Insurance terminology explained in simple terms
In a work contract , the agent owes the principal a specific work or labour, for example software or an app. The contract ends with the successful completion of the work (usually with the successful acceptance by the principal).
If freelancers are commissioned via a work contract, the principal has certain rights if there is a defect in the work owed. They can demand supplementary performance, reduction in price or compensation and even withdraw from the contract.
Work contracts are a popular way for companies to circumvent temporary employment (keyword: Temporary work). Instead of employing your own staff, a project or order is awarded as a work contract.
Withdrawal by the Principal from the Work Contract
If the work contract is withdrawn, the initial situation is usually restored. That means the principal must return the work received or may not use it. The agent (freelancer) must repay the payments received and open invoices are cancelled. This means that the principal’s withdrawal from the work contract poses a great risk for freelancers. That is because the freelancer not only has to pay for personnel, material, administrative and office costs, they also have to pay back the wages.
Professional Indemnity Insurance offered by exali.com covers activities both on the basis of a work contract and a service contract.
Term: Work Contract
Related Search Terms starting with W :
If you can’t find a term, please don’t hesitate to contact us. We will answer your question and add it to the glossary.
You can find more tips and information about your business, insurance and real claims in our News & Stories.