A contractor is an individual or company that performs certain tasks for a principal. Unlike an employee, a contractor is self-employed or acts as a separate company and is not subject to the direction and control of the employer. In addition, a contractor’s relationship with the principal is governed by a contractors contract rather than an employment agreement. Nevertheless, many principals and contractors don’t bother with a contractor’s contract. In some cases, the parties decide that a so-called handshake agreement is sufficient, but in the event of a breakdown in the relationship between the parties, this can prove troublesome.
From the Legal Perspective
Some governing bodies do not even define independent contractors and instead use common law tests. In other words, a handshake agreement may not provide the inherent legal protection for the consumer and contractor the way an agreement between a consumer and a traditional business would. If the court must settle a disagreement between such parties, it must first perform these tests to establish the context, which is often different from what either the consumer or independent contractor expected.
Why a Principal Needs a Contract
First and foremost, a principal needs a contract because it establishes the work arrangement between them and the contractor. Although the Australian Tax Office (ATO) has set out a list of factors which allow a relationship to be deemed an employee/employer relationship, it is clear that the presence of a Contractors Contract, if the approach that the parties take is clearly also a contractor/ principal relationship, will be of importance. It is important that, if the intention of the parties is that the relationship be a contractor/ principal relationship, this intention is followed through.
Why a Contractor Needs a Contract
A contractor needs to protect him or herself from liability wherever possible. Generally a well drafted contractors contract can achieve this result. Furthermore, a valid contractors contract ensures that the contractor has a clear legal document to put forward before a court in the event of non-payment or breach of conditions. It is simply best practice to ensure that a contractor’s contract is drafted before work is commenced.
Creating the Contract
You don’t need to spend large amounts of money to create a good contractors contract. If you have simple requirements you don’t even need to get a lawyer involved. Well drafted, accurate and customizable contractors contract templates are available for low cast sites like LegalVision.com.au, and the service even gives you access to lawyers who can answer your questions, review your documents and ease any concerns that you may have.
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