Red Flags in Freelance Contracts: Protect Your Business
Freelancing offers freedom, but bad contracts can trap you in unprofitable or legally dangerous situations. Here are the red flags every freelancer should watch for before signing.
Payment Red Flags
1. Net 60, 90, or Longer Payment Terms
Waiting 2-3 months to get paid while the client uses your work? Standard payment should be Net 30 or better for freelancers.
2. No Kill Fee
If the project is cancelled, will you get paid for work completed? Without a kill fee, you could do weeks of work for nothing.
3. Payment "Upon Completion to Client's Satisfaction"
This gives the client unlimited ability to delay payment by never being "satisfied." Payment should be tied to deliverables, not subjective approval.
4. No Deposit Requirement
For significant projects, 25-50% upfront protects you from clients who disappear.
Scope and Revision Red Flags
5. Unlimited Revisions
This is an invitation to scope creep. Cap revisions (e.g., "2 rounds of revisions included") and charge for additional rounds.
6. Vague Scope of Work
"Design a website" means nothing. The contract should specify pages, features, content, and what's NOT included.
7. No Change Order Process
When the client inevitably asks for more, how are changes handled? Without a process, you'll be expected to do extra work for free.
Intellectual Property Red Flags
8. All IP Transfers Before Payment
IP should transfer upon final payment, not before. Otherwise, the client can stop paying once they have your work.
9. No Portfolio Rights
If you can't show your work to future clients, that's a significant business limitation. Always negotiate portfolio rights.
10. "All Work Product Ever" Language
Some contracts try to claim IP on anything tangentially related to the project, including your pre-existing tools and methods.
Liability and Legal Red Flags
11. One-Sided Indemnification
You indemnify them but they don't indemnify you? That's unbalanced risk.
12. No Limitation of Liability
Your liability should be capped at what you were paid. Unlimited liability for a $500 project could bankrupt you.
13. Mandatory Arbitration in Distant Location
Being forced to arbitrate in their city makes pursuing claims practically impossible.
Restrictive Covenant Red Flags
14. Non-Compete Clauses
Freelancers shouldn't sign non-competes. You need to be able to work with multiple clients in your industry.
15. Overly Broad NDAs
Confidentiality is reasonable, but NDAs that prevent you from saying who you worked for limit your marketing.
What Fair Freelance Contracts Include
- Clear scope with defined deliverables
- Payment milestones with Net 30 or better terms
- Limited revision rounds
- IP transfers upon final payment
- Portfolio rights
- Mutual indemnification
- Liability cap at contract value
- Kill fee for cancelled projects
- Change order process
Frequently Asked Questions
Should freelancers sign non-compete agreements?
Generally no. Freelancers depend on working with multiple clients in their industry. A non-compete that prevents this undermines your entire business model. Push back hard or walk away from contracts requiring non-competes.
What payment terms are fair for freelancers?
Net 30 is standard and fair. Net 60 or longer is a red flag. For larger projects, request 25-50% upfront and tie remaining payments to milestones. Never agree to payment 'upon satisfaction' without objective criteria.
When should intellectual property transfer to the client?
IP should transfer upon final payment, not before. This protects you from clients who stop paying once they have your work. The contract should clearly state that ownership transfers only after full payment is received.
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