Chapter 17. Terms and Conditions
In the early years of my self-employment, getting things in writing wasn’t too much of a concern. I was keener to make things as easy as possible for my client, not wanting to add the burden of paperwork and signatures.
But then came those inevitable projects when I was expected to go far above and beyond the original scope of the project. Those situations arose because there were no specific terms and conditions, no definite deliverables that had been signed off on.
On one occasion, a client of mine kept sending revision requests. The “orders” were arriving on an almost daily basis for weeks on end until it was clear there was no way I could create something he’d be happy with. In addition, the time I’d already spent on the project had eaten all my profits.
These situations can be avoided by putting in place a definite set of project guidelines—something for the client to sign at the outset. Should the project run off course, you’ll have documentation that will protect you.
Pear Deli and the sword of Damocles
Oregon-based designer Von Glitschka learned the contract lesson the hard way. (Names in the following story have been changed.)
In 2007, he was subcontracted to work with a small creative firm based in New York City. Whenever the firm needed a logo, icons, illustration, or whatever, it would commission Von. He worked with the firm’s creative director Irvin for about a year on various projects until Irvin left the agency and took a new job as an in-house creative director for a New York City chain of grocery stores called Pear Deli.
“In late 2008, Irvin wanted to hire me to create a set of 45 food icons for use on Pear Deli’s in-store signage throughout all their locations,” Von said. “I sent a quote for the project and Irvin approved it. Because I had worked with him before, I didn’t request a signature or bother with a contract. Everything was approved via email or verbally over the phone.”
Von created the illustration set then delivered the final art, invoicing that October. In January of 2009, he received an email from Irvin asking if he could create two more pieces of art to complete the set. Von agreed and told Irvin he’d just send another invoice for the two additional pieces along with the final art. Irvin agreed.
“After another month had passed I realized the original invoice was over 90 days old,” said Von, “so I sent Irvin an email but never heard back. A few weeks later I sent another, still no reply. At this time I was busy with other work and another month went by and still no payment. I decided to call Pear Deli and talk to Irvin directly.”
But Von found out that Irvin no longer worked for the company, so he asked to talk to accounts payable and was transferred to someone else. That person told him there was no invoice and requested that he email it to him directly, which Von did.
“I didn’t hear back that week,” Von said, “so I sent a follow-up email and got no response. I called and left a message with Pear Deli accounts payable and still nothing. Another month went by and I was able to talk to someone else at Pear Deli. They told me they didn’t have any record of me doing any work for them and refused to process my invoice.”
During the next several days, Von tracked down Irvin and asked him to call Pear Deli and straighten the situation out so Von could get paid for the work he did, work that totaled more than $4,000. Irvin gave Von the owner’s contact information at Pear Deli but repeated attempts by email and phone proved useless. At this point it was about eight months after Von had sent the initial invoice, and he was frustrated. He was getting the runaround and decided to send the invoice to a collections agency to at least recoup something rather than nothing.
“I discovered that I couldn’t collect from out-of-state due to some New York City law and that I had to hire a New York City collection agency to do it on my behalf,” he said. “There was one just down the street from Pear Deli headquarters, and they agreed to collect for me.”
Another two months went by and the collection agency couldn’t get Pear Deli to pay. The agency said the only way to get the money was to file a legal claim with the local court. This cost $95, and the agency would handle things from there. Von agreed, and the legal claim was filed. At that point it was September of 2009.
In January of 2010, after three more months and still no collection, Von received a letter from Pear Deli’s attorney notifying him that they were suing for $250,000 accusing Von of harassment and extortion. The paperwork stated that Von had no claim to the money he was trying to collect because Pear Deli never hired him.
“At this point,” said Von, “I was just shocked. How was this possible? I created the art, I delivered the art, the person I worked with knows I did, yet they’re saying none of it was true? I once again contacted Irvin and asked him if he could go on record to confirm I created the art for Pear Deli while he was the creative director. He said he didn’t want to get involved in the situation.
“I talked to my business lawyer locally, and he summed up the letter as an intimidation ploy. Pear Deli had a far deeper wallet than I did, so they decided it was worth scaring me rather than paying what they owed. My lawyer got on my case for not having a proper contract, and we agreed to write one I could use moving forward.
“Since the legal letter came from a New York City jurisdiction, my lawyer couldn’t respond to it, and I had to use the collection agency’s lawyer, who thankfully said he’d make them go away by stating I’d drop my claim for collection. Even though I dropped my claim it really pissed me off that a business would do this to me. The whole experience was kind of surreal, and I was mad at myself for letting it happen.”
The next day Von talked to one of his designer friends in New York City, who agreed to stop by one of the Pear Deli locations to have a look at the signage. That same day Von received an email from his friend with three attachments, each showing in-store signage at Pear Deli using Von’s artwork.
