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What is a contract?

A contract refers to a commercial contract made between a contractor and a hirer:

  • Hirer refers to the person or business that engages a contractor. Sometimes, a contract or a law will refer to the hirer as a 'principal'.
  • Contractors include people who describe themselves as 'self-employed', a 'consultant' or a 'subcontractor'.

A commercial contract may be for:

  • your labour or skills where payment is based on hourly or daily rates
  • you to achieve a result where payment is based on a fixed fee.

Commercial contracts are different from 'employment' contracts that apply to employers and employees.

Why it’s important to understand contracts

As a contractor, you may enter into verbal and written contracts to do work for others. When you agree to do a job for another person or business for money or some other benefit, you’re probably entering into a commercial contract. If so, this is legally enforceable regardless of whether it was just a 'handshake deal' or a written agreement.

By understanding the contracts you enter into, you’ll be better able to negotiate contracts that work for you. However, it’s still important to get professional advice to fully understand your obligations.

Understanding and negotiating contracts

It’s important to prepare when negotiating a contract. If you aren’t confident doing this, check our page on how to negotiate a contract.

Make sure you understand the terms of the contract and what it should include.

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