At our latest Career Tools, Create Legal’s Josh Barrett took us Beyond Boilerplate & explained the ins and outs of contracts for creative professionals.
Career Tools is a quarterly breakfast series helping designers improve and refine their professional practices. At each installment, an industry leader shares practices you can implement immediately to better tackle the practical realities of a design career.
This time, Josh Barrett taught ways designers can protect their rights when negotiating a project; Make sure you get paid. Don’t unwittingly let customers shift their intellectual property clearance duties to you. Secure the right to advertise your work. And limit your guarantees. Here are 10 key takeaways to add to your toolkit, followed by an in-depth recap below. So listen to Josh, read the recap, and embrace the contract.
10 Key Takeaways:
Talk with the customers at the outset to discuss and set expectations. Lay those out in your contracts.
Make payment terms work harder for you. Even with net 30, you might offer discounts for early payment, ask for at least some payment up front, or charge interest.
If you’re unsure about intellectual property issues, don’t take on the liability for clearance. You can use caveats, express disclaimers, and other provisions.
Don’t guarantee what the client provides. Specify that the customer represents it has permission to use any materials they provide, or specify that you are going to rely without verifying.
Protect your portfolio. You might limit what the client receives to a final approved product or define what you get to keep. Specify where you can share your work, like social media channels and award submissions.
Encourage clients to advertise for you. You can include logos in footers of documents, add links to a website you build and point back to your website, and offer to remove them for an additional fee.
If you sign a NDA, keep it in mind when you specify your portfolio rights.
Try an As-Is Clause. Be clear that the only expectations should be those expressed in the contract. If a customer doesn’t like an As-Is Clause, ask to specify the warranties they want.
Be clear that you don’t promise any particular business result, unless you want to. Cap your liability. One thing to watch for is no liability cap at all, which always favors the customer, as well as caps that have no relation to the size of the project or your business.
Boilerplate Basics – an explanation of the Terms and Conditions of Terms and Conditions!
Disclaimer: The information contained in this article should not be considered a substitute for legal advice. This article is not legal advice and is not guaranteed to be correct, complete or up-to-date. If you need legal advice, you should consult a licensed attorney in your area.
Josh admits that in many cases, Net 30 is just the beginning of the oppressive terms that get laid on the creative. How can you structure your payments terms to make it work?
How can you improve it? Fortunately Josh has some suggestions:
- Offer a discount for early payment. For example, you could offer 2% off for payment within 10 days, but no discount for payment in net 30days. If you do this, you might consider increasing your price by 2% instead of actually discounting it. “Studies show that the longer you wait to collect money the harder it is to collect,” reports Josh. So incentivize clients to pay sooner. Josh’s insider tip: larger companies and procurement departments are often required to act on a discount if it’s offered by a contractor.
- Get money up front. Structure your project fee to be payable as ½ up front and ½ due upon completion or request a deposit. Josh points out, “Other businesses ask for payment up front, why can’t creatives do that too? Landlords don’t charge net 30 for rent.” Another option you might consider: have payment terms based on dates instead of receipt of deliverables.
- Charge interest. You could make your invoice due upon receipt, and offer a 15 day grace period where no interest is charged, and then make interest accrue from receipt date if not paid (it would accrue from the original due date). “If it’s net 30 they can easily forget about it,” says Josh. However, this scenario sets the expectation that this is an invoice that needs to be dealt with right away. This also helps you if you need to stop work due to nonpayment – you’ll realize earlier that payment is going to be an issue and can halt work mid project if needed, instead of not realizing it for 30 days when the work is already done.
- Consider requesting 75% down for photo, video, or new clients. There are a lot of upfront costs for photo and video. Requiring this for new clients also protects you from the potential risk that they are a late or non-payer.
Intellectual Property Protection
Many contracts from clients often have this phrase, “Contractor represents that its work does not infringe on the intellectual property rights of any third parties.” But there are some scenarios where this is unrealistic or outside the creative’s ability to control. How can we improve this?
