When and How to Enter into a Contract for Work

What Is a Contract for Work and When to Enter Into One

 When we hear the term “contract for work,” many of us probably first imagine a painting or a sculpture. However, a “work” can encompass a wide range of things, from magazine articles to computer software, programs, e-shops, or custom-built applications, all the way to skilled construction work. At the very least, a simple contract for work is quite common among freelancers in a wide variety of industries, developers, and even translators. In what situations is it appropriate to enter into a contract for work?

When to Enter into a Written Contract

We often encounter contracts for work in everyday life, and we may not even realize that we are entering into one. For example, when having shoes repaired or a suit cleaned at a dry cleaner’s, most of us probably do not sign a written contract for work; at most, we sign a standard order form for the work.

However, a standard work order often does not allow for the negotiation of more specific and detailed terms that the customer might insist upon. On the other hand, for example, when renovating a house or performing major car repairs, a high-quality written contract for work should be a given. This will help you avoid many of the problems and disputes that we unfortunately encounter with our clients in practice.

If you are entering into a preliminary contract—where, for example, the construction of a house is contingent on the purchase of a specific plot of land—we always recommend that you enter into the contract in writing. This applies to all construction and renovation projects.

We recently handled a case for a client who had opted for a low-cost quote to renovate his cottage; the contractor then failed to deliver, constantly asked for more money for materials, and the client even had to drive the workers to the construction site in his own car. Unfortunately, he had paid most of the money up front without a written contract, so he found himself in a difficult situation.

What a Well-Drafted Contract for Work Should Include

Do you know the 12 essential elements a contract for work should include to truly protect both contracting parties? How do you draft a contract for work under the Civil Code? A framework contract for work is a bilateral contractual relationship between the client and the contractor. “Work” specifically refers to the creation of an item, the maintenance, repair, or modification of an item, or an activity resulting in another outcome. In short, it is an activity that does not fall under a traditional sales contract, as defined by the Civil Code regarding contracts for work.

