The Five Clauses Every Vendor Agreement Needs Before You Hand Someone Access to Your Business

Written by Aisha McKinney, Esq., Principal Attorney & Co-Founder at Zova Law, and Jasmine Johnson Parker, Esq., Co-Founder & Counsel at Zova Law.

Most founders who start outsourcing operate on a reasonable assumption: they hired someone, they paid for the work, they own the result. Under U.S. copyright law (17 U.S.C. § 101), that assumption is wrong. Independent contractors retain copyright in their creative work unless a written agreement explicitly transfers it. Payment is not that transfer. An invoice is not a contract. A statement of work that covers deliverables but not ownership creates a gap that stays invisible until the relationship ends and the contractor asserts rights the business didn’t know they still had.

What Should Be in a Subcontractor Agreement?

A subcontractor or vendor agreement needs five categories of provisions: intellectual property assignment, confidentiality, non-solicitation, performance and payment terms, and termination rights. The absence of any one of these is a specific legal exposure. The absence of all five — which describes most informal founder-to-freelancer arrangements — means the business has created a legal relationship with no documentation of what either party owes the other.

Clause 1: Work-for-Hire and IP Assignment

Under 17 U.S.C. § 101 of the Copyright Act, copyright in a work vests in the author at the moment of creation. For an independent contractor, the author is the contractor. There is a statutory exception for work made for hire, which applies to works created by employees within the scope of employment and, for independent contractors, only to works falling within nine specific statutory categories (including contributions to collective works, compilations, translations, and certain audiovisual works) subject to a signed written agreement designating the work as work made for hire.

Most freelance creative work — website development, brand design, marketing copy, photography, custom software — does not qualify as work made for hire under the statutory exception when created by an independent contractor. Paying a freelancer to b

uild a website, design a logo, or write marketing copy does not transfer the copyright to the hiring business.

What to include: A work-for-hire clause designating all deliverables as work made for hire to the extent eligible under applicable law, combined with a comprehensive IP assignment: ‘To the extent any work product created under this Agreement does not qualify as work made for hire, Contractor hereby irrevocably assigns to [Company] all right, title, and interest in such work product, including all copyrights, patents, trade secrets, and other intellectual property rights.’ The assignment should also require the contractor to execute any additional documents necessary to effectuate the transfer.

Clause 2: Confidentiality Provision

A subcontractor working on a business project typically gains access to information the business considers confidential: client names and contact information, pricing and financial data, proprietary processes and methodologies, business strategy and plans, and trade secrets. Without a confidentiality provision, the contractor has no legal obligation to keep any of this information confidential after the engagement ends.

A confidentiality provision should define confidential information broadly enough to cover everything the contractor will access, impose an obligation to protect and not disclose or use confidential information except as necessary to perform the services, specify the duration of the obligation (typically two to five years for general information, indefinitely for trade secrets under applicable state law), and include a provision allowing the business to seek injunctive relief for breach.

Clause 3: Non-Solicitation Provision

A non-solicitation clause restricts the contractor from soliciting or doing business with clients, customers, or prospective clients of the hiring business for a defined period after the engagement ends. For subcontractors who work directly with clients — account managers, consultants, client-facing developers and designers — this is one of the most operationally important protections in the agreement.

Non-solicitation provisions are generally enforceable against independent contractors as reasonable restrictions on business competition, though requirements vary by jurisdiction. Unlike non-competes (which restrict the contractor from working in the same industry generally), non-solicitation clauses restrict only the targeting of identified clients or employees and are viewed more favorably by courts in most states. An attorney should review the specific language against applicable state law before the agreement is signed.

What to include: A restriction on directly or indirectly soliciting or accepting business from any client or prospective client of the company that the contractor was introduced to, worked with, or received confidential information about during the engagement, for 12 to 24 months following termination. The clause should apply regardless of who initiates contact and should include both active solicitation and passive acceptance of business from covered parties.

