A new client has just presented you with an eagerly anticipated contract and you’re raring to go. But before you sign on the dotted line, there’s a few things you should watch out for that may not immediately jump off the page.
When buying goods, you’re bound by the Latin principle “caveat emptor” which translates to “let the buyer beware”.
According to the age-old legal doctrine, sellers naturally hold more information about the goods you’re buying from them, so it falls to you to carry out your own due diligence beforehand otherwise you’ll be legally bound to accept the seller’s goods as you find them – warts and all.
And so it is when you’re a contractor looking to land your next big gig. Naturally, your client will be way better acquainted with their standard contract terms than you are, so it’s your job to go through them with a fine-tooth comb and object to any unwanted inclusions or omissions to ensure that you don’t come up short commercially or legally.
Whatever factors may be propelling you to sign your next contract without giving it the once-over first, here’s five reasons to put your foot on the brakes.
Ever wondered whether you could send someone else to do the work in your place? If so, you should be on the lookout for a substitution clause, which allows the work to be done by another person working under the umbrella of your business.
Substitution rights can either be fettered or unfettered. A fettered substitution right calls for the prior consent of the client (which can only be withheld on reasonable grounds). On the other hand, an unfettered right of substitution allows you to assign anyone you choose to do the work, but in terms of the overall responsibility for the work the buck stops with you.
While unfettered substitution rights may go some way to getting you clear of IR35 (provided substitution has actually taken place), they are a rarity. Most clients won’t want any part of them and, in any event, they’re inappropriate within the context of continuing work where your expertise (and not that of your substitute) has been instrumental in securing the work in the first place.
If a substitution clause isn’t already buried deep within your contract, be sure to insert one there.
2. Mutuality of obligation
In the eyes of the law, employees and contractors are entirely different animals and never the twain shall meet.
In an employment setting, an employee is legally obliged to work and their employer is equally obliged to provide work for them or pay them in lieu.
But, as a contractor, for your agreement to be IR35-friendly, there should also be a clause stating that there is no “mutuality of obligation” between you and your client, so there is no “obligation, on the one hand, to work and, on the other, to remunerate”. No work, no pay and vice versa. Furthermore, your client can bring your relationship to a halt without any further obligation to pay you.
When it comes to the right of control, it’s a case of “out with the old, in with the new.”
Old-style standardised agency agreements, which contained a clause requiring contractors to be under the client’s direction, supervision, and control are a definite no-no. The contract should state that you will exercise your own professional judgement as to the method and the manner of performance.
The key is to ensure that the contract provides that the client doesn’t have the right to control what, where, how, and when the work is done. You do.
Fancy titles may look and sound good, but to stay on the safe side of IR35 your contract for services should contain an accurate, task-based description of the work to be done, rather than simply a title (however lofty it may be).
Crucially, your work shouldn’t appear to be ongoing. Rather, it should be a discrete project or series of projects clearly highlighting any deliverables, timeframes, dependencies, and constraints.
When it comes to contracting, “free love” takes pride of place over monogamy.
Exclusivity is the last thing most contractors want, so any undue restriction on you providing services to other clients is a deal-breaker. The contract should make it clear that the intention of both parties is not to create an employer-employee relationship. So language that is used in an employment context, like gardening leave, notification of absence, and overtime should be avoided like the plague.
Prevention is better than cure
If you sign a contract, you’ll generally be bound by its terms and conditions, whether you’ve read them carefully or not.
Any attempt to argue your way out of an unfavourable agreement will be far more difficult than having put pen to paper (or finger to keyboard) in the first place. As is so often the case, prevention is better than cure.