Contractor Agreement Checklist: 7 Must-Have Clauses

Use this plain-English checklist to build a contractor agreement that protects your budget, timeline, and ownership—without legalese.

Why a Checklist Matters

Hiring a freelancer or consultant is a smart way to move faster without adding headcount. But a vague or incomplete contractor agreement can create expensive problems—scope creep, unpaid invoices, missed deadlines, and fights over who owns the work. This guide walks you through the seven must-have clauses every independent contractor agreement should include, with practical examples, why it matters explanations, and red flags with context so you can spot issues early.

The 7 Must-Have Clauses

1) Scope of Work (SOW) & Deliverables

Define exactly what’s being done, what’s not, and when it’s due. Treat the scope like a mini project plan: deliverables, milestones, responsibilities, and assumptions. The tighter your scope, the fewer surprises.

• What to include: deliverables list, formats (e.g., Figma, PNG, source files), access needs, acceptance criteria, and timeline.
  Why it matters: Specifics prevent “I thought this was included” debates and let you hold the project to objective checkpoints.
• Simple sample: “Contractor will design a 10-slide pitch deck (Google Slides) including templates, icons, and brand-aligned visuals by Nov 15.”
  Why it works: Tasks, format, and deadline are unambiguous.
• Red flags (with context):
  • “Help with design” / “as needed.” — Too vague to manage. Risk: Endless scope creep. Fix: Replace with deliverables, formats, and counts (e.g., “10 social graphics in PNG + editable files”).
  • No acceptance criteria. — You can’t prove “done.” Risk: Disputes at launch. Fix: Add measurable criteria (e.g., “passes mobile test; loads under 3s on homepage”).
  • No timeline or milestones. — Progress stalls. Fix: Add dates tied to deliverables (wireframes → draft → final).

2) Payment Terms, Deposits & Invoicing

Spell out how much, when, and under what conditions. Deposits and milestone payments keep cash flow predictable and align incentives on both sides.

• What to include: pricing model (fixed, hourly, retainer), deposit %, milestone schedule tied to deliverables, invoice timing (Net 15/30), late-fee policy, expense rules (pre-approval).
  Why it matters: Prevents “we’ll pay later” disputes and sets objective triggers for payment.
• Simple sample: “Total fee $6,000: 40% deposit on signature, 40% on first draft, 20% on final. Invoices Net 15. Late balances accrue 1.5% monthly. Pre-approved expenses reimbursed within 10 days.”
  Why it works: Early commitment, progress-based payments, clear remedy for late pay.

🔗 Authority Resource: See the U.S. Small Business Administration’s guide on managing invoices and payment terms for small businesses.

• Red flags (with context):
  • “Pay on completion only.” — If acceptance drags, so does cash. Risk: Contractor cash crunch, project tension. Fix: Add deposit + milestone tied to first draft/demo.
  • “We’ll sort payment later.” — Vague timing invites delays. Fix: Put payment events in writing: “Invoice issued on draft delivery; Net 15.”
  • Unlimited revisions included. — Fixed fee becomes endless. Fix: Cap revisions (e.g., 2 rounds) and use change orders for new direction.

3) IP Ownership & Work-Made-for-Hire/Assignment

If you’re paying for code, copy, or creative, you should own it when you’ve paid for it. For contractors, ownership does not automatically transfer—use a clear assignment clause.

• What to include: assignment of all rights upon payment, limited portfolio license back to contractor (optional), and a disclosure list of third-party materials (fonts, stock, open-source) with license terms.
  Why it matters: Without assignment, you may only have a license to use the work, not true ownership.
• Simple sample: “Upon payment, Contractor assigns to Company all right, title, and interest in the Deliverables (including source files). Contractor may display non-confidential samples for portfolio use. Contractor will disclose any third-party materials and ensure appropriate licenses.”
  Why it works: Transfers ownership at payment, clarifies portfolio use, and surfaces license risks.
• Red flags (with context):
  • No assignment clause. — You can’t adapt/resell/transfer later. Fix: Add explicit assignment upon payment.
  • Unclear source-file ownership. — Only receiving exports (PNGs/MP4s) blocks future edits. Fix: Require editable/source files (Figma/PSD/code).
  • Hidden/transfer-restricted licenses. — Stock/open-source terms may limit commercial use. Fix: Demand a third-party list and confirm license scope matches your use.

4) Confidentiality & Data Security

Protect your customer lists, financials, product roadmaps, and credentials. Keep it simple but firm.

