Contract Negotiation Tips for Independent Contractor AgreementsBy James Blake on
Negotiating business contracts for services with independent contractors can be very different from negotiating contract agreements for goods. Unlike the sale of goods and plain commodities, part of what you’re buying with a service agreement includes intangible things like reliability, ease of communication and cooperation, experience, quality of service, reputation, etc.
Many small business owners make contract negotiation mistakes when bargaining for services with independent contractors because they are focused only on price and the product. In addition to purchasing the actual service or product, you are also negotiating the production process, the payment structure, and other important aspects of the business relationship. A Texas business lawyer or contract attorney can help you draft and negotiate business agreements that will achieve your goals, protect your interest, and incentivize cooperation between the parties.
Negotiating Independent Contractor Agreements
When negotiating independent contractor agreements, it’s important to look beyond the present. Whether you will need the independent contractor’s services for maintenance or future service should influence your contract negotiation strategy. Thinking about your independent contractor agreement as the beginning of a relationship (instead of just a single transaction) can be a good approach in many cases. It’s also helpful to get a business lawyer’s advice and to keep these principles in mind during contract negotiation:
Low Bidder. Think twice before hiring the lowest bidder. Price should not be the main driver of contract negotiation. Think about future service, maintenance, warranties, credibility, the independent contractor’s business networks, payment options, and other value-add options. Also, remember that industry competitors talk among themselves about prospective clients. If you develop a reputation as a business with no loyalty to vendors, and a business that only cares about the lowest price, your strategy may backfire on you.
Due Diligence. Fully investigate the independent contractor. Do you know where the independent contractor’s materials and labor are coming from? Have you seen their service contracts with the individuals or organizations that provide services that could impact your project? Is there counter-party risk? Risks and problems that the independent contractor encounters can bring your project to a halt. A business lawyer can help you identify these risks, as well as draft and negotiate contracts to protect you.
Discounts and Spec Work. Don’t pressure the independent contractor for discounts. If you bargain for price cuts at the beginning of the relationship, an independent contractor is likely to cut corners and under-serve your needs thereafter. Also, if you are hiring a graphic artist, web developer, or other design professional, don’t ask for free “spec work.” You should be able to make a decision about whether a design professional is appropriate for you based on their portfolio of past work. Asking for free spec work tells the contractor that 1) you’re not confident in their ability based on their portfolio, and 2) you don’t value their time. Pay a fair price for fair work.
Contract negotiation with independent contractors is an important part of running a successful business. Our Austin business law firm regularly advises clients in all types of business contract agreements. Call us today to find out how we may assist your contract negotiation.