| There can often be clauses that appear one-sided, which give the client power or restrictions over you. However, sometimes there may be good and sensible reasons for doing this with which you agree. But you should put much thought into whether you really do agree and have weighed up the advantages and disadvantages. |
| Clause Type | Comment | Clause example (These are clauses taken from actual contracts) |
| Exclusivity | ||
| Exclusivity | This clause is a subtle variation on similar restrictive clauses we flag elsewhere as ‘red’. What softens this clause are the words ‘when performing the services’. That is, the client is saying that when you do work for them you should not do other work during the same period. For example if you were doing computer programming at the client’s premises, you should not take phone calls from other clients and so on. This is not an unreasonable request. However, this would/should not stop you doing other work, even on the same day, once you have finished that particular work for that client. If the client placed a wide meaning on this clause to stop you doing any other work, we would flag it as ‘red’. | The Sub-Contractor must ensure that he/her devotes all his/her time and attention exclusively to the Project when performing the Services unless the prior written approval of the Client is first obtained by the Sub-Contractor through the Principal and, even if consent is given, the Sub-Contractor must ensure that the Nominated Employee must not engage in any alternative projects or activities which may impact on the performance of the Services. |
| Intellectual property | ||
| Intellectual property | This clause may be perfectly reasonable, but you should take great care to ensure you are happy with it. The clause seems to ensure that any work you have done for the client creating intellectual property is owned by the client. That’s reasonable given that the client is presumably paying you to create the intellectual property. However, you should be careful that any intellectual property you already own or may create unrelated to the work you are being paid for by the client is not also caught by this clause. | For the avoidance of doubt, the Sub-Contractor hereby assigns absolutely, all of its right title and interest in and to each Work (whether current or future, vested or contingent) to the Principal throughout the world for the full duration of rights subsisting in the relevant work including, without limitation, all drafts and other documentation relating to the Works and all claims and causes of action relating to the Works, accrued or accruing at any time. |
| Insurance | ||
| Insurance | This is slightly different to the insurance clause we flag elsewhere as ‘red’. In this instance, the client is presumably taking out insurance it may be required to under law and for which it will pay. Assuming there is no charge to you over which you have no control, this clause appears reasonable and may actually be a positive protection for you. However, this will depend on the specific circumstances. | The client shall maintain adequate professional indemnity, public liability and worker’s compensation insurance to cover the contractor. |
| Prevention of future work | ||
| Prevention of future work | This is different from the similar clause we flagged elsewhere as ‘red’ because the limitation on future work relates specifically to work you may have done for the client. I.e., this is a typical clause found under ‘labour hire’ arrangements. It is designed to prevent the labour hire company’s ‘client theft’ by you. This is not unreasonable, assuming that the labour hire company has found the client/s for whom you have done the work. However, circumstances change for each piece of work and you should ensure that this clause matches the reality of the work you are doing. | In order to protect the interests and goodwill of the Principal, the Independent Contractor and the Nominated Person undertake that they will not, without the written consent of the Principal, either during or for a period of 6 months after the termination of this Agreement, undertake work for any client for whom it undertook work for pursuant to this Agreement at any time during the 12 months immediately preceding the termination of this Agreement. |
| Prevention of future work | This relates to the foregoing clause and is a very fair variation. I.e., if you brought the client to the labour hire company, the labour hire company is not seeking to limit your right to work independently for the client in the future. | The above clause shall not apply in circumstances where the Client had previously engaged the Independent Contractor to provide services to it of a similar kind to those provided by the Independent Contractor in accordance with this Agreement. |
| Alternative work ban | ||