- Include knowledge limitation. Clarify that to the best of your knowledge, you’re not infringing on any intellectual property rights. Your contract might have a statement that starts out. “To the best of their knowledge, contractor represents that …” The client is still covered because if you stole something, then the contract still protects them.
- Register your work for trademark or patent and charge for it. Especially with developers, if you don’t have patents on your work you’re taking on a lot more risk – consider raising your fee to compensate for it. If you’re a designer doing logos, you’re not a trademark lawyer. You’re not going to be able to substitute what a real trademark lawyer would do to vet and clear usage for a new logo. Your typical designer is not providing intellectual property clearance services (combing trademark databases to make sure your logo or tagline doesn’t infringe the rights of another). The client should be advised to vet it with their trademark lawyer instead. You could add the phrase, “The designer is not responsible for providing trademark clearance services,” to your contract. The client can take your design proofs and do intellectual property right research with a trademark lawyer, but they shouldn’t expect that to be the designer’s obligation.
- Include exception for third-party materials. When dealing with plugins, stock imagery, open source software, and items that someone else made, it’s very difficult for you to make guarantees about the quality and rights of use. Whenever possible, cite the license that is provided by that third party and limit your guarantee to that. For example you could direct the client to consult the license from the stock company.
- Request in your contract that the client agrees any materials they provide do not infringe upon other’s’ rights. Your contract should state that the client promises that any materials they provide do not infringe on any rights, including materials, information, specifications, directions, etc. Recording specifications in your contract protects you because if something is stipulated in the client’s specifications and those specifications are incorrect, then you shouldn’t be held responsible for the problems that arise. It’s also the client’s responsibility to make sure they’re not taking the specifications of someone else’s “secret sauce” and using that to sell as their own if they don’t have rights to it.
- State that you’re not going to proofread or double-check whatever the client provides. In lawyer terms, you’re going to “rely without verification.” In other words, you’re going to rely on the content or specifications that the client gives you without verifying it.
- For any materials provided by the client, they agree they’ve secured permission to use them. This means that the client gives an express promise that they have secured permission to use any materials they provide to you.
- Limit client rights to final deliverables only. Upon full payment, the client only gets rights to use the final art as represented by the final, approved, proof document. That way if you did five design treatments and the client rejected a bunch of them, you still have the right to use those treatments for other purposes.
Another topic to be on the look out for in the terms and conditions portion of work contracts is the portfolio clause. Ideally, as a contractor you should be able to feature the work you do for the client in your portfolio, but sometimes that is forbidden or limited. What are some ways we can adjust contracts to get around this?
- Define what goes in your portfolio from the project. Josh suggest this is helpful to avoid any unpleasant surprises or “cease and desist” letters from clients with sensitive projects. For example your contract might say, “Designer is entitled to include any work done for the client in their portfolio or for promotional purposes and may also include any of the following: client name, client logo, web links, work description, work images.”
- Define how it’s shared. To be clear about where you’re going to share the work, you might consider listing possible venues. For example, “Designer may share the work they’ve done for the client via their physical portfolio, social channels, website, award submissions, and publications.”
- Encourage your clients to advertise for you. Just the way companies like Squarespace and MailChimp add their logos in the footer, consider doing the same. Perhaps your website design / development fees include a discount for a including a link in the footer pointing back to your site, and removing the link increases your fee.
- Get notification up front if permission is required. Pay attention if the client requires that you get prior written consent to include projects in your portfolio. It’s unlikely it will ever happen, but there are some cases where this is required by clients. If you can, get these things addressed in advance in your statement of work so you can be aware.
- Reconcile an NDA you may have signed to reflect portfolio permissions. At the beginning of a project you may have signed a nondisclosure agreement (NDA) saying you’d keep quiet about what you’re working on. Sometimes these NDA’s are no longer applicable if you’re working on a new product, after that product has been announced to the public and it is general knowledge. In that case, make sure you update, void, or reconcile any NDA you’ve signed with the client to allow you the ability to include the work items in your portfolio after the work is finished. “You don’t want the NDA to contradict your portfolio clause,” asserted Josh.
