A project-based contract agreement or service contract agreement is a legal document detailing the terms agreed upon in a professional contract. The contract's purpose is to legally protect the business and the contractor who sign it.
Project-based contract agreements are made between businesses and independent contractors. Project-based workers usually have a limited time frame for their work with a company. They are not referred to as employees, who typically don't have an end-date for their position.
Understanding the difference between an employee and an independent contractor will go a long way in helping you develop your business.
With an employee, you can:
By contrast, with independent contractors you cannot:
To underscore the difference between a contractor and an employee, project-based contracts often contain a clause stating that nothing in the agreement will be interpreted as creating an employer-employee relationship.
If you create a project-based contract agreement, you must include details of the two parties who are signing it. This means the agreement should briefly explain what the company does and why it needs a project-based worker, as well as what the worker can offer.
You should also include in the agreement a list of services the contractor will perform. The list doesn't need to include every step of the process the worker will need to perform, only a broad outline of the duties.
Additionally, you will need to set out a planned time frame for the project, together with a payment schedule. The project length might change, for example, due to employee absences or software upgrades to your business' computer systems.
Finally, to make the contract legal, both you and the contractor must sign and date the document. Either party can then use the contract in the event legal action is required.
Project-based agreements can vary depending on the parameters of the work and how much of it has already been planned. Common types of agreements include:
In some cases, the extent of the work required by the company might expand during a project. This is referred to as "scope creep." Some agreements will outline a process to cope with this challenge. For example, you might agree with the contractor that new tasks can be added to the project following mutual agreement.
Alternatively, the contract might include standard rates of pay and pay rates for additional work requested by the company.
When you hire an independent contractor, you do not make any payments toward that individual's taxes. Instead, the contractor is responsible for making all tax payments for which they're liable. This information will likely be included in the agreement.
The contract will also contain payment terms. These terms could require contractors to submit invoices at the end of each month for work they have completed. Another possibility is for both parties to agree on installments based on the total fee for the project.
A typical contract could include the provision that the independent contractor has no authority to represent the company while performing the agreed-upon services. Additionally, an agreement usually makes clear that the business will not provide employee benefits to the contractor.
You must also include a termination clause in your agreement. This might confirm that either party can terminate the contract at any time, provided they give one month's written notice.
Project-based agreements generally contain a confidentiality provision. This commits the contractor not to share confidential information with anyone, apart from authorized employees from the company.
If you need help understanding a project-based contract agreement, you can post your job 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.