The contract should include

• Identification of the contracting parties —that is, information about each contracting party. Don’t forget to include names (or company names), registered offices, identification numbers, details of registration in the commercial register, and ideally bank account information and the name of the company representative, including contact information, if the contract is entered into on behalf of a company. You may be wondering why we’re mentioning such basics. But you’d be surprised how many people make mistakes right in the very first section.
• Definitions of Terms Used – For more complex matters, it’s worth defining not only the contracting parties but also the terms you use in the contract. The purpose is to ensure that everything is clear to everyone involved and to prevent any ambiguity in the interpretation of terms. Therefore, be sure to specify exactly what is meant by “defects,” in which cases they are considered minor defects, and clearly cite the law that governs the matter.
• Subject Matter of the Contract – In the next step, you must describe the subject matter of the contract—that is, the work itself—in as much detail as possible. This is absolutely crucial. It is worth investing, for example, in a visualization of the work or at least in a list of required functionalities. At the same time, it is necessary to specify the formal requirements—namely, that the work will be completed by the deadline specified in the contract and for the price specified in the contract.
• Deadline for Completion – Linked to the previous point is the need to specify the exact date by which the work will be delivered to the client. Completion may take place in stages, which may also need to be taken into account. It is advisable to confirm the subsequent acceptance of the work with the signatures of both contracting parties; a special handover protocol is generally recommended, and a template for this may already be included in the contract. It is advisable to include in the handover protocol not only the date of handover but also any reservations the client may have, a list of defects and outstanding work, the deadline for their rectification, and information on whether the defects prevent the use of the work.
• Price – in addition to the deadline, we must not forget to specify the price for the work. This can be determined in various ways—as a final amount or as a somewhat less strict budget. However, be careful here and also address provisions for so-called “additional work.”
• Place of Performance – If a contract for work is being signed for construction work or other activities performed at a specific location, such as the client’s office, it is necessary to specify not only the deadline and price but also the location where the work will be performed. This is usually logical, but it protects the parties in the event of a dispute.
• Contractor’s Obligations – The contract should also clearly outline the obligations of both contracting parties. As for the contractor, the contract primarily specifies the obligation to perform the work in accordance with the contract, under their own responsibility, in their own name, and with due care. The contractor also declares that they have familiarized themselves with all the details and have been provided with everything they need to complete the work. This is also crucial, as it helps avoid disputes later on. If the contractor also uses colleagues or employees to perform the work, they undertake to ensure that these are only competent individuals who comply with all legal regulations governing the performance of the given activity.
• The Client’s Obligations – The client has significantly fewer obligations necessary for the completion of the work. In addition to paying the agreed-upon amount for the work, the client is also required to provide all information and documentation that the contractor needs to complete the work. If the contract concerns construction work on a house, it is, of course, necessary to allow access to the property. It is precisely in this cooperation that the “catch” may lie. Its necessity and scope should therefore be carefully considered, also in light of the deadlines and scope of the work. Our experience shows that this is particularly evident in IT projects, where client cooperation and testing are absolutely essential.
• Copyright and Intellectual Property – For creative and technical works, it is necessary to explicitly stipulate who will be permitted to use the result of the work and to what extent. This applies in particular to texts, graphics, photographs, architectural designs, project documentation, software, websites, e-shops, and applications. Simply paying the price for the work does not automatically mean that the client acquires all copyrights or that they may freely modify, distribute, or transfer the work to others.It is therefore advisable to stipulate a license in the contract, specifically its scope, purpose, duration, territorial scope, the possibility of modifying the work, the possibility of granting authorization to third parties, and, where applicable, the transfer of source files, source code, access rights, or technical documentation. If the client provides the contractor with its own materials—such as drawings, designs, databases, business information, or know-how—the contract should clearly specify the purposes for which the contractor may use them and that the contractor may not use them for other clients or disclose them to third parties. Therefore, a confidentiality clause is typically included in the contract. For IT projects, it is also advisable to consider “vendor lock-in”—a situation in which the client obtains functional software or an application but, without the necessary rights, source codes, documentation, or access, remains effectively dependent on the original supplier.
• Liability for Defects in the Work – The contract should clearly distinguish between liability for defects in the work and liability for damages. The contractor is responsible for ensuring that the work, upon delivery, complies with the contract, project documentation, agreed-upon parameters, legal regulations, and its intended use. The contractor is also liable for defects that the work already has at the time of delivery, even if they do not become apparent until later. In the case of construction projects, it is also important to consider hidden defects that may become apparent over time. It is therefore advisable to specify in the contract how and within what timeframes defects are to be reported, by when the contractor must remedy them, whether the client is entitled to a price reduction or to have the defect remedied by another party at the contractor’s expense, and how to proceed in the case of defects that prevent the use of the work.
• It is also advisable to address liability for damages separately. In the case of construction projects, for example, it is generally the case thatthe contractor bears the risk of damage to or destruction of the structure until its handover, unless the damage occurred otherwise. The contract should address not only damage to the work itself, but also damage to materials, equipment, neighboring properties, data, the client’s operations, or damage caused by the contractor’s employees or subcontractors. For larger projects, it is advisable to also require the contractor to have liability insurance and to specify a minimum coverage limit. If a defective or delayed project could cause the client operational downtime, lost profits, or other consequential damages, the contract should explicitly address these situations as well. For technical, construction, or IT projects, it is also advisable to negotiate service terms, response times, and support following project handover.
• Penalties – Every contract should also include potential penalties for failure to meet a performance deadline or other obligation. A contractual penalty is usually set as a fixed amount or as a certain percentage of the project price for each day of delay. The contract must also specify how and by what deadline any penalties will be paid.
• Termination of the Contract for Work – In connection with penalties, termination of the contract should also be addressed. This can be used to address significant delays in the delivery of the work. The contract may stipulate that if the delay lasts for a certain number of days, the client has the right to terminate the contract. Another reason for termination may be the contractor’s unwillingness to remedy defects arising during the performance of the work, even after a written notice from the client. We discussed the termination of a contract for work in one of our previous articles.

