| Often people/businesses who do the engaging will insert clauses designed to entirely protect their business in any form. From their perspective, the clauses shown here are perfectly reasonable because they protect them. But they are totally one-sided. If clauses of a similar type were imposed on them in the contract, they would be outraged and consider them an unacceptable limitation on their ability to run their business. Frankly, however, what is sauce for the goose should be sauce for the gander. If clauses in this red category are to be imposed, they should apply equally to both parties. Further, if you see such clauses in a contract, it should lead you to wonder if you want to do business with this client. |
| Clause Type | Comment | Clause example (These are clauses taken from actual contracts) |
| Immediate Termination | One of the most ‘unfair’ clauses we see is where the client can terminate the contract immediately for no reason. Typically, the clauses will say that termination can occur for ‘non-performance’ but the question always is: who determines the non-performance? Usually it is just the client. We recommend against agreeing to such clauses if your contract is for a set period or specific job result. If the contract is to be subject to an immediate termination clause, we suggest that an upfront negotiated payment to you should be provided for. Further ‘non-performance’ should be subject to agreement between the parties and ultimately to resolution by an agreed independent mediator. | |
| Immediate termination | We strongly advise against agreeing to such a clause. It means the contract is not in anyway a ‘true’ contract between parties. If you think you are entering a contract for a specific term or job, this clause nullifies the term completely. Effectively the clause means the availability of the work is entirely at the discretion of the client. In this case the contract is, in effect, a minute-by-minute contract. You’d be better off not having a written contract at all and just work ‘minute by minute’ and be paid accordingly. | The Principal may terminate this agreement immediately without payment or compensation to the Contractor if the Contractor commits any act or omission which materially or detrimentally affects the Principal including but not limited to deliberate disobedience, serious misconduct and serious breach of duty (or) in the Principal’s reasonable opinion the Contractor is guilty of negligence in the completion of the services. |
| Immediate termination | As above | If this agreement is terminated by the Principal, the Contractor has no further claim against the Principal for compensation for loss in respect of the termination. |
| Immediate termination | As above | The Principal may reduce the Notice Period in respect of the Sub-Contractor so that the termination takes effect as indicated in the written notice, which may be immediately, if the Sub-Contractor (i) fails to perform the Services to the satisfaction of the principal; (ii) fails to rectify any breach of this Agreement or default in performance within seven (7) days of the principal giving notice of that breach or default; (iv) acts without due diligence and skill; (v) fails to conform to the security provisions or standards of professional conduct referred to in clause x hereof. |
| Immediate termination | This is a typical clause seen in ‘labour hire’ type agreements. It’s designed to protect the labour hire company if the end client seeks to terminate. Again, this is totally open-ended, meaning that the contract is really only a minute-by-minute contract. | The Principal may at any time before the Expiry Date terminate this Agreement without notice if: (a) the Independent Contractor breaches a material provision of this Agreement; (b) the Client ceases to require the Principal or the Independent Contractor’s services; or (c) the Client otherwise refuses to allow the Independent Contractor to continue providing the Services. |
| Immediate termination | As above | (The Company) may at its discretion immediately suspend your rights to market our products etc. |
| Immediate termination | As above | If this Agreement is terminated pursuant to clause [x], you will not be entitled to any commission or other payment etc. |
| Immediate Termination | As above | (The Company) may withdraw accreditation to perform the services at any time. |
| Immediate termination | As above | This Agreement may be terminated immediately at any time by us giving notice to you if, in our opinion, any of the following events occurs: 17.1 (b) you breach any of (The Company) policies 17.1 (l) you engage in any conduct that is in the sole opinion of (The Company) likely to injure (The Company) reputation or commercial interests. 17.1 (m) you do not comply with the Minimum Performance Requirements specified in the Addendum. |
| Immediate Termination | As above | If the Contractor fails or refuses to comply with the written policies or reasonable directive of the Company, is guilty of serious misconduct in connection with performance hereunder, or materially breaches provisions of this Agreement, the Company at any time may terminate the engagement of the Contractor immediately and without prior written notice to the Contractor. |
| Immediate termination | This effectively enables your immediate termination for alleged non-performance. Non-performance of both parties should always be subject to discussion and agreement and triggering of a dispute-resolution clause with resolution by an agreed independent third party. | The contractor must perform the Services with due care and diligence to the reasonable satisfaction of the client. Any failure, refusal or neglect will be a breach of this Agreement for which the client will be entitled to terminate the Contractor’s services forthwith without prejudice to any outstanding or future claims. Any outstanding monies owed to the Contractor at the time of termination will offset to correct any substandard work performed by the Contractor. |