“It was like getting salt rubbed into an open wound,” Von said. “All kinds of thoughts cascaded through my conscience. How could this happen? How could someone just flat-out lie like this and think it was OK? I was pissed, but I also felt vulnerable. I didn’t want to kick a hornet’s nest that had no problem hanging a $250,000 sword of Damocles over my head. I had no contractual leverage, and I knew that was the real problem.
“I contacted my copyright lawyer to see if I could handle it from that angle, but it would have ended up costing more than what they owed me just to pursue it, with no guarantee whatsoever. I was not happy how any of this came out but I decided to live and learn and just drop it all.
“Over the next several months, I worked out a contract form for my business that I now use with clients. I prefer the term ‘work agreement’ instead of ‘contract.’ It just sounds more approachable and doesn’t come with any preconceived baggage like ‘contract’ tends to paint in people’s minds. When I work with large ad agencies, I’m usually signing their contract. When I work with smaller firms or business owners I use my form.
“Having a custom contract written for your business will cost you anywhere from $500 to $1,500 or more in legal fees to have a lawyer spend the necessary time to finesse it for your specific needs. But don’t think of it as an expense. It’s an investment worth its weight in gold in terms of protecting you from those who have no integrity and would seek to exploit your work for their gain at your expense.”
Growing pains
When Jonathan Selikoff first started his New York-based design studio, Selikoff+Company, most of his work and income were generated from work for other design agencies. Jonathan’s goal was to eventually shed this work by building a base of clients to grow with, handling the creation of their brands, and managing their growth.
“Lucky for me,” said Jonathan, “a client materialized from a posting on an online message board looking for someone to design an identity and packaging for a new health-care product. I wrote a proposal, drafted a creative brief, and followed all of the steps I should have, except for sending the prospect a written contract. Looking back, I was so happy for the opportunity to bring on the type of client I was looking for—a new company with a great idea and a strong vision for what they wanted their brand to become—that I overlooked the risk inherent in the launch of a new company.”
Jonathan’s client achieved nationwide distribution for its product, largely based on the client’s strong identity and packaging (which stood out in a rapidly expanding category). As the company grew, it needed to produce more materials: catalogs, sell sheets, a website, and advertisements. So the two parties began a retainer-based relationship. The rapid growth continued, and the client launched new products, expanded into other national retailers, and had an active trade show program that kept Jonathan busy and growing right along with them.
“Sounds like a dream, right?” Jonathan said. “Unfortunately, the company didn’t have the financing to support its rapid growth and had difficulties both producing enough products and supporting them with consistent marketing. Cash flow issues arose, we were lax with our collections, and eventually the company owed us for a considerable amount of work. With no contract, we couldn’t prove the terms under which we’d been working with them, leaving us without the option of pursuing legal action.”
Fortunately for Jonathan, the founders were honest people who have been paying him little by little. He designed a new product launch in the midst of this issue, but this time required a 50 percent deposit on the project. He also didn’t release final files until the remainder of the project was paid. This new project was, of course, specified on paper in the form of a signed proposal.
“We still have a good relationship with the company and its founders,” said Jonathan, “but we learned several important lessons that many start-up design firms have also learned the hard way: always have a contract, monitor the state of the business, and when payment slows or stops, don’t keep working based on promises.”
What to include
With the help of some close allies in the profession, I’ve tailored a set of terms and conditions that I need all clients to agree to before I’ll begin any work on their projects. A document containing the information is emailed to my clients, with space for their signature and the date at the bottom.
You might encounter a client who wants to change your terms. This happened to me on one particular occasion, and I don’t think it was a coincidence that I never received full payment upon completion (not because of the new terms, but because of a difficult client who may never have had any intention to pay in full). That project taught me to view any amendment request as a red flag.
You’re welcome to use the following terms as is or edit them for your own purposes. It’s also wise to consult with an attorney to make sure your terms and conditions will work for you.
Rights and ownership
Rights: All services provided by the designer shall be for the exclusive use of the client other than for the designer’s promotional use. Upon payment of all fees and expenses, the following reproduction rights for all approved final designs created by the designer for this project shall be granted:
Client to gain full transferable rights to brand identity.
Client to gain full license to reproduce works through commercial printers.
Ownership: The client shall be entitled to full ownership of all artwork created during the project upon full payment of the agreed fee.
Third-party contracts: The designer may contract with other creative professionals to provide services such as web development, photography, and illustration. Any third-party terms and conditions will include full reproduction rights for the client. Where such contracting adds to the project cost, the client will first be asked for permission to proceed. No project will commence on the assumption that third parties might be required for project completion. Such details will be finalized prior to project commencement, unless requested by the client at a later date.
