has the knowledge and skills to complete it, instead of hiring and training an employee. Find out more about the difference between employees and independent contractors in UpCounsel's contractor agreement resources.
Examples: Using an Independent Contractor Agreement
When a company needs auditing services for its accounts review, it could contact an independent accounting review contractor. These services are not needed on a permanent basis, and it is likely that an experienced accounting contractor will complete the review in two months. The company creates a project, defines the requirements, and sets a deadline and fee for completion.
An independent contractor will complete the accounting review, after signing a confidentiality agreement that is included in the contract, and deliver the report to management. The company will not need to purchase accounting review software or set up an office for the contractor. Instead, it pays a higher price for assured quality and guarantees provided by the contractor.
Examples: Not Using an Independent Contractor Agreement
If a company does not use an independent contractor agreement for accounting reviews, this can have a negative impact on the business and the outcome. Without clearly defined goals for the project, any contractor can simply do something that he thinks the company needs.
Let us assume that the project ties up the independent contractor's resources for at least three months. If there is no independent contractor agreement in place, the contractor can claim that he was an employee, and is entitled to health insurance as well as other benefits.
Not having a contract can lead to disputes between the client and the contractor. It is the company's responsibility to file a Form 1099 to indicate the type of contract between it and the contractor.
A contract also protects the hiring company's intellectual property rights, based on Section 101 of the Copyright Act, stating that contractors' work for hire automatically becomes the property of the hiring client.
Frequently Asked Questions
- Can I claim benefits as an independent contractor?
Usually, you cannot claim benefits related to employment, such as health insurance, as a contractor unless this is included in one of the clauses of your agreement.
- Who is responsible for paying my taxes as an independent contractor?
All independent contractors need to do their own self-assessment based on the earnings from their different projects.
- How long can I use an independent contractor?
The duration of the project should be clearly defined in the terms of agreement. Independent contractors are generally used for short-term projects.
- Should I include a confidentiality clause in the contractor agreement?
As independent contractors work for multiple clients on a freelance basis, it is recommended to use a confidentiality clause if they deal with sensitive company-specific information.
- Can I employ a contractor for an indefinite time?
No. Hiring a contractor for an indefinite time would indicate that he became an employee.
Steps to Create an Independent Contractor Agreement
- List the terms of the contract and the aim of the project (desired outcomes).
- Draw up the terms of termination.
- Negotiate compensation and timescales.
- Define the services that need to be performed by the contractor.
- Define intellectual property clauses and other implications of the work, including confidentiality and conflict of interest.
- Consider travel, availability, and representation interests.
- Contact a professional independent contract lawyer to finalize the contract.
- Sign the contract.
Do you need professional advice from legal professionals on creating independent contractor agreements? Visit UpCounsel's contractor resources and start talking to one of our top lawyers about your needs.
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