The Freelance Contract Dictionary

A glossary of 125 common "Red Flag" terms found in freelance contracts.

Work for hire

RED RISK

The client owns the copyright the moment you create it. You have no rights to the source files.

Source: U.S. Copyright Office

In perpetuity

RED RISK

This agreement or right never ends. It is valid forever.

Source: Black's Law Dictionary

Moral rights

YELLOW RISK

Check if you are being asked to waive these. Usually includes the right to be named as the creator.

Source: Cornell Law School LII

Moral rights waiver

RED RISK

You lose the right to be named as the creator or to object to changes in your work.

Source: Cornell Law School LII

Derivative works

RED RISK

The client can modify your work and own those new versions without your permission.

Source: U.S. Copyright Office

Irrevocable license

RED RISK

Once you give permission, you can never take it back, even if they stop paying.

Source: Nolo

Sub-licensable

YELLOW RISK

The client can rent or sell your work to third parties without paying you extra.

Source: Investopedia

Transfer of title

RED RISK

Ownership moves to the client. Ensure this only happens AFTER full payment.

Source: LawInsider

Pre-existing IP

YELLOW RISK

Check that they aren't trying to claim ownership of tools/code you owned before the gig.

Source: UpCounsel

All rights reserved

YELLOW RISK

Vague but powerful; usually means you cannot use this in your portfolio.

Source: Copyright.gov

Exclusive license

YELLOW RISK

You cannot sell this work to anyone else, even if it's a generic style.

Source: LegalZoom

Sublicense

RED RISK

Allows them to license your work to others without your consent.

Source: WIPO

Assignment of rights

RED RISK

Total transfer of your legal rights to another party.

Source: Black's Law Dictionary

Worldwide rights

YELLOW RISK

Grants permission to use work everywhere on Earth (and sometimes beyond).

Source: Copyright.gov

License back

YELLOW RISK

You need their permission to use your own work after you've 'sold' it.

Source: LawInsider

Portfolio exclusion

RED RISK

Explicitly bars you from showing the work in your professional portfolio.

Source: Freelancers Union

Grant of rights

YELLOW RISK

The specific clause where you give away legal powers. Read carefully.

Source: Nolo

Royalty-free

YELLOW RISK

You get paid once; you don't get a cut of future sales.

Source: Investopedia

Ownership of deliverables

YELLOW RISK

Standard, but ensure it doesn't include your 'Background Technology'.

Source: UpCounsel

Publicity rights

YELLOW RISK

They can use your name and likeness to promote the project.

Source: Cornell Law School LII

Copyright assignment

RED RISK

Permanent transfer of copyright ownership.

Source: U.S. Copyright Office

Patents pending

RED RISK

If you invent something, they might claim the patent.

Source: WIPO

Trademark ownership

RED RISK

They own any branding/marks you create.

Source: USPTO

Source code access

YELLOW RISK

They want the 'raw' files, not just the final result.

Source: LawInsider

Buy-out

RED RISK

A one-time payment to take all your rights forever.

Source: Investopedia

Indemnify

RED RISK

You pay their legal bills if a third party sues them because of your work.

Source: Cornell Law School LII

Hold harmless

RED RISK

You agree not to sue the client for any losses, even if they are at fault.

Source: Black's Law Dictionary

Liquidated damages

RED RISK

An automatic pre-set fine you must pay if you break the contract (e.g., missing a deadline).

Source: Investopedia

Consequential damages

RED RISK

You are liable for their 'lost profits,' which can be far more than your project fee.

Source: Nolo

Sole discretion

RED RISK

The client has total power. If they 'decide' they don't like it, they don't pay.

Source: LawInsider

Injunctive relief

RED RISK

They can get a court order to stop you from working immediately without a full trial.

Source: Cornell Law School LII

Limitation of liability

YELLOW RISK

Limits how much they owe you if they screw up. Ensure this is 'mutual'.

Source: SBA.gov

Joint and several liability

RED RISK

You are 100% responsible for damages even if others were involved.

Source: Black's Law Dictionary

Gross negligence

YELLOW RISK

A very high bar for 'reckless' behavior. Standard in most liability clauses.

Source: Nolo

Arbitration

YELLOW RISK

You cannot sue in court; you must use a private (often expensive) arbitrator.

Source: American Arbitration Association

Class action waiver

RED RISK

You give up the right to join other freelancers in a joint lawsuit.

Source: FindLaw

Attorney's fees

YELLOW RISK

Specifies who pays the lawyers if you go to court.

Source: Black's Law Dictionary

Disclaimer of warranties

YELLOW RISK

They aren't promising their data/tech actually works.

Source: Cornell Law School LII

Representations and warranties

YELLOW RISK

Legal 'promises' you are making. Read each one carefully.

Source: Nolo

Third-party claims

RED RISK

You are responsible if someone else sues the client because of your work.

Source: LawInsider

Venue

RED RISK

The specific city/court where a lawsuit must happen.

Source: FindLaw

Jurisdiction

RED RISK

The legal system (e.g. 'New York Law') that governs the contract.