| Alternative work ban | The clause puts limits on your doing other work, but only where ‘conflict of interest’ arise. This is very different from other similar clauses we flagged elsewhere as ‘red’. Under this clause you are free to work for other clients, even if they are competitors to this client. However, you cannot do so where a conflict of interest arises—(eg) where your other work may give away intellectual property belonging to this client. In agreeing to this clause you would need at all times to be aware of potential conflicts of interest. And it would be prudent to discuss these with the client. Further, this clause should be subject to a dispute-resolution clause and settlement by a mediator if necessary. | The Contractor undertakes to not, during the term of work for the Client, do work for a competitor of the Client where a conflict of interest may arise and without the knowledge of the Client. |
| Assigning of rights | ||
| Assigning of rights | This appears to mean that if you have a contract with this client, you cannot ‘on-sell’ or transfer the work to another party without the client agreeing. In most circumstances this is probably a reasonable protection of the interests of the client. However, you’d need to make sure this general clause fits specific circumstances. | The rights and obligations of the Independent Contractor under this Agreement cannot be assigned, changed or otherwise dealt with other than in accordance with this Agreement, without the prior written consent of the Principal. |
| Work standards | ||
| Work standards | This is imposing an obligation on you to do the work properly, which is not an unreasonable obligation. However, the ability of the client to seemingly give directions should relate only to directions on the standard of work to be achieved, not necessarily how that is to be done. | The Contractor agrees that the Services will be performed by the Contractor in a proper and workmanlike manner and in accordance with all reasonable directions of the engaging Party. |
| Termination of payments | ||
| Termination of payments | This clause may seem reasonable on the surface—that is, once the contract ceases, payments cease. However, this would depend on the specific circumstances in the contract. We would suggest caution and clarity in specific understandings under this contract clause. | in the event of the termination of the Agreement, the Contractor shall not be entitled to the Fees which the Contractor would have been entitled had this Agreement continued to be in force. To avoid confusion the Contractor will not have an ongoing entitlement to receipt of trail Fees from Services settled as a result of introductions of Clients made by the Contractor once the Agreement is terminated. |
| Rectifying work | ||
| Rectifying work | It is your responsibility as a contractor to fix any faulty work. But you should take care with this clause because the decision about what is faulty and who pays the cost is entirely at the discretion of the client. You should be very careful about signing such a clause. Identification of a fault in your work should be subject to mutual agreement and, where you can’t agree, settlement by an independent third party should be stipulated in the contract. | The contractor must at its own cost rectify any part of the Services that is faulty or defective at a time stipulated by the client, otherwise the task will be delegated to another contractor and the Contractor will be responsible for their payment. |
| Trade restriction | ||
| Trade restriction | You are agreeing here NOT to use any of the client’s employees in a business you may have for a set period. In this case the period is probably reasonable (6 months). But you need to be quite sure you are comfortable with this restriction. | For a period of six months following any termination, the Contractor shall not, directly or indirectly hire, solicit, or encourage to leave the Company’s employment, any employee, consultant, or contractor of the Company or hire any such employee, consultant, or contractor who has left the Company’s employment or contractual engagement within one year of such employment or engagement. |
| Assigning contract | ||
| Assigning contract | Be very cautious about agreeing to such a clause. Assignment of rights under the contract should normally be subject to both parties agreeing. If you do sign such a clause, make sure your rights are protected by other clauses in the contract. | The client may assign their rights, title and interest under this Agreement without obtaining the consent of the Contractor. The Contractor may only assign its right, title and interest under this Agreement by first obtaining the prior written consent of the client. |
| Price control | ||
| Price control | This clause is ‘reasonable’ from the engager’s point of view. There is nothing to say that a contract price should be changed yearly. However, the contractor should be clear that such limitation on price increases is okay with them. | The quantum of the fee may be reviewed annually by the Principal but the Principal is not obliged to increase the quantum of the fee as a consequence of the review. |
| Reputation damage | ||
| Reputation damage | This clause is okay as long as it applies to both parties in the contract. Further, what constitutes ‘damage’ should be subject to a dispute-resolution clause and procedure and ultimate settlement by an agreed independent mediator. | The contractor must at all times not be a party to any act or thing prejudicial to the commercial interests, goodwill, reputation or public image of the Principal. |