Yes, there are also other forms the foreigner must fill out to indicate that US taxes do not need to be withheld. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Reporting-Payments-to-Independent-Contractors
See this link.
This answer is based on general legal principles only and is not intended to provide specific legal advice. This answer is for informational purposes only and does not constitute the formation of a lawyer-client relationship. Any reader of this answer should not make decisions based upon in without first directly consulting with an attorney
1. Does your contract have an arbitration clause, in case the contractor does not give you the IP rights or later tries to dispute ownership of the IP rights ?
2. Which country is this ? Some countries where the US does not have foreign relations or has cut off relations are very complicated to do business in. (for eg. Cuba)
3. If there is IP being generated - you should have a separate IP agreement, with a US choice of law clause, and a US based enforcement mechanism. Most countries that are signatories to the NY Convention recognize that IP rights are non-arbitrable - accordingly, it always helps to have separate agreements.
Of course, it comes down to how much money is involved - I would suggest that if you have more than $50000 (value of the IP) at stake - hire a lawyer. Not only does it ensure that everything goes smoothly - it also hedges your risk.
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