Source: Cornell Law School LII

Governing law

RED RISK

Same as Jurisdiction; determines which state's rules apply.

Source: Nolo

Mutual indemnification

YELLOW RISK

The 'fair' version where both parties protect each other. Better than one-sided.

Source: UpCounsel

Statute of limitations

YELLOW RISK

The deadline to sue. Check if they have shortened the legal limit.

Source: Black's Law Dictionary

Confession of judgment

RED RISK

You admit guilt in advance if a dispute happens. Extremely dangerous.

Source: Investopedia

Personal guarantee

RED RISK

You are personally liable even if you have an LLC/Corporation.

Source: SBA.gov

Standard of care

YELLOW RISK

Defines how 'good' you have to be. Avoid 'Best' or 'Highest'.

Source: LawInsider

Damages cap

YELLOW RISK

Limits the total money you might owe. Essential for freelancers.

Source: Nolo

Uncapped liability

RED RISK

You could lose everything you own if something goes wrong.

Source: Investopedia

Net 90

RED RISK

You won't get paid until 3 months after you send your invoice.

Source: Freelancers Union

Net 60

YELLOW RISK

You wait 2 months for payment. Standard for big corps, tough for freelancers.

Source: SBA.gov

Pay when paid

RED RISK

You only get paid if the client's customer pays them first. High risk!

Source: Levelset

Audit rights

YELLOW RISK

They can demand to see your personal bank records or accounting software.

Source: LawInsider

Set-off

RED RISK

They can deduct 'debts' from your check to 'pay back' a separate issue.

Source: Investopedia

Retainage

YELLOW RISK

They keep a percentage of your pay (usually 10%) until the very end of a project.

Source: Nolo

Kill fee

YELLOW RISK

Check if this exists! It's what they pay you if they cancel the project mid-way.

Source: Freelancers Union

Time is of the essence

RED RISK

Legal code for: 'If you are 1 hour late, the whole contract is breached.'

Source: Cornell Law School LII

Milestone approval

YELLOW RISK

Payment is locked behind their 'satisfaction' at specific stages.

Source: UpCounsel

Flat fee inclusive of expenses

YELLOW RISK

You pay for your own travel, software, and stock photos out of your fee.

Source: SBA.gov

Late fees waived

RED RISK

You agree not to charge interest even if they pay you months late.

Source: Freelancers Union

Contingency payment

RED RISK

You only get paid if a specific (often out of your control) event happens.

Source: LawInsider

Most favored nation

RED RISK

You must give them your lowest price ever given to anyone.

Source: Investopedia

Budget cap

YELLOW RISK

They won't pay a penny over the limit, even if the work doubles.

Source: SBA.gov

Invoicing requirements

YELLOW RISK

If the invoice isn't 'perfect,' they have a legal excuse not to pay.

Source: LawInsider

Acceptance period

YELLOW RISK

How long they have to 'test' your work before they are forced to pay.

Source: Nolo

Pro-rated

YELLOW RISK

Paying only for the portion of the month/work completed.

Source: Investopedia

Currency fluctuations

RED RISK

You take the hit if the Dollar drops against the Euro.

Source: Investopedia

Taxes and duties

YELLOW RISK

Standard for freelancers, but ensure you aren't paying THEIR corporate taxes.

Source: IRS.gov

Subject to approval

RED RISK

Vague. They can withhold pay if they simply 'don't like it'.

Source: LawInsider

Reimbursable expenses

YELLOW RISK

They pay you back. Check if they require 'pre-approval' for a $5 lunch.

Source: SBA.gov

Payment schedule

YELLOW RISK

Often hidden in 'Exhibit A'. Read it before you sign.

Source: Freelancers Union

Pre-approval of costs

YELLOW RISK

You can't buy a $10 stock photo without an email chain.

Source: LawInsider

Accrued interest

YELLOW RISK

Check if you have the right to charge interest on late payments.

Source: Nolo

Non-refundable deposit

YELLOW RISK

Good for you, bad for them. Ensures you are paid for starting.

Source: Consumer Rights

Non-compete

RED RISK

Restricts you from working for competitors. Check the time and geographic limits.

Source: FTC.gov

Non-solicitation

YELLOW RISK

You can't hire the client's staff or 'steal' their other clients for your own business.

Source: Nolo

Non-disparagement

YELLOW RISK

You agree never to say anything negative about the client, even if they treat you poorly.

Source: Cornell Law School LII

Trade secrets

YELLOW RISK

Broader than an NDA; defines what 'secret sauce' you must protect forever.

Source: WIPO

Right of first refusal

RED RISK

You must offer them your next project or availability before anyone else can hire you.

Source: Investopedia

Exclusivity

RED RISK

You are barred from taking other clients while working on this project.

Source: LawInsider

No-hire clause

YELLOW RISK

Similar to non-solicitation; prevents you from poaching their talent.

Source: LegalZoom

Residual knowledge

YELLOW RISK

Allows the client to use 'ideas' they learned from you without it being a trade secret breach.

Source: UpCounsel

Non-disclosure

YELLOW RISK

The classic NDA. Standard, but check the 'Duration' (shouldn't be forever).

