Consulting Agreement: red flags and what's market-standard
Watch deliverable definition, non-compete/exclusivity, uncapped liability for advice, IP in frameworks and methods you reuse, and termination for convenience.
Who signs these: Consultants, advisors, fractional operators.
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Review my contractPayment terms (net period)
How long the client has to pay after you invoice. 'Net 30' means 30 days. Longer periods are effectively an interest-free loan from you to the client, and they compound when combined with slow approval cycles.
Market standard: Net 15 to net 30 for freelancers and small agencies. Net 45-60 appears with larger clients but should be pushed back on. Net 90 is a red flag for a small vendor's cash flow.
Watch for: Net 60 or longer; Payment clock starts on 'approval' rather than invoice date; Client may withhold the entire invoice over a dispute about one line item; No stated due date at all.
Invoices are due within fifteen (15) days of the invoice date. Payment is not contingent on any approval, and the Client may withhold only the specific disputed amount, not the entire invoice.
Late payment interest / fee
A charge that accrues when the client pays late. Without it, there is no financial consequence for a client that pays 60 days after the due date.
Market standard: 1% to 1.5% per month (roughly 12-18% annualized) on overdue balances, plus the right to suspend work until the account is current. Some jurisdictions cap the rate, so 'the lesser of 1.5% per month or the maximum permitted by law' is common phrasing.
Watch for: Clause is entirely absent; Client-favorable version that penalizes the freelancer for late delivery but is silent on late payment; Explicit waiver of any late fee or interest.
Overdue amounts accrue interest at the lesser of 1.5% per month or the maximum rate permitted by law. The Provider may suspend performance on 5 business days' notice while any undisputed amount is overdue.
Upfront deposit
A portion of the fee paid before work begins. It funds your work-in-progress and filters out clients who will not ultimately pay.
Market standard: 25% to 50% of a fixed-fee project on signature, with the balance tied to milestones or delivery. Retainers are paid in advance each month.
Watch for: Zero upfront payment on a large fixed-fee build; Deposit is fully refundable for any reason, including client convenience; First payment only after final delivery and acceptance.
The Client shall pay a non-refundable deposit of 40% of the Project Fee on execution of this Agreement. Work will not commence until the deposit is received. The deposit is applied against the final invoice.
Kill fee / cancellation fee
What you are paid if the client cancels the project partway through for their own reasons. Without it, a client can walk after you have done 80% of the work and owe only for 'work completed', which is hard to prove.
Market standard: Payment for all work performed to date plus a percentage (25-50%) of the remaining fee, or a defined percentage of the total fee depending on how far along the project is. Milestone payments already made are non-refundable.
Watch for: Client may terminate for convenience with no payment beyond 'hours documented'; All payments refundable on cancellation; Kill fee only applies if the freelancer cancels.
If the Client terminates for convenience, the Client shall pay (a) all fees for work performed through the termination date and (b) a cancellation fee equal to 40% of the remaining unpaid Project Fee. All amounts already paid are non-refundable.
Scope of work definition
The specific description of what you will deliver. A vague scope ('a website', 'a brand identity', 'marketing support') is the root cause of most freelancer disputes because the client's expanding expectations have nothing to push against.
Market standard: An itemized deliverables list with quantities, formats, and explicit exclusions ('does not include: copywriting, photography, ongoing maintenance'). Anything not listed is a change order.
Watch for: Scope described in one sentence; Phrases like 'and other tasks as needed' or 'to the Client's satisfaction'; Deliverables defined by outcome ('a successful launch') rather than artifacts; No exclusions listed.
The Services are limited to the deliverables itemized in Exhibit A, including the stated quantities and file formats. Any work not expressly listed in Exhibit A, including items in the 'Exclusions' section, is out of scope and handled under the Change Order process in Section X.
Change order process
The mechanism for handling work that falls outside the agreed scope. Without it, out-of-scope requests get absorbed as 'small favors' that add up to weeks of unpaid work.
Market standard: A short written change-order process: new request, written estimate of added fee and timeline, client approval before work starts. The base schedule shifts to accommodate approved changes.
Watch for: No change-order clause at all; Changes 'within the spirit of the project' are free; Provider must accommodate changes without adjusting price or deadline; Client can unilaterally expand scope.
