Playing it Safe: Contract Basics for Freelance Designers

September 03, 2008 | Articles
Posted by: Carl Alviani [Permalink]

Do I need a contract?

It's a reasonable question for freelancing creative professionals, especially those of us just starting out, or doing a little work on the side. The ordeal of tracking down and retaining clients, after all, is complicated and time-consuming enough, and The Law a confusing and foreign construct. While many small consultancies (and most of the larger ones) will have clear sets of legal guidelines for entering into any kind of work agreement, lone freelancers frequently sidestep the whole issue, trusting in their personal client relationship to derail any potential disputes.

To the uninitiated, it may be unclear why a contract is such a big deal in the first place. To help answer that, I sought the advice of Joe Makuch, a patent attorney at Marger, Johnson & McCollom, a Portland law firm that's been handling Intellectual Property (IP) and patent law since the 80s, for companies like Samsung, Pixelworks and recumbent bike builder BigHa Cycles.

The most immediately useful aspect of a contract, it turns out, is the degree to which it dispels uncertainty. A chat and a handshake are comforting, but it's remarkable how many slight differences in understanding can emerge once you start writing them down.

To begin with, do you want to use any of this work in your portfolio? Better get it in writing. Because so much creative work relies on confidentiality to maintain its market advantage, clients can be wary when it comes to use of the concepts you generate. It's not unheard of for a freelancer to be prohibited from publishing any images associated with a project, even after it's complete and out in the world. It's also not unheard of for a client to not care one way or the other, or to change their mind on what's permissible halfway through a project. Finding out their stance will probably inform your bid and level of interest, and inquiring about an agreement is a great way to work out these details.

In more extreme cases, a written contract can literally save a professional relationship, by offering a common point of reference during disputes instead of a pair of wrestling egos. Non-payment of invoices, claims of deliverables not supplied, and other hitches in the flow of business are much easier to smooth over when a document can be produced.

Less obvious but more harrowing is the liability issue. Every manufactured good brings with it the potential for litigation should someone suffer injury during its use, and as a participant in the creation of that good, the designer can be a target. Even in the absence of physical harm, IP issues like third-party copyright or patent infringement can sometimes wind up on the designer's shoulders. A written agreement does a lot to prevent a brief gig from turning into a career-ruining lawsuit down the line.

A more obscure reason Joe mentions is the growing prevalence of royalty arrangements, where a freelancer accepts a reduced flat or hourly fee in return for a percentage of whatever profit is realized from the project. Such an arrangement has two enormous advantages: first, it can make the initial offer more attractive by reducing the client's initial investment; and second, if the project is well-received, it means a long-term source of revenue for the designer, smoothing out those valleys when work gets scarce. The disadvantage, of course, is that it's far more legally complicated than a fee-based agreement, making a contract mandatory.

But even in the absence of exotic things like royalties, how does the poor, lone freelancer go about producing such a document? Most of us aren't lawyers, and are in no financial position to retain one; moreover, clients may get spooked by the introduction of excess legality into what they see as a simple arrangement. Fortunately, there are intermediate levels of formality.

The simplest sort of "contract" is just a clear list of agreed points followed by a short disclaimer. Makuch points out that simply adding two or three sentences to the bottom of a quote or Statement of Work can do much to protect the designer from liability; while not the same as a binding contract, it still holds significant legal weight should action be threatened. The website of Makuch's law firm even has a disclaimer, and it's pretty short.

This sort of document is short and simple, often less than a page long. The main portion should include, at minimum, a clear list of terms: an hourly rate or flat fee, an estimate of hours, expected deliverables (ie digital images, video files, CAD databases, technical drawings, print-ready documents, etc), and estimated schedule. Below that, the disclaimer simply states that you, the Vendor, are not to be held liable for any damages claimed against the client as a result of the product's performance (obviously more of a concern for designers of physical products than print or web designers, but you'd be surprised). This is also not a bad place to state that the estimated hours are just an estimate, and that you get to use your work in your portfolio at some point. While every case is unique, and a truly effective document requires the input of an attorney familiar with the specific details of the arrangement, a paragraph like this is a good place to start:

Vendor makes no warranty or indemnification for services provided, and assumes no liability for damages incurred due to the manufacture, use or sale of any goods created as a result of this agreement. All images and documents produced in execution of this agreement may be used by the Vendor for personal advertisement purposes, beginning six months after the conclusion of services. Additionally, Client agrees that hours quoted above are a preliminary estimate only, and may be adjusted as the project demands.

The next step up in formality is to use a previously generated "boilerplate" contract, and adjust it to fit. The best source for design-specific contracts are probably the professional associations: here in the US, the American Institute of Architects sells a complete Contract Documents system on a pricey licensing basis, AIGA offers a 56-page PDF Standard Contract up for free, and IDSA has partnered with the Association of Professional Design Firms to create a "Terms and Conditions Reference," which Makuch recommends as a well-balanced and flexible starting point for creative contract writing, for the relative bargain price of US$249 ($149 for members). Even this agreement, however is not turn-key. It requires the user to consider and elect between various ownership options for rights to the intellectual property created during the relationship: a task best done with the help of an attorney.

If that seems unreasonable, consider that retaining an attorney to write a contract from scratch can run from US$2000 to $5000 or more. The costs of all these options are more or less commensurate with the protection they offer; a larger firm with more to lose will generally spend more.

The other place to look is online (isn't it always?), and there are dozens, if not hundreds, of sites offering to sell non-specific legal advice and documents for a wide spectrum of prices. Makuch observes that much of this advice is dubious at best, but does recommend nolo.com as a good general reference.

Of course, a savvy client may preempt the entire issue by coming to the table with a contract of their own. Under this circumstance, the creative professional is advised to work with the client to make sure a single fair contract is used, since bringing your own into play establishes a "dueling contracts" scenario which can lead to impossibly complicated legal dealings should something go wrong.

What the client will most commonly ask you to sign is a Non-Disclosure Agreement, or NDA, a contract that prevents the designer from sharing or discussing the project with anyone else. While NDAs are usually quite reasonable, they're worth reading through carefully before signing, as some create very tight restrictions, such as prohibiting the designer from working for a competitor for a period of time--and defining "competitor" so broadly as to make future work nearly impossible.

Other terms to look out for in any contract are "warranty" and "indeminification" clauses, little red flags that should be scrutinized and discussed intently. If a client hands you a contract that appears to assign you any liability, ask to talk to their legal department or the contract's originator--failing to do so opens you up to some very expensive problems later on.

"In the end, though," explains Makuch, "a contract's not a silver bullet." That's because the process of contract litigation is an expensive, time-consuming process for all involved. While having a written agreement can do a lot to keep small disputes from getting bigger, an angry or predatory client can do a lot of harm regardless of what's been signed. Common sense, it turns out, is more effective than any contract, and there's no substitute for trusting your client, and your client trusting you.

photo: Nomad Tales