• What to include: definition of Confidential Information, no use beyond the project, no disclosure to third parties, basic security (private repos, MFA, secure storage), and return/delete on request.
  Why it matters: Prevents leaks and sets expectations for handling sensitive info.
• Simple sample: “Contractor will use Confidential Information solely to perform the Services and will not disclose it to third parties. Upon request, Contractor will promptly return or securely delete all Company data.”
  Why it works: Clear purpose, clear boundaries, clear exit steps.
• Red flags (with context):
  • “We’ll use public repos / shared logins.” — Easy to leak data. Fix: Private repos, per-user access, password managers.
  • No delete/return obligation. — Data lingers indefinitely. Fix: Add “return or delete on request” + confirmation email.
  • Contractor wants to reuse your materials. — Risk of your templates/IP walking away. Fix: Limit reuse to anonymized portfolio samples only.

5) Independent Contractor Status & Control

Avoid misclassification by documenting the independent nature of the relationship: contractor controls the how, uses their own tools, pays their own taxes, and isn’t eligible for employee benefits.

• What to include: no employee status, no benefits, contractor responsible for taxes/insurance, contractor controls methods and schedule (within deadlines).
  Why it matters: Aligns the paperwork with reality—critical if the relationship is ever reviewed.
• Simple sample: “Contractor is an independent business, not an employee. Contractor controls methods and schedule, uses its own tools, and is responsible for taxes and insurance.”
  Why it works: States independence plainly and allocates responsibilities.

• 🔗 Authority Resource: For classification rules, review the IRS guidance on independent contractors vs. employees .

• Red flags (with context):
  • Fixed daily hours / mandatory standups. — Looks like employment. Fix: Use outcome-based check-ins (weekly/milestone) instead.
  • Company equipment by default. — Blurs independence. Fix: Contractor brings own tools; exceptions documented.
  • Manager-level duties. — Supervising your staff implies employment. Fix: Keep control focused on deliverables, not personnel.

6) Deliverables, Acceptance & Revisions

Set a clear review window, define what “accepted” means, and limit revisions so projects don’t spiral.

• What to include: acceptance criteria, review timeline (e.g., 5 business days), number of included revision rounds, and what triggers a change order.
  Why it matters: Keeps momentum and prevents endless back-and-forth.
• Simple sample: “Company has 5 business days to request reasonable revisions tied to scope. Two rounds of revisions are included. New features or direction changes require a change order.”
  Why it works: Everyone knows the window and the limits up front.
• Red flags (with context):
  • Unlimited revisions. — Time sink. Fix: Cap rounds and define “material change.”
  • No review deadline. — Work stagnates waiting on feedback. Fix: Add a 5–7 business-day window; silence = deemed accepted.
  • Subjective acceptance (“we’ll know it when we see it”). — Disputes guaranteed. Fix: Tie acceptance to the scope/criteria (e.g., features list, brand guide, performance metrics).

7) Term, Termination & Kill Fees

Projects sometimes pause or end early. A fair off-ramp protects both parties and preserves the relationship.

• What to include: start/end dates, termination for convenience with notice (7–14 days), payment for work performed, and an optional kill fee to cover context-switching and lost booking.
  Why it matters: Early exits happen; this prevents hard feelings and unpaid work.
• Simple sample: “Either party may terminate on 10 days’ notice. Company will pay for Services delivered to date plus a 10% kill fee on remaining milestones.”
  Why it works: Predictable, fair, and fast to execute.
• Red flags (with context):
  • No payment on termination. — Encourages walk-aways after heavy lift. Fix: Pay for work to date + reasonable kill fee.
  • Deposit forfeited despite progress. — Can be unfair if lots of work is done. Fix: Apply deposit to completed work, then reconcile.
  • No notice period. — Abrupt stops derail planning. Fix: Add 7–14 days to wrap and hand off cleanly.

Helpful Add-Ons (Optional but Smart)

• Change Orders: Quick one-pager to approve new work with budget/timeline updates.
• Non-Solicit: Prevents poaching your team or clients for a defined period.
• Warranties: Contractor promises original work and non-infringement.
• Balanced Indemnity: Each side covers the risks they control (e.g., contractor indemnifies for IP infringement in deliverables).
• Dispute Resolution: Governing law, venue, and mediation/arbitration preferences.

One-Page Mini-Checklist

Common Mistakes (and Easy Fixes)

FAQs

Build Your Agreement the Easy Way

SMVRT Legal provides lawyer-drafted Independent Contractor Agreement templates designed for small businesses. Create, customize, collaborate, and e-sign in one platform—no formatting hassles or version control headaches.

• Create a clear scope, payment terms, and IP assignment.
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• Sign & Store securely with built-in e-signature.

Conclusion

A solid contractor agreement doesn’t need to be complicated. If you cover these seven essentials—Scope, Payment, IP, Confidentiality, Status, Acceptance & Revisions, and Termination—you’ll eliminate most common risks and set your project up to succeed. Keep it clear, stick to your scope, and document changes as you go.