| Hidden clauses | These clauses commonly require you, the contractor, to agree to the ‘policies and procedures’ of the company. If you have never sighted these or they change without your knowledge, the contract effectively has clauses and conditions of which you are unaware. We recommend you NOT agree to such a clause unless you have sighted the company’s polices, they are annexed to the contract and cannot be changed without your agreement. | |
| “Hidden” clauses | Key performance indicators (KPIs) are central to the determination of whether you have performed the work as required. Requirement to comply with KPIs is to be expected on the condition that the specifics of the KPIs are listed in the contract. Where they are not, you effectively do not know the requirements of the contract you are entering. | You agree that it is a term of this Agreement that you must strictly meet all KPIs. You acknowledge that new KPIs and KPI targets may vary as advised by (The Company) from time to time and that compliance with those new KPIs and KPI targets constitutes a condition of this Agreement. |
| “Hidden” clauses | As above | The contractor agrees to abide with all (The Company’s) polices as advised by (The Company) from time to time. |
| “Hidden” clauses | We strongly advise against agreeing to such a clause. It effectively means that the terms of the contract you are entering are unknown and can be changed at a moment’s notice by the client simply by them writing a new ‘procedure’. You may not even know the new procedure has been written and could, for example, change even the price under which you are being paid. | The Contractor shall comply with and adopt all written procedures and standards of the engaging Party. |
| Price Control | When you enter a contract you should know the agreed rates and payments to be made to you. These should not be capable of being changed unless you agree. Where rates can be changed without your agreement, you are entering a contract based on ‘blind faith’. | |
| Price change | We advise against agreeing to such a clause. This enables the client to change the price you are paid without your agreement or even without consultation with you. | You agree that (The Company) may declare and determine the amount or rate of commission payable etc. |
| Price change | As above | We reserve the right to vary the basis upon which you are remunerated, the rates of commission and other information. |
| Price change | As above. Even if there is a set pricing arrangement in the contract, this clause stops you from disputing the way a payment has been calculated. In effect, you are agreeing to be allowed to be potentially defrauded—either through an error by the client or by their intent. | (The Company’s) calculation and determination of any commissions or other benefits payable to you is final. |
| Price change | As above | Subject to the entitlement of (The Company) to unilaterally vary the rates of commission and other information specified in the Addendum etc. |
| Deducting payments | You should never agree to clauses that enable the client to deduct money from you without your agreement. Such clauses effectively give the client the ability to ‘steal’ from you. | |
| Authority to deduct payments | Comments as above. But, further, this allows the client to demand money from you after the contract has been terminated and entirely at their discretion. | During the term of this Agreement and at any time after the Termination Date, if any commissions or other payments have been paid to you were in the reasonable opinion of (The Company) payments you are not entitled to, such commission or payments must be repaid by you to (The Company) on demand etc. |
| Authority to deduct payments | We strongly advise against agreeing to such a clause. It effectively gives the client the ability to take any money from you it wishes without your authority and in a way over which you have no control. | The Principal may withhold part or total payment of the fee due to any claim, taxes, penalties, fines or premiums incurred by or imposed on it due to any act of the contractor. |
| Authority to effect insurance | We would advise extreme caution in agreeing to such a clause. It is entirely open-ended, enabling the client to enter (insurance) agreements on the independent contractor’s behalf with you having no control over the nature or price of the insurance being entered into. For such a clause to be acceptable it should stipulate the type and nature of the insurance, be subject to your agreement, and grant you the ability to obtain alternative insurance to the agreed level required. | The Contractor authorises the Principal to effect on behalf of the Contractor insurances as required, to pay the premiums on behalf of the contractor and to deduct the cost of the premiums from the fees paid to the contractor. |
| Authority to damage you | You should never agree to a clause that enables the client to do or say things that would damage you in any way. | |
| Defame you | We strongly advise against agreeing to such a clause. This clause effectively enables a client to defame you and harm your business reputation without your having any capacity to stop such reputational damage. | In the event that this Agreement is terminated etc we will notify (specifies a wide number of people and organisations) of the circumstances giving rise to the termination You agree not to make any claim against (The Company) in respect of an notification made pursuant to clause … |
