Written contracts

Written contracts

Written contracts provide more certainty for both parties than verbal contracts. They clearly set out the details of what was agreed. Matters such as materials, timeframes, payments and a procedure to follow in the event of a dispute, can all be set out in a contract.

A written contract helps to minimise risks as it is much safer to have something in writing than to rely on someone's word. A written contract will give you more certainty and minimise your business risks by making the agreement clear from the outset.

Benefits of a written contract:

A written contract can:

• Provide proof of what was agreed between you and the hirer.
• Help to prevent misunderstandings or disputes by making the agreement clear from the outset.
• Give you security and peace of mind by knowing you have work, for how long and what you will be paid.
• Clarify your status as an independent contractor by stating that the contract is a 'services contract' and not an 'employment contract'. This will not override a 'sham' contract, but a court will take the statement into account if there is any uncertainty about the nature of the relationship.
• Reduce the risk of a dispute by detailing payments, timeframes and work to be performed under the contract.
• Set out how a dispute over payments or performance will be resolved.
• Set out how the contract can be varied.
• Serve as a record of what was agreed.
• Specify how either party can end the contract before the work is completed.

Risks of not having a written contract

When a contract is not in writing, you are exposing yourself and your business to a number of risks including:

• The risk that you or the hirer misunderstood an important part of the agreement, such as how much was to be paid for the job or what work was to be carried out.
• The risk that you will have a dispute with the hirer over what was agreed because you are both relying on memory.
• The risk that a court won't enforce the contract because you may not be able to prove the existence of the contract or its terms.

Get advice before you sign

Before you sign a contract, it is a good idea to seek advice from your industry association, lawyer, business adviser or union.

When a written contract is essential

It's always better to have your contract in writing, no matter how small the job is. Any contract with a hirer that involves a significant risk to your business should always be carefully considered and put in writing. This is advisable even if it means delaying the start of the work. A written contract is essential:

• When the contract price is large enough to make or break your business if you don't get paid.
• Where there are quality requirements, specifications or specific materials that must be used.
• Where there is some doubt that the hirer has enough money to pay you.
• When you must have certain types of insurance for the type of work you are doing.
• Where the contract contains essential terms, such as a critical date for the completion of the work before payment can be made.
• Where you or the hirer need to keep certain information confidential.
• When it is required by your insurance company for professional indemnity purposes.
• Where there is a legal obligation to have a written contract (eg. trade contracts for building work in Queensland).