As Is Clause – Except as represented in this agreement…
The client should be aware that the only promises you’re making about your work are the ones you and the client expressly put in writing. If the client wants something a certain way, it should be put it in the contract or statement of work. If you get push back on the As Is clause, ask the client to express desired warranties and then include them in the contract. If you use a disclaimer, make sure it’s visually highlighted (bold, all-caps, etc.) – don’t make it a smaller font or hide it somewhere. For more information about the As Is clause, check out this blog article on the topic by Create Legal.
Limit contractor guarantees
Sure you’re darn good at what you do, but you’re not a wizard who can see the future and you’re not an engineer sitting on the development board at Google. Therefore, there’s only so many guarantees you should make about your work. Consider limiting guarantees by stating something in your contract like this: “Contractor does not guarantee any specific business results from the services provided.”
One of the most common mistaken expectations of clients is that you’re going to be able to guarantee that their new website will get them on the first page of Google search results after it launches. Unless you’re an SEO firm, that’s not realistic. Consider explaining to your client “if Google changes their ranking algorithms, we can’t promise you’re going to get a particular business result.” If they push back, Josh recommends that you discuss with them what they’re really expecting of your services and determine if their expectations are really reasonable before entering into a work agreement.
Limitation of Liability
There are two kinds of limitation of liability: 1) limitations on the amount of damages and 2) limitations on the type of damages. Below are some suggestions on how you might dial back the liability that you’re taking on when you enter into a working relationship with a client. For more information on this topic from Create Legal, check out their article on Limitation of Liability.
- Cap your liability to the fees paid for the project. This means you as the service provider aren’t responsible for the effects of the client’s business, and the max you can be considered liable for is the fees the client paid you for the project.
- Cap your liability at insurance limits.
- Cap your liability to a portion of the total fee. Cap your liability at the total project fee or a portion of it. Some contractors try to limit it to the profit on the project – after you pay subcontractors, hard costs, etc.
- If rights are infringed, remove liability cap. A “no cap for infringement breach of confidentiality” favors both sides. You might remove the cap if there is a breach in confidentiality, and make it mutual – both you or your client are liable to each other.
- Beware if there is no cap. Watch out for contracts with no cap at all as they typically only favor the client. Also be on the look out for a cap that is unrelated to the size of the job, or a cap unrelated to the size of your business.
Responsibility for Damages
Some contracts seek to hold creatives responsible for any financial effect to the business the client believes was caused by the deliverables. This can be limited by a statement such as, “Subject to applicable law, contractor is not liable for any consequential damages or lost profits in connection with this agreement.” If this isn’t possible to add to the contract, how can you at least partially protect yourself?
- These are specific types of damages that could be related to your work. Approach the client with the stance that if we have a fight, let’s only fight over the contract price. For example, you might agree to add to the contract, “Contractor can’t be considered responsible for the scope of the client’s business.”
- If there’s no clause at all, watch out. Make sure the clause favors both sides. You don’t want to receive a phone call from the client where they say, “We lost $5 Million dollars in revenue because our new website was delivered 5 days late!!”
About Josh Barrett
Josh Barrett is a lawyer in Portland, Oregon specializing in advising creative professionals of all stripes. After nearly 15 years in a downtown law firm, Josh struck out on his own to form CreateLegal, where he works to make legal matters painless and understandable. Out of the office, Josh is an avid supporter of the Portland Timbers and proud member of its supporter group, the Timbers Army. In addition to singing and chanting in the North End, Josh helped establish and advises the 107 Independent Supporters Trust,the nonprofit financial engine behind the Timbers Army. Josh also helped found and serves as a board member for Operation PitchInvasion, a local 501©(3) that repairs and revitalizes soccer fields. Josh joined the AIGA Portland board in 2012 as Treasurer.