| Litigation against you | You are effectively agreeing that the client has a right to sue you if there is a breach of the agreement. There are two problems with this: (1) You are not being given the same rights to sue the client in the same way. (2) The identification of what is a ‘breach of the contract’ is open-ended. This will make you vulnerable to attack even if it’s arguable that you have breached the contract. The contract should have a dispute clause with referral to an independent arbitrator with the power to determine if the clause has been breached. | The Contractor expressly agrees that the Company shall be entitled to injunctive and other equitable relief in the event of, or to prevent, a breach of any provision of this Agreement by the Contractor. Resort to such equitable relief, however, shall not be construed to be a waiver of any other rights or remedies that the Company may have for damages or otherwise. The various rights and remedies of the Company under this Agreement or otherwise shall be construed to be cumulative, and no one of the them shall be exclusive of any other or of any right or remedy allowed by law. |
| Changing the contract | Nothing should be in the contract that enables the contract to be changed without your written agreement. | |
| Changing the contract | This is a dangerous clause which allows your client to change the contract at a whim without your approval. | The client … can at its sole discretion add to or vary the Services to be performed by the Contractor and the Clients for whom it is performed. |
| Intellectual Property | Your intellectual property is your property and has value. You should not agree to clauses that transfer your intellectual property to the client unless you are being paid a substantial amount for it. | |
| Intellectual Property | This clause involves your handing over all your existing intellectual property to the client and gives the client the right to do with this what they wish. If you were to agree to such a clause, you would need to make sure you were well paid for the loss of your property. | Any and all inventions, discoveries, developments and innovations conceived by the Contractor prior to the term of this Agreement and utilised by [him or her] in rendering duties to the Company are hereby licensed to the Company for use in its operations and for an infinite duration. This license is non-exclusive, and may be assigned without the Contractor’s prior written approval by the Company to a wholly-owned subsidiary of the Company. |
| “Reasonable” | The idea of ‘reasonableness’ is a technical issue at law. We recommend that you should not agree to an open-ended declaration in a contract that it is ‘reasonable’. | |
| Contract ‘reasonable’ | Such clauses are often a trap and usually written-in because the client knows that aspects of the contract may be ‘unreasonable’ if tested in the courts. Be very wary of agreeing to such clauses. In fact such a clause may flag that the client is or could behave in an unreasonable manner to you and should lead you to consider if you want this client or not. | The Contractor acknowledges that the restrictions in this clause … are reasonable in the circumstances and necessary to protect the business and goodwill of the client. |
| Restraint is ‘reasonable’ | This also reeks of being a ‘trap’ clause. If you agree to such a clause, you would have to ensure that you were truly being paid enough to compensate for any restrictions placed on you. | The Contractor acknowledges that the Contractor’s fees, remuneration and other benefits would be significantly lower but for the restraint in this clause … and that by agreeing to be restrained the client has significantly increased the remuneration than would have been made had the Contractor not agreed to the restraint. |
| Alternative work | Your ability to undertake work for many people/businesses is a key party of being an independent contractor. It is and should be normal for you to work for a client’s competitors. If you agree not to work for a client’s competitors, the payments to you should be high to reflect the restrictions placed upon your ability to do business. | |
| Alternative work ban | This clause stops a contractor from engaging in their normal business with other parties. If a contractor agrees with this, they should be very clear about the limitation being imposed. In fact the clause seeks to make the contractor dependent on the client. This is an indicator of employment, not independent contracting. Further, if a limitation is to occur, the contract should specify who the ‘competitors’ might be to the extent of naming other companies. | The contractor will ensure that it does not provide without the prior written consent of the principal any services to or for any third party who has an interest which is directly or indirectly in competition with the Principal’s Business |
| Alternative work ban | This is really a clause that indicates that the ‘client’ wants you as an employee. An essential part of being an IC is your ability to work for many clients without restriction. If, however, they want your services for an exclusive period of time, the client should be prepared to pay a high premium for such exclusivity. | Requires the contractor to work exclusively for (The Company) and ‘devote their whole time and attention to the business of (The Company)’. |
| Alternative work ban | As above | The contractor will not have any interest in or be involved in any business which in the reasonable opinion of (The Company) is engaged or concerned in competition with or provides the same or similar products to (The Company). |
| Alternative work ban | As above | The Contractor will not during the Term (without the prior written consent of the Principal) become involved or participate in any business, undertaking or concern which in the Principal’s opinion conflicts or appears to conflict with the interests of the Principal. |
| Prevention of future work | We strongly advise against agreeing to such a clause unless the client is prepared to pay a large payout clause on the termination of the contract or the price you are being paid is huge during the contract. This clause effectively stops you from working in your field of expertise following the termination of the contract. | Throughout the Term and for 12 months after this Agreement is terminated, the Contractors will not be employed by, engaged by or enter into any business relationship with any third party or otherwise provide services equivalent or similar to the services to any third party. |