Definition of the Work

 As mentioned above, the key element of the contract should be the definition of the work itself—that is, a specification of the work to be performed for the customer.

The more general the description, the greater the contractor’s freedom in creating the work, and the client, beyond a general understanding, will not know exactly what form the work will take. With a general definition of the work, the client would also be unable to file a complaint that the work does not meet their specific expectations.

In this regard, caution is advised when using free downloadable contract-for-work templates. If you search for terms such as “contract for work” and “construction work,” the template will never contain a thorough definition of the work that precisely matches your specific situation and needs.

If the work is not defined at all or is described vaguely, the contract could be invalid. Worse still, however, is when the work does not meet the customer’s needs due to an incorrect specification. An example of this could be a custom-made shirt in the wrong color.

Deadline for Completion of the Work

It is important for both parties to set a deadline by which the work must be completed. The customer will know when they can move into their new home, while the contractor, in turn, will be able to plan other projects. In the event that the completion date is not met, it is advisable to agree on a contractual penalty. With a contractual penalty, the customer will have more options to ensure the contractor meets the deadline. In the event of a prolonged delay, the customer could also terminate the contract and demand a refund of the money paid.

Payment Terms

The payment terms should also be defined as precisely as possible in the contract. The contractor performing the work will need advance payments during the course of the project in order to carry out the work. The customer, on the other hand, will expect to pay part of the price for the work only after its completion, in case the work is of poor quality. It is therefore important to set not only the price for the entire contract but also the amounts and due dates of the individual advance payments.

Clearly defined payment deadlines established in advance will allow both parties to plan their finances and fulfill their obligations in a timely manner. The contractor will often insist on agreeing to a contractual penalty in the event that the customer has outstanding invoices.

Changes to the Work and Additional Work in Construction Projects

In construction contracts, it is common for the need for changes to arise during the project. These may include additional work, reduced scope of work, a change in materials, a different technical solution, or an amendment to the project documentation. The contract should specify in advance who can propose a change, how it is approved, whether it must be in writing, how the price of the change will be determined, and whether the completion date will be extended as a result. Without clear rules, disputes often arise over whether the work in question was additional work ordered by the client or work already included in the original price.

Warranty

Liability for defects and the warranty are not the same thing. The contractor is liable for defects present in the work at the time of handover, or for defects that arose due to a breach of the contractor’s obligations and become apparent only later. In the case of construction projects, hidden defects must also be taken into account; the client must report these without undue delay after they could have been discovered with due care, but no later than five years after acceptance of the construction.

A quality guarantee goes beyond the scope of statutory liability for defects. In it, the contractor undertakes that the work will be fit for use for a specified period or will retain the agreed-upon characteristics. It is advisable to specify in the contract the duration of the warranty period, the procedure for reporting defects, deadlines for their rectification, any exclusions from the warranty, and the procedure in the event of recurring defects. For construction projects, IT solutions, or technical equipment, it is also advisable to address service, maintenance, and response times.

Summary

A contract for work is used when the result of the collaboration is to be a specific deliverable—such as an article, software, or construction work. It is common among freelancers, developers, and tradespeople. For small jobs (e.g., shoe repair), the agreement is usually made verbally, but for more complex projects (e.g., home renovation), a written contract is essential—it protects both parties and prevents disputes.

A good contract should include: precise identification of the contracting parties, a definition of terms used, a detailed description of the work, a completion date, the price (including terms for additional work), the place of performance, and the obligations of both parties. It is also important to address copyright, liability for defects, penalties, and the option to terminate the contract. For technical or creative works (e.g., software), intellectual property and licensing must also be addressed.

In the construction industry, changes during implementation are common and must be addressed through amendments. Negotiating a warranty is advantageous for the client—it ensures that defects will be repaired even after the work has been delivered. Payment terms (including advance payments) must be established in advance, as must penalties for failure to meet deadlines.