Independent Contractor Agreement Red Flags: Six Clauses to Check Before You Sign
This page is general information, not legal advice.
An independent contractor agreement sets out how you get paid, who owns your work, and what happens when the job goes wrong. Clients usually send their own template, and it is written to protect them. This page covers six clauses that often move cost or risk onto the contractor. For each one you get an illustrative example, why it matters, and wording you can propose. Unlike platform terms, contractor agreements can often be negotiated, so this is a list of things to raise before you sign.
The example clauses below are illustrative. They are not taken from any real company's contract.
1. Payment tied to "acceptance" at the client's discretion
A typical clause might read: "Payment is due within sixty (60) days after Client's written acceptance of the Deliverables. Client may accept or reject Deliverables in its sole discretion."
Why it works against you
The payment clock doesn't start when you deliver. It starts when the client says it accepts the work, and the client decides that with no standard and no deadline. A client that never confirms acceptance may never trigger payment. Long payment windows also mean you're funding the client's cash flow, and the clause says nothing about late fees.
What to ask for instead
Sample wording to propose: "Deliverables are deemed accepted unless Client gives written notice of a specific, material defect within 10 business days of delivery. Invoices are payable within 30 days of the invoice date. Overdue amounts accrue a late fee as stated in the invoice."
2. IP assignment that reaches your existing tools and know-how
A typical clause might read: "Contractor hereby assigns to Client all right, title and interest in any and all work product, inventions, materials and know-how created or used by Contractor in connection with the Services."
Why it works against you
"Created or used" can cover your templates, code libraries, design assets and methods you built before this client and plan to use for others. The assignment also takes effect immediately, so ownership may pass before you've been paid. See IP assignment clauses explained.
What to ask for instead
Sample wording to propose: "Contractor assigns to Client the Deliverables created specifically for Client under this Agreement, effective on full payment. Contractor keeps ownership of its pre-existing materials and grants Client a non-exclusive license to use them as part of the Deliverables."
3. One-sided, uncapped indemnification
A typical clause might read: "Contractor shall indemnify, defend and hold harmless Client and its affiliates from and against any and all claims, losses, damages and expenses, including attorneys' fees, arising out of or relating to the Services."
Why it works against you
"Arising out of or relating to" is broad. You could be asked to cover losses even when the client's own instructions, materials or mistakes caused them. There is no cap, and the duty only goes one way. One claim could cost far more than the whole project paid. See indemnification clauses explained.
What to ask for instead
Sample wording to propose: "Each party will indemnify the other for third-party claims to the extent caused by its own negligence, willful misconduct or breach of this Agreement. Contractor's total liability under this Agreement will not exceed the fees paid to Contractor under it."
4. Non-compete and non-solicitation restrictions
A typical clause might read: "During the term and for twenty-four (24) months thereafter, Contractor shall not provide similar services to any business that competes with Client, nor solicit or accept work from any Client customer."
Why it works against you
Contractors are supposed to be free to work for several clients, which is part of what makes them independent. A broad non-compete can keep you out of your own field, and a ban on accepting work from client customers can cost you work you never went looking for. Whether a restriction like this is enforceable depends on where you are, so ask a qualified lawyer. See non-compete clauses explained.
What to ask for instead
Sample wording to propose: "During the term and for 6 months after, Contractor will not actively solicit Client customers that Contractor worked with directly under this Agreement. Nothing in this Agreement prevents Contractor from providing services to other clients."
5. Termination for convenience without payment for work done
A typical clause might read: "Client may terminate this Agreement at any time, for any reason, upon written notice. Upon termination, Client shall have no further obligation to Contractor."
Why it works against you
The client can end the deal at once, and "no further obligation" may be read as no payment for work already in progress or done but not yet invoiced. If you turned down other work or bought materials, you carry that cost. See termination for convenience clauses explained.
What to ask for instead
Sample wording to propose: "Either party may terminate on 14 days' written notice. Client will pay for all Services performed through the termination date, plus any non-cancellable expenses Contractor incurred, within 30 days of termination."
6. Open-ended scope and unlimited revisions
A typical clause might read: "Contractor shall perform the Services described in Exhibit A and such additional services as Client may reasonably request, and shall make revisions until the Deliverables are satisfactory to Client."
Why it works against you
"Additional services as Client may reasonably request" and revisions "until satisfactory" let the job keep growing at the original price. With a fixed fee, every extra round of work lowers your real rate. Combined with the acceptance clause in section 1, this can hold up payment for a long time.
What to ask for instead
Sample wording to propose: "The fee includes the Services in Exhibit A and up to two rounds of revisions. Additional work or revisions require a written change order and are billed at Contractor's stated hourly rate."
Also worth a look
Watch for clauses that let the client set your hours, require you to use its equipment, or bar you from working for others. A contract that calls you an independent contractor but treats you like an employee can raise classification questions about tax, benefits and liability. The label in the document may not settle the question, so ask a qualified professional where you work. For more general warning signs, see freelance contract red flags.
Scan your own agreement free
Every client template is different, and one changed word can change who carries the risk. Paste your independent contractor agreement into the ScanMyTerms freelance contract review. In about a minute it flags clauses that work against you, with the exact wording and what to ask for instead. The free preview shows the risk count and the first two findings, and the full report is a one-time $5 per document.
This page is general information, not legal advice. For decisions about a specific contract, talk to a qualified lawyer where you live.
Sources
- All clause examples on this page are illustrative and written for this guide. They are not quoted from any real company's agreement.