Clause 4: Delivery Milestones and Payment Schedule

A subcontractor agreement without defined deliverables, delivery dates, and payment milestones leaves both parties without an objective record of what was promised. In a dispute about whether work was completed or whether quality was acceptable, the absence of defined milestones means the resolution depends on whoever presents a more credible account.

What to include: A specific description of each deliverable (not just a general project description), delivery dates or a milestone completion schedule, an acceptance process defining what constitutes satisfactory completion with a review period and a process for requesting revisions, and a payment schedule tied to delivery milestones. Tying payment to milestone completion creates an enforceable mechanism for withholding payment if deliverables are not met and reduces the business’s exposure if the contractor fails to perform.

Clause 5: Termination Rights and Remedies

A termination clause defines the conditions under which either party can end the engagement, what happens to work product in progress, and what remedies are available for material breach. Without a termination clause, the business may have limited recourse if the contractor stops performing.

What to include: Termination for convenience (either party can terminate on written notice, typically five to fifteen business days), termination for cause (immediate termination rights for material breach), a provision governing work-in-progress at termination (all work product and work-in-progress transfers to the company upon termination regardless of completion status, with pending milestone payments prorated based on documented progress), and a representation that either party may seek injunctive or other equitable relief for breach.

Frequently Asked Questions About Subcontractor Agreements

What should be in a subcontractor agreement?

At minimum: a work-for-hire clause and IP assignment transferring ownership of all deliverables to the hiring business, a confidentiality provision restricting the contractor from disclosing business and client information, a non-solicitation clause preventing the contractor from approaching clients, defined delivery milestones with payment tied to performance, and termination rights specifying how either party may exit and what remedies are available. The agreement should also include governing law and jurisdiction, a statement of the independent contractor relationship (not employment), and a merger clause stating the written agreement is the complete agreement between the parties.

Do I own work I paid a freelancer to create?

Not automatically. Under U.S. copyright law, copyright vests in the creator at the moment of creation. For an independent contractor, the creator is the contractor. Payment for the work is not a copyright assignment. To acquire ownership of work created by a freelancer or independent contractor, you need a written work-for-hire agreement (for work qualifying under the statutory categories) and/or a written IP assignment clause. Without one, the freelancer retains the copyright even if you paid them in full.

Can I use a subcontractor’s agreement?

You can — but the subcontractor’s agreement was written to protect the subcontractor, not you. The IP provisions may be absent or leave ownership ambiguous. The confidentiality provisions may be minimal. The non-solicitation clause is almost certainly missing. If you are using the other party’s agreement, have an attorney review it before you sign — specifically for the five provisions above.

What is the difference between a work-for-hire clause and an IP assignment?

A work-for-hire clause attempts to characterize the work as work made for hire under 17 U.S.C. § 101, which would make the hiring party the author for copyright purposes from the moment of creation. For independent contractors, this only applies to work in nine specific statutory categories. An IP assignment is a separate contractual transfer of copyright from the creator to the assignee. Because most freelance work doesn’t qualify as statutory work made for hire when created by an independent contractor, a comprehensive subcontractor agreement should include both: a work-for-hire clause for qualifying work and an IP assignment clause covering everything else.

Is a non-solicitation clause enforceable against an independent contractor?

Generally yes, with appropriate scope and duration, though enforceability varies by state. Non-solicitation clauses restricting a contractor from targeting identified clients of the hiring business are viewed more favorably by courts than broad non-compete provisions. The clause should be narrowly tailored to clients the contractor had actual contact with, limited to a reasonable duration (12–24 months), and supported by a legitimate business interest in protecting client relationships. An attorney should review the specific language against applicable state law before the agreement is signed.

If you’re outsourcing work and your subcontractor agreements don’t include the five provisions above — this is a gap that compounds silently with every new vendor relationship. At Zova Law, reviewing subcontractor and vendor agreements before founders sign them is part of the ongoing legal infrastructure review we do for every Zova member. One flat rate. Real attorney oversight. Ongoing. Join at zovalaw.com/membership.