Five common contractual mistakes and how to avoid them
- 02 Jul 2021
- Markel Direct
Drafting contracts that are robust when you’re a self-employed freelancer working with different clients is essential. If anything unexpected happens, such as a client refusing to pay you for the work you’ve carried out, your contract is there to protect you as well as your relationship with the client.
When a contract goes wrong and a relationship with a client goes off the rails, everyone suffers and resolving a dispute can be stressful, time-consuming and expensive.
In this article, Markel Direct will provide you with some tips on how to avoid five of the most common contractual pitfalls and keep things on track with your clients.
1. Get it in writing
The first area where mistakes are most commonly made with client relationships, is in failing to set out the contract clearly in writing.
That might be a total failure to get anything in writing, or it might be that only some of the terms have been committed to writing.
While contracts do not have to be in writing and an oral contract can be just as enforceable, without being written down, there is potential for ambiguity.
Where there are grey areas, there is room for more than one interpretation of your intentions.
As an IPSE member, you have access to a range of contract templates in our Resources hub.
2. Prepare for the worst
While no-one goes into a contract expecting that it will fail, it is still important to give thought to how it might come to an end earlier than intended.
Key things to consider include:
- What will your client have to do to trigger your right to suspend or terminate the contract?
- What do you need to be mindful of avoiding, so that they don’t have the right to terminate early?
A good way of approaching this is to think about how a particular project could go wrong. In those circumstances, who should have what rights as a result?
3. Scope: less is more
Another way in which contracts can go wrong is when you start completing additional work for ‘free’. While there are occasions when this can successfully appease a client and help get a project over the line, there are times where this can cause problems.
If you have a difficult client who is always wanting more, there is a good chance that if you give them an inch, they will try to take a mile.
At the start of the project, define project deliverables and have a process outlined for change requests when these do arise.
4. Limiting exposure
Disagreements are inevitable in business. Some of them will give rise to disputes, no matter what you do to reduce the risk of this happening. There are however plenty of things that you can do ahead of time to reduce the risk of those disputes arising.
This starts with not overselling your skill set at the outset. Not being able to do something you said that you could is likely to result in termination of the contract and a claim against you for damages for misrepresentation.
5. How insurance can help
One way of protecting yourself from contractual risk is to take out contractor insurance.
Professional indemnity insurance provides cover for claims alleging negligence or breach of contract. As an IPSE member, you enjoy a 10% discount* on professional indemnity insurance from Markel Direct. Get a quote here.
Subject to any excess, the policy will cover the legal costs of investigating and responding to allegations, as well as meeting any damages that are payable to the claimant.
Read the full guide on contractual mistakes and how to avoid them on the Markel Direct website.
* IPSE 10% member discount terms and conditions
The discount will be applied to the net policy premium before insurance premium tax is applied. All quotations provided will be subject to meeting underwriting and claims criteria acceptance. All cover will be subject to full policy terms and conditions which are available upon request.
Meet the author
In this blog, we take a closer look at the court ruling which sparked recent investigations into deemed Managed Service Providers.
- 26 May 2022
In this blog, an anonymised contractor explains how HMRC's MSC investigation has impacted them.
- 11 May 2022
It's never been more important to incorporate sustainable practices within business. Discover the simple ways you can be more sustainable as a freelancer.
- 21 Apr 2022