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12 points that every work contract should contain

The works contract protects both the client and the contractor. It protects the risks associated with late or incomplete delivery of the work, defects in the work, payment problems or copyright.

Pár rukou sepisující důležité náležitosti smlouvy o dílo
9 minutes of reading

Chapters of the article

  1. Identification of the contracting parties
  2. Definition of terms used
  3. Subject matter of the contract
  4. Term of performance
  5. Price
  6. Place of performance
  7. Obligations of the contractor
  8. Obligations of the Client
  9. Copyright and intellectual property
  10. Liability for damage and defects in the work
  11. Penalties
  12. Withdrawal from the work contract

When we say work, many of us probably first think of a painting or sculpture. However, a work can be anything from a magazine article to a piece of computer software, a bespoke program or application to a piece of craft work.

A contract for work is thus quite common among freelancers in various industries, developers, translators or the aforementioned craftsmen. Which elements should such a work contract contain in order to really protect both parties well?

1. Identification of the parties

Any properly drafted works contract should first and foremost contain details of the individual parties. Don’t forget the names (or company names), registered offices, identification numbers, details of registration in the Companies House and ideally the bank details and the name of the company’s representative, including contact details (if the contract is entered into on behalf of the company). Now you may be wondering why we mention such basics. But you’d probably be surprised how many people get it wrong on the very first point.

2. Definition of terms used

In addition to the parties to the contract, you need to define the terms you use in the contract. The purpose of this is to make things clear for everyone involved and to prevent any double interpretation of terms. Therefore, be sure to mention exactly what is meant by defects, in which cases they are minor defects and indicate exactly which law governs the issue.

3. Subject matter of the contract

The next step is to describe the subject matter of the contract, i.e. the work itself, in as much detail as possible. At the same time, the formalities must be stated, i.e. that the work will be carried out within the time specified in the contract and at the price specified in the contract.

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4. Term of performance

The preceding point is linked to the need to specify directly the date by which the work will be handed over to the client. Completion may be carried out in stages, and this must also be taken into account. Subsequent acceptance of the work should be confirmed by the signatures of both parties; a special handover report is usually recommended, a model of which may already be included in the contract.

5. Price

In addition to the deadline, we must not forget to mention the price for the work. You can:

  1. Set a fixed amount – in this case, the contractor or the client cannot request a change in the price because the work required more effort or higher costs.
  2. Fix it by estimation – in this method of fixing the price, the client and the contractor agree on an estimated price which is to be respected in principle. If the contractor discovers in the course of the process that the price will have to be substantially exceeded (by more than 10%), he must notify the client without undue delay, giving reasons and specifying a new price. The client may withdraw from the contract at such time and pay a pro rata part of the determined price to the contractor (if he benefits from the partial performance). Should he fail to do so, he shall be deemed to have agreed to the price increase.
  3. Determine it by a budget, the completeness of which has been guaranteed by the contractor – in this case, neither party can ask for a change in price because the work required different efforts or costs than anticipated.
  4. Determined by a budget subject to incompleteness – used in situations where the contractor is unable to determine how much material or labour will be required to complete the work. In this case, he or she may request a price increase during the progress.
  5. To be determined by a budget subject to non-binding – used most often in cases where the final price of materials cannot be determined due to excessive fluctuation. Thus, during progress, the contractor may request a price increase by the amount by which the cost exceeds that originally included in the contract.
  6. Not fixing a price at all – in this case, the agreed price will be that which the client would have paid for the same or comparable work at the time of contracting and under similar contract terms.

The price setting should always reflect the individual circumstances of the contractual relationship, most notably the nature of the work as a whole, its scope and the technical and temporal complexity of its execution.

Finally, do not forget to indicate whether the price includes VAT or whether it is yet to be added. It is also advisable to mention what all the price includes, for example, the contractor’s costs, fees and the steps to be taken to remedy any defects.

Along with the specific amount, the method of payment should then be indicated, i.e. whether the price will be paid directly on handover or whether an invoice will be issued with a 14-day payment period, etc.

Ruce muže hrající na elektrickém pianu a vytvářející nahrávku, která je předmětem smlouvy o dílo.
Ruce muže hrající na elektrickém pianu a vytvářející nahrávku, která je předmětem smlouvy o dílo.

6. Place of performance

If a work contract is signed for construction work or any other activity to be carried out at a specific location (for example, at the client’s office), it is necessary to specify the location where the work will be carried out in addition to the date and price. This is usually logical, but it protects the parties in case of a dispute.

7. Obligations of the contractor

Furthermore, the contract should not lack obligations of both parties. As far as the contractor is concerned, there is first of all the obligation that the author will carry out the work in accordance with the contract, on his own responsibility, on his own behalf and with due care.

The contractor also declares that he has acquainted himself with all the details and has been supplied with everything he needs for the execution of the work. If the contractor also uses his colleagues or employees to carry out the work, he undertakes that these are only competent persons who comply with all the legal requirements for the performance of the work.

8. Obligations of the client

For the client, the obligations required for the execution of the work are considerably less. In addition to the payment of the agreed amount for the work, these include the provision of all information and documents that the contractor needs to create the work. If the subject of the contract is building alterations to the house, access to the property is of course required.

It is in the cooperation that the “dog” may be buried. It is therefore advisable to consider the necessity and scope of the cooperation well, also because of the deadlines and the scope of the work.

9. Copyright and intellectual property

Rights and obligations are also linked to the treatment of copyright and intellectual property. Copyright deals with works that are the result of the author’s creative activity (e.g. paintings, graphic, verbal or architectural works as well as computer programs).

Tip: We have discussed copyright and its treatment in more detail in one of our previous articles.

If the client provides the contractor with confidential and professional information, e.g. drawings and designs, these documents are the intellectual property of the client, which must also be addressed in the contract. Indeed, confidentiality is usually expressly included in the contract.

10. Liability for damage and defects in the work

Liability for damage and defects must also be specified in the contract. Usually, the contractor is liable for any damage until the work is handed over to the client. This includes not only damage to the work itself, but also to materials or equipment. The contractor should therefore take out the necessary insurance and ensure that all equipment is stored safely.

The contractor is also liable for defects in the work which have arisen during the execution of the work or have been caused by improper execution and have become apparent after the work has been handed over. The contractor should repair such defects at his own expense.

This is perhaps one of the most important parts of the contract – it is the liability that is examined if there is a problem. Often the works are part of a complex solution, so the damage is not just caused by a malfunctioning delivery, but also by the stoppage of the entire operation or perhaps lost profits from a malfunctioning e-shop. It is therefore advisable to include the servicing of the work in the contract.

Tip: Learn how to deal with hidden defects after the work is finished.

11. Sanctions

Any penalties for breach of a performance deadline or other obligation should be part of any contract. The contractual penalty is usually set as a fixed amount or as a percentage of the price of the work for each day of delay. The contract should also specify how and when any penalties will be paid.

12. Withdrawal from the work contract

In the context of penalties, withdrawal from the contract should also be mentioned. This can also be used to deal with long delays in the delivery of the work. It can be defined in the contract that if the delay lasts for a certain number of days, the client has the right to withdraw from the contract.

Another reason for withdrawal may be the contractor’s unwillingness to remedy defects arising during the performance of the work, even after written notice from the client. We have discussed the termination of the work contract in a previous article.

You can finda model works contract on many websites. Keep in mind, however, that such templates may be outdated, overly general, and will not contain specific details for your work. Therefore, we always recommend that you have your contract reviewed by an attorney who can advise you on the proper wording to protect your rights.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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