Any change to the scope, deliverables, or schedule must be documented in a written Change Order signed by both parties before the additional work begins. Each Change Order states the added fee and the adjusted timeline.
IP transfers only on full payment
Whether ownership of the deliverables passes to the client immediately, or only once they have paid in full. If IP transfers on delivery or on signature, an unpaid client already owns everything and has no incentive to pay.
Market standard: All right, title, and interest transfer to the client upon receipt of payment in full. Until then, the freelancer retains ownership and grants at most a limited license for review.
Watch for: 'All work product is the Client's property upon creation'; Assignment 'effective on the Effective Date'; Work-for-hire language with no payment condition; Client gets a perpetual license before paying.
Upon the Provider's receipt of payment in full for a deliverable, the Provider assigns to the Client all right, title, and interest in that deliverable. Prior to payment in full, the Provider retains all ownership and grants the Client a non-transferable license to review the deliverable internally only.
Immediate / work-for-hire IP assignment
Broad language assigning everything you create, sometimes including things you made before the engagement or that you reuse across clients. 'Work made for hire' plus a catch-all assignment can sweep in your templates, libraries, and methods.
Market standard: The client owns the specific custom deliverables. The freelancer keeps ownership of pre-existing materials, general skills, know-how, and reusable tools, and grants the client a license to use them as embedded in the deliverables.
Watch for: Assignment of 'all intellectual property conceived during the term', not limited to the deliverables; No carve-out for pre-existing IP or background tools; Assignment of 'derivatives and improvements' to the freelancer's own tools; Moral rights waiver with no portfolio carve-out.
The assignment in Section X applies only to the Deliverables. It excludes the Provider's Pre-Existing Materials, tools, libraries, and know-how, which the Provider retains and licenses to the Client on a perpetual, non-exclusive basis to the extent embedded in the Deliverables.
Pre-existing materials and tools
Whether the contract recognizes that you bring reusable assets (code libraries, component systems, project templates, frameworks) and lets you keep owning them.
Market standard: The freelancer retains ownership of anything created before or outside the engagement, and of general-purpose tools, and grants the client a license to use them as delivered. Open-source components are governed by their own licenses.
Watch for: Silence on pre-existing IP combined with a broad assignment; Client owns 'all materials used to produce the Deliverables'; No mention of open-source or third-party licenses; Freelancer must indemnify for open-source that the client asked for.
'Pre-Existing Materials' means anything owned or licensed by the Provider before or independent of this engagement, including tools, libraries, and templates. The Provider retains ownership of Pre-Existing Materials and grants the Client a perpetual, non-exclusive license to use them as incorporated in the Deliverables. Open-source components remain subject to their respective licenses.
Limitation of liability cap
The maximum amount you could owe the client if something goes wrong. With no cap, a $5,000 project can expose you to a claim for the client's lost profits, which can be orders of magnitude larger than what you were paid.
Market standard: Total liability capped at the fees paid under the agreement (or fees paid in the preceding 12 months for ongoing work). Both parties waive indirect, incidental, and consequential damages, including lost profits.
Watch for: No limitation of liability clause at all; Cap applies only to the client's liability, not the freelancer's; Carve-outs so broad they swallow the cap (e.g. 'except for breach of this Agreement'); Freelancer liable for consequential damages and lost profits; Cap set at a multiple of fees (2x, 5x).
Except for each party's indemnification obligations and breach of confidentiality, neither party's aggregate liability under this Agreement will exceed the total fees paid to the Provider in the 12 months preceding the claim. Neither party is liable for indirect, incidental, special, or consequential damages, or lost profits.
Indemnification
A promise to cover the other party's losses, legal costs, and third-party claims in defined situations. One-sided or unlimited indemnification can require you to pay for lawsuits that are largely the client's fault.
Market standard: Mutual and narrow: each party indemnifies the other for claims arising from its own IP infringement, gross negligence, or willful misconduct. The freelancer's indemnity is usually subject to the liability cap; sometimes IP indemnity is a capped carve-out.
Watch for: Only the freelancer indemnifies; Indemnity covers 'any claim arising from the Services' regardless of fault; Indemnity is uncapped and excluded from the liability cap; Freelancer must indemnify for client-provided content or client-directed decisions; Duty to defend with client's choice of counsel at any rate.