Communication
The designer can be reached by telephone from Monday to Friday between 9 a.m. and 5 p.m. GMT. Skype chats are welcomed. The majority of designer/client communication is normally via email, helping both parties keep track of specific design requirements and potential changes.
Payment schedule
The client will make a 50 percent down payment prior to work commencing. The project can be scheduled once the down payment is received by the designer. The down payment is non-refundable. The remaining 50 percent is payable to the designer upon completion of the project and before original artwork is supplied to the client.
Delayed payment
If the final invoice is not paid within 30 days, a 5 percent “delayed payment” fee will be charged. This initial 5 percent figure will be added upon each recurring 30-day period until the full amount has been received by the designer.
Cancellation
If, after project commencement, client communication (face-to-face, telephone, or email) stops for a period of 180 days, the project can be cancelled, in writing by the designer, and ownership of all copyrights shall be retained by the designer. A cancellation fee for work completed shall be paid by the client, with the fee based on the stage of project completion. The fee will not exceed 110 percent of the total project cost.
Miscellaneous
Samples: The client shall provide the designer with samples of print design that result from the project deliverables. Such samples shall be representative of the highest quality of work produced. The designer may use such copies and samples for publication, exhibition, or other promotional purposes.
The designer shall have the right to photograph all completed designs or installations and shall have the right to use such photographs for publication, exhibition, or other promotional purposes.
Confidentiality: The client shall inform the designer in writing before the project commences if any portion of any material or information provided by the client or if any portion of the project is confidential.
Indemnity: The client agrees to indemnify and hold harmless the designer from any and all claims, demands, losses, causes of action, damage, lawsuits, judgments, including attorneys’ fees and costs, but only to the extent caused by, arising out of, the work supplied by the designer.
It’s not unusual
San Francisco-based designer Ian Vadas is another who recommends including a cancellation fee (or kill fee)—a clause in your contract that says if the client terminates the project midway through, then a fee to “kill” the contract must be made. Ian recently worked on a project where this issue came up.
“The client decided to back out of the project after about 80 percent of the work was done,” said Ian. “I had the initial 50 percent deposit, and kept it, but lost out on time for the work I had already completed, plus the remaining amount to finish the project. If I had included a kill fee in my contract, it might have convinced the client to see the project through.”
Houston-based graphic artist Patricia Schaefer learned early on to always require 50 percent up front for design services.
“Clients who balk at a down payment for creative work are usually those who won’t pay you at all,” said Patricia. “I’ve learned this the hard way, particularly from clients who were friends, either personally or professionally. They tell you that other designers don’t make them pay up front, or they are offended that you don’t trust them. If they want you, they’ll pay, and standing your ground is much better than caving in and finding your ideas being implemented by your client, or another designer, without you seeing a dime. Trust me, I’ve been there.”
Another practice that Patricia has learned the importance of—and one I highlight in the “ownership” section of my terms and conditions—is to stipulate that all design is copyrighted under her until the work has been paid for in full. It adds an extra incentive for clients to pay quickly so they can use the new creative without issue.
One incident that Patricia remembers from early in her career is when she sketched a rough idea for a bumper sticker for a radio station. She was asked to submit a design, and sketched it on some scrap paper right then and there, presenting it to the program director. “I was promised payment, but what was I thinking?” Patricia asked herself. “The next thing I know there are all these bright and shiny newly printed bumper stickers out there with my rough sketch on them, to size, in neon green and yellow, on clear Mylar no less. The worst thing was that everyone was complaining to me about the quality of my artwork! It was a rough sketch, an idea, a proof, not anywhere close to the final design I had planned to flesh out. And I certainly would not have recommended those colors on that material.”
Patricia learned two important things from just that one incident: Get some form of payment up front, and get all the information up front, too, including print details (in order to offer advice if necessary).
In more than 15 years in business, only one of Patricia’s potential clients has ever refused to do business with her because of her 50 percent up front rule.
“I’m very much against spec work of almost any kind,” Patricia said. “We all have our instances where we will do pro bono work for one reason or another, but even the smallest charity can often barter for design work—even if it is just advertising you through their social networks or naming you as a contributing sponsor on their promotions. Selling yourself short happens, but don’t give yourself away completely for free, ever.”
Ultimately, incorporating terms and conditions into your workflow is as much about ensuring that your clients know exactly what they’re getting as it is what they’re not getting for their money. For example, if you’re creating a website, are you also handling site updates? If not, you should say this in your terms so there’s no uncertainty when a client requests a tiny change (a lot of tiny changes will lead to a lot of your time).
We’ll end this chapter with a few final words from Von Glitschka:
“Whether you call it a contract, a work agreement, or just itemize the deliverables on a provided quote and have the client sign off on it to green-light the project, the point is to have a mutual understanding and clear communication between you and your client as to what you are being hired to create, how much they’ll pay you to create it, and who owns the final product when it’s done.”