Source: Nolo

Confidential information

YELLOW RISK

Check if this includes your own methods/processes (it shouldn't!).

Source: WIPO

Exclusivity of effort

RED RISK

You must spend 100% of your work hours on them. You are an employee, not a freelancer.

Source: SBA.gov

Geographic restriction

RED RISK

Limits where in the world you can work or who you can work for.

Source: FTC.gov

Conflict of interest

YELLOW RISK

You must tell them if you work for a competitor. Standard, but keep it narrow.

Source: Nolo

Return of materials

YELLOW RISK

You must delete/return everything after the job. Keep your own 'Tools'!

Source: LawInsider

Destruction of data

YELLOW RISK

A more intense version of returning materials. Often requires a 'Certificate'.

Source: WIPO

Non-circumvention

RED RISK

You can't go 'around' them to deal with their supplier/customer directly.

Source: Investopedia

Personal data

YELLOW RISK

GDPR/CCPA rules. You are liable if you leak their customer's data.

Source: GDPR.eu

Background check

YELLOW RISK

They want to dig into your criminal/credit history.

Source: FTC.gov

Duty of loyalty

RED RISK

A vague term that can mean you must prioritize them over your own business.

Source: Black's Law Dictionary

Relationship of the parties

YELLOW RISK

Confirms you aren't partners or employees. Actually good for you.

Source: Nolo

Independent contractor

YELLOW RISK

Standard. Confirms you get no benefits but keep your freedom.

Source: IRS.gov

Non-transferable

YELLOW RISK

You can't hire a sub-contractor to do the work for you.

Source: LawInsider

Exclusivity of effort

RED RISK

Requirement to work only for this client during the project term.

Source: UpCounsel

No-poaching

YELLOW RISK

Another term for Non-Solicitation of employees.

Source: LegalZoom

Subcontracting prohibited

YELLOW RISK

You must do 100% of the work yourself. No helpers allowed.

Source: SBA.gov

Termination for convenience

RED RISK

They can fire you at any time for no reason. Ensure there is a 'Kill Fee' associated with this.

Source: SBA.gov

Evergreen

RED RISK

The contract renews automatically every year unless you cancel it in a very specific window.

Source: Black's Law Dictionary

Survival clause

YELLOW RISK

Specifies which parts of the contract (like NDAs) stay in effect after the work is done.

Source: Nolo

Merger clause

YELLOW RISK

Means 'only what is written here counts.' Your emails and verbal promises are legally void.

Source: Cornell Law School LII

Severability

YELLOW RISK

If one part of the contract is found illegal, the rest of the contract remains valid.

Source: Investopedia

Successors and assigns

YELLOW RISK

If the client sells their company, the new owner now owns your contract and your rights.

Source: LawInsider

Force Majeure

YELLOW RISK

Excuses performance due to 'Acts of God' like war or floods. Check if 'Pandemic' is included.

Source: Black's Law Dictionary

Choice of Law

RED RISK

Determines which state's laws apply. If you're in CA and they're in NY, you might have to sue in NY.

Source: Nolo

Unlimited revisions

RED RISK

You might be stuck doing endless work for the same fee.

Source: Freelancers Union

Non-refundable

YELLOW RISK

If you pay a deposit, you might not get it back even if they cancel.

Source: Consumer Rights

Material breach

RED RISK

A 'big' mistake that allows the other party to end the contract immediately.

Source: Cornell Law School LII

Cure period

YELLOW RISK

The time you have to fix a mistake before they can sue you.

Source: LawInsider

Notice period

YELLOW RISK

How much warning you must give before quitting (or they give before firing).

Source: Nolo

Entire agreement

YELLOW RISK

Same as a 'Merger Clause'. Only the paper matters, not your previous chats.

Source: Black's Law Dictionary

Counterparts

YELLOW RISK

You can sign two different copies and they count as one deal. Normal.

Source: Investopedia

Headings for convenience

YELLOW RISK

The titles of sections don't have legal power. Only the fine print does.

Source: LawInsider

No waiver

YELLOW RISK

If they let you slide once, it doesn't mean they'll let you slide again.

Source: Nolo

Ambiguities

YELLOW RISK

Usually interpreted against the person who wrote the contract.

Source: Cornell Law School LII

Exhibits and schedules

YELLOW RISK

The 'hidden' pages at the end where the real work/money is defined.

Source: UpCounsel

Independent contractor

YELLOW RISK

Re-confirms you are not an employee. Good for tax purposes.

Source: IRS.gov

Notices

YELLOW RISK

Defines how you must 'officially' talk (often via snail mail).

Source: LawInsider

Effect of termination

YELLOW RISK

What happens to the work/money the moment the deal dies.

Source: Nolo

Term of agreement

YELLOW RISK

The 'start' and 'end' dates. Ensure it's not open-ended.

Source: SBA.gov

Modification in writing

YELLOW RISK

You can't change the deal over the phone; you need a signed paper.

Source: Investopedia

Cumulative remedies

YELLOW RISK

They can use EVERY legal trick against you at once.

Source: LawInsider