Q: What should I keep in mind when establishing an independent contractor relationship?
A: An independent contractor (IC) is one who agrees with a buyer to provide goods or services for pay in a nonemployment (also known as freelance) relationship. A good method is for an IC and buyer to establish a contract where both sides understand the course (timing) and scope (specific duties for an amount of pay) of the project.
A contract is an agreement that a court will enforce. A valid contract with an IC occurs when there's an offer, acceptance, consideration (the "what-for-what" — usually money for work), legal purpose of the contract and the parties hold the mental capacity to negotiate a contract.
While oral agreements (handshakes) are generally acceptable when forming a contract, they are best avoided, particularly when the buyer is a business.
A written document helps ascertain what was necessary and agreed to when establishing an IC deal, and it is better to be specific than general.
When discussing an IC agreement, it's ideal for parties to choose words wisely in their offers, counteroffers and acceptances, whether they are over the phone or face-to-face. Common sense is a good guide.
If either the buyer or IC presents the other with words clarifying definite specifics such as pay amount, start date, time deadlines and job duties, then matters are moving in the direction of establishing a contract. Parties sending out or responding to a letter of intent or memorandum of understanding should pay attention to what they are saying in writing and the reasonable meaning that their words could hold to the other side. The common law lays a duty on parties to negotiate in good faith during contract formation, which means being honest.
Once a written document states terms defined enough to understand the course and scope of an IC agreement and there's a signature or clear affirmation from both sides that they have reached a meeting of the minds, then a contract has been established.
Coming up next week will be part two, implementing a contract.
John Del Vecchio has been operating a general practice, solo law office since 1988 and is on faculty at the University of St. Thomas Opus College of Business.