Each party will indemnify the other against third-party claims to the extent arising from the indemnifying party's (a) infringement of IP rights, or (b) gross negligence or willful misconduct. The Provider's indemnification obligations are subject to the limitation of liability in Section X. The Provider has no obligation for claims arising from Client-provided materials or Client's instructions.
Termination for convenience
The right to end the contract for any reason on notice. When only the client has it, and there is no kill fee, the client can cancel the day before final delivery and owe very little.
Market standard: Either party may terminate for convenience on 14-30 days' written notice. On client termination for convenience, the client pays for all work performed plus a cancellation fee (see kill fee). Amounts already paid are non-refundable.
Watch for: Only the client may terminate for convenience; Notice period of 0-3 days; On termination the client owes only for 'accepted' deliverables; No cancellation fee tied to convenience termination; Client may terminate and still demand delivery of in-progress work.
Either party may terminate this Agreement for convenience on 20 days' written notice. On termination by the Client for convenience, the Client shall pay all fees for work performed through the effective date plus the cancellation fee in Section X. Sums already paid are non-refundable.
Termination for cause and cure period
The right to end the contract because the other side breached it, usually after a chance to fix the problem ('cure period'). Without a cure period, a minor, fixable slip can be used as grounds to terminate and withhold payment.
Market standard: Either party may terminate for material breach if the breach is not cured within 15-30 days of written notice describing it. Non-payment often has a shorter cure period (5-10 days).
Watch for: Client may terminate for cause immediately with no cure period; Freelancer's non-payment remedy has a long cure period but client's termination rights have none; 'Material breach' undefined, so any deviation qualifies; Termination for cause forfeits fees already earned.
Either party may terminate for material breach if the breaching party fails to cure within 30 days after written notice describing the breach in reasonable detail (10 days for payment breaches). Termination does not relieve the Client of the obligation to pay for work performed before the effective date.
Non-compete
A restriction on working with other clients, often competitors of this client, during and after the engagement. For an independent contractor this can directly cut off your income and is unenforceable or restricted in a growing number of places.
Market standard: For a freelancer, no non-compete at all, or at most a narrow one: named direct competitors only, limited to the engagement term plus a short tail (0-6 months), tied to specific confidential projects rather than an entire industry.
Watch for: Bar on working in the client's entire industry; Duration of 1-3 years after termination; No geographic or scope limit; 'Competitor' defined by the client at its discretion; No carve-out for work you were already doing before this client.
The Provider agrees not to provide substantially similar services to the specific named competitors listed in Exhibit C during the term and for 3 months after. This restriction does not apply to any client, project, or category the Provider served before the Effective Date, and does not restrict the Provider's general practice.
Non-solicitation
A promise not to poach the client's employees or customers for a period. Reasonable in principle, but overbroad versions can stop you from accepting inbound work from anyone connected to the client.
Market standard: No soliciting the client's employees you worked with, and sometimes its customers you were introduced to, for 12 months after the engagement. 'Solicit' should exclude general job postings and inbound approaches you did not initiate.
Watch for: Applies to all client employees and customers, not just those you interacted with; Duration over 2 years; Bars 'hiring' even when the person approached you; Covers the client's 'prospects' and 'affiliates' with no list.
For 12 months after the engagement ends, the Provider will not actively solicit for employment any Client employee the Provider worked with directly. This does not restrict general advertising not targeted at Client personnel, or hiring someone who responds to such advertising or approaches the Provider on their own initiative.
Exclusivity
A requirement that you work only for this client, or not for anyone in a defined category, for the term. Unlike a non-compete it bites during the engagement, and without a matching minimum retainer it can leave you underpaid and unable to take other work.
Market standard: For freelancers, no exclusivity, or exclusivity only within a narrowly defined category and only if the client commits to a minimum monthly retainer that reflects the opportunity cost.
Watch for: Full exclusivity with no minimum spend commitment; Category defined so broadly it covers most of your potential clients; Exclusivity continues during any 'pause' or 'hold' the client calls; Applies for a fixed term the client can extend.
The Provider is not exclusive to the Client and may perform services for others, including in the same industry, provided the Provider complies with its confidentiality obligations and avoids working on a directly competing project as defined in Exhibit C. Any exclusivity requires a separate written addendum with a minimum monthly fee.
Mutual confidentiality with carve-outs
The obligation to keep the other side's non-public information secret. Standard and usually fine; the issues are whether it runs both ways and whether it has the normal exceptions.
