You have found a strong specialist. You discussed the tasks, agreed on pay verbally and shook hands, and the “extra paperwork” seems unnecessary. This is exactly the stage where many founders plant a problem that later costs money, time and relationships. We go through how an employee differs from a contractor, why a verbal deal or an internet template is risky and what a solid agreement must contain.
Checked on 21 October 2026. Rules and sources are current as of this date.
An agreement settles in advance the task, deadlines, pay and rights to the result. A verbal deal or an unadapted template risks payment disputes and loss of rights to what was built.
What can go wrong without an agreement
Vague expectations
The contractor understood the task differently from you. Without a technical specification in the contract it is almost impossible to prove who is right.
Payment disputes
The work is delivered late, but the contractor demands full payment. Or you paid an advance and the work never started.
Losing rights to the result
In many countries the rights to code, design or text stay with the author until they are assigned to you in writing.
Misclassification
If someone works in substance as an employee but is engaged as a contractor, regulators may assess back taxes and contributions and impose fines.
Employee or contractor
In many countries regulators and courts look at the actual relationship, not the name of the contract. A person who works like an employee can be reclassified even if the contract is called a services agreement.
What a solid contractor agreement contains
Scope
A detailed description of the work. Not “build a website” but “develop a five-page corporate website with responsive design per the specification”.
Deadlines and acceptance
Deadlines per stage and an acceptance procedure: acceptance act, test period, quality criteria.
Payment
The full price, the advance, payment terms and timing, and the currency.
Rights to the result
A clear assignment to the client of the exclusive rights to code, texts, design and other results, for example upon payment.
Confidentiality
An obligation not to disclose commercial information and data received during the work.
Liability
Penalties for missed deadlines and the consequences of poor-quality work.
Termination
When and how each party may end the agreement and what happens to payment and the result.
Law and disputes
The governing law, court or arbitration, and the pre-trial settlement procedure.
You do not sign an agreement because you distrust the person. You sign it because everyone has their own expectations.The LegalBit team
We will review your situation and propose a solution for your project.
The free template trap
The internet has a template for every occasion, and it is tempting to download one and fill in your details. But a template is universal and your business is not: it ignores your industry, your country, the tax status of the parties and your specific risks.
Templates go out of date quickly, often protect only one party or contain contradictory wording. A lawyer’s job is not filling in a form but analysing your situation and drafting a document for it.
Sign the agreement before the work starts. More about the service: Contracts and documents.
If the contractor is in another country
Teams are increasingly spread around the world, and the agreement has to answer extra questions.
Tax status
Where the specialist pays tax, whether withholding applies and which documents confirm their status.
Currency and payments
The contract currency, fees, exchange rate and transfer time, and the payment method.
Governing law
The law and courts of one of the countries, or arbitration. Without it a dispute between parties in different countries becomes much harder.
Personal data
If the contractor handles personal data, you need terms on protecting it, for example in line with the GDPR (EU General Data Protection Regulation).
Case law
The name of a contract does not decide a person’s status. This was shown clearly by a case heard by the UK Supreme Court. It is UK law, but the focus on the real facts matters in other jurisdictions too.
Uber v Aslam, 19 February 2021
The Court unanimously dismissed Uber’s appeal and held that the drivers were “workers”, entitled to the minimum wage and paid annual leave. It said that written terms are not the starting point and that the law protects those who depend on, and are subordinate to, whoever controls their work. What counted was control over pricing, limits on declining trips, passenger ratings and restrictions on contact with passengers. Working time was counted from when the driver is logged into the app within the licensed area and ready to accept trips.
If you call someone a contractor but set the price, the schedule and the way of working, and penalise refusals, that can count against you. Check the real relationship, not only the contract.
A company has worked with a designer for two years under a services contract, but the designer works set hours, on company equipment and on a manager’s instructions. After a dispute the designer asks to be recognised as an employee. A sensible order of action is to assess the real level of control, determine which law applies and how it treats such relationships, rethink the working model (a genuine contract for a result or hiring on staff), and reflect the choice in a new agreement.
A checklist before signing
Before you sign, answer five questions: is it clear what result you receive, are the deadlines and the acceptance procedure defined, who owns the rights, what happens on early termination, and which law governs the agreement.
Then that point has to be added to the agreement. It is better to settle it before the work starts than to argue about it afterwards.
Frequently asked questions
Can I hire someone as a contractor to save money?
Only if they genuinely work as a contractor. If a person has a fixed schedule, one client and follows internal rules, the relationship may be reclassified. The consequences depend on the country: taxes, contributions and fines.
Who owns the contractor’s work?
Without a written assignment of rights, the result often stays with the author. In many countries rights must be assigned expressly, so the agreement should include such a clause.
Do I need a separate NDA?
Confidentiality terms can be included in the main agreement. A separate NDA is needed if you disclose information before the agreement is signed, for example during negotiations.
Can I use a template from the internet?
Only as a reference, and after a lawyer reviews it. A template must be adapted to the country, the tax status of the parties and the specifics of your work.
Which law should govern the agreement?
It depends on where the parties are located and where the work is performed. The governing law and the dispute resolution forum, court or arbitration, should be agreed in advance.
See also: How to choose a jurisdiction for your company registration?; SAFT vs. Token Warrant: Choosing the Right Instrument for a Seed-Stage Crypto Raise. Services: contracts and legal documents.