Market standard: Mutual obligation, 2-5 year term (or perpetual for trade secrets), with the standard carve-outs: information that is public through no fault of the recipient, already known, independently developed, or rightfully received from a third party. A carve-out for compelled legal disclosure.
Watch for: One-way: only the freelancer is bound; No standard carve-outs; Definition covers 'all information disclosed' with no marking or context requirement; Perpetual obligation on all information, not just trade secrets; 'Residuals' clause that lets the client freely use your unmarked ideas.
The confidentiality obligations are mutual. 'Confidential Information' excludes information that (a) is or becomes public without breach, (b) was known to the recipient without a duty of confidentiality, (c) is independently developed, or (d) is rightfully obtained from a third party. A party may disclose as required by law after giving reasonable notice. Obligations last 3 years from disclosure, except trade secrets, which are protected for as long as they remain trade secrets.
Governing law and venue
Which jurisdiction's law applies and where a dispute must be filed. If it is the client's home turf far from you, even a strong claim can be uneconomical to pursue or defend.
Market standard: A neutral or mutually convenient jurisdiction, or each party's own courts for claims it brings. For small contracts, the practical answer is often the freelancer's location because they are the more resource-constrained party.
Watch for: Exclusive venue in a distant jurisdiction with no connection to the work; Client's choice of forum, freelancer must appear; Waiver of objection to inconvenient forum; Loser pays all fees combined with a far venue.
This Agreement is governed by the laws of [Provider's state/country], excluding its conflict-of-laws rules. Each party consents to the exclusive jurisdiction of the state and federal courts located in [Provider's city] for any dispute, or the parties may agree in writing to remote proceedings.
Mandatory arbitration
A requirement to resolve disputes through private arbitration instead of court. It can be faster, but filing fees are often much higher than small-claims court, which can price a freelancer out of pursuing an unpaid invoice.
Market standard: For small contracts, either no arbitration clause (leaving small-claims court available) or arbitration with a carve-out that lets either party bring claims under a threshold (e.g. $10,000) in small-claims court. Fees shared or shifted to the losing party.
Watch for: Mandatory arbitration for all claims, including small unpaid invoices; Arbitration seated in a distant city; Freelancer bears its own fees regardless of outcome; Class-action waiver plus a ban on small-claims court; Client may litigate but freelancer must arbitrate.
Disputes will be resolved by binding arbitration under [rules] in [neutral location or by video]. Notwithstanding the foregoing, either party may bring a claim in small-claims court, and either party may seek injunctive relief in court for IP or confidentiality breaches. The arbitrator may award the prevailing party its reasonable fees and costs.
Assignment of the agreement
Whether either party can transfer the contract to someone else. A one-sided clause lets the client hand your obligations to a different entity (or a party you would not have agreed to work with) while restricting you from doing the same.
Market standard: Neither party may assign without the other's consent, except to a successor in a merger or sale of substantially all assets. Some agreements let the freelancer use subcontractors while remaining responsible.
Watch for: Client may assign freely to anyone; freelancer may not assign at all; Client may assign to a competitor or a collections entity; No successor carve-out for the freelancer's own sale of their business; Ban on subcontracting with no ability to request approval.
Neither party may assign this Agreement without the other party's prior written consent, except that either party may assign to a successor in connection with a merger, acquisition, or sale of substantially all of its assets on written notice. The Provider may engage subcontractors but remains responsible for their work.
Independent contractor status
Confirmation that you are a contractor, not an employee: you control how the work gets done, you provide your own tools, you are responsible for your own taxes, and you get no employee benefits. Also relevant to who owns the IP by default.
Market standard: A clear statement of independent-contractor status, no authority to bind the client, each party responsible for its own taxes, and no benefits. Paired with the freelancer keeping control over methods and schedule.
Watch for: Contract asserts contractor status but then dictates hours, location, and tools like an employer; Freelancer must work exclusively on client premises with client equipment; Client controls detailed methods and requires set working hours; 'Contractor' label with employee-style non-compete and reporting structure.
The Provider is an independent contractor. The Provider controls the manner and means of performing the Services, provides its own equipment, sets its own schedule, and is responsible for its own taxes and insurance. Nothing in this Agreement creates an employment, partnership, or agency relationship, and neither party may bind the other.
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