Graphic Designers Getting in Business (GD-GIB): Contracts

Other GD-GIBs:
-GD-GIB: Overview

This post is an edited blurb I gave on the GDC listserv on things to include in a contract, including a lot of valuable comments and suggestions from the list's members integrated in it.
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Some suggestions based on my rules:

- First rule of business: make a written contract.
- Second rule of business: make a written contract.
- Third rule of business: make a written contract, and what the heck is this Fight Club thing?

- Verbal contract do exist, but should be only done by someone who has done written contracts before, and for very basic things that can't get out of hands. Sorry, I don't have any examples in mind to give. This is a sign as how rarely this should be done ;). Plus, you're breaking the first 3 rules if you do so.

- The contract defines the structure of the work relation. It does not protect you only, but also your client.

- A contract doesn't necessarily mean fixed price, it can be by hourly rates.

There is also special form of contract made for freelance jobs. It is called a "retainer". Basically, a "retainer" reserves a predetermined amount of your time per week (or longer) to the client, for a given price and over a fixed period of time (say, 20 hours per week for 2 months at x$/hour). This amount should be paid periodically (weekly, bi-weekly, monthly) even if you haven't received any work from them in that time. That's right: You may have worked for them less than predetermined, but you've built your schedule around the assumption work would come. Any additional time will be charged accordingly. Usually, the rate charged on the predefined period will be lower than usual because it is "assured income" (Pick in your profit margin or work-time estimate adjustment, but don't chip in your overhead or personal income) while additional time will be closer to your regular fee. Clauses like rush fees, late fees and business hours shouldn't be left out either.
If I'm not mistaken, I think the RGD Ontario site has a template for retainers.


Things to do/say in a contract:

- Milstone the payments, and start right off with a contract-opening one, invoiced at the signature of the contract. A classical example in a fixed-price contract would be: opening/research, presentation, delivery. all at 1/3 of total fee. Always milestone with something you have to give without having to wait for the client. Example:. don't use a "sketch approbation" as a milestone. This is an invitation for a bad client to evade payment by not giving his approbation.

- Do not set deadline in dates, but rather as increment. for example: set 1st revision at x business days after receiving the signed order. (always, always, aaaalwaaaayyyys talk in business days and business hours)

- Set a fixed number of propositions and revisions. When the limit busts, you charge per hour (specify the hourly rate)

- Set a minimum turnaround period for "last minute changes" (remember, all in business hours). Say also that, depending on the amount of work asked, a longer period may be needed, but that you'll advise the client beforehand. If needed in a shorter amount of time, extra fee of x$ / hour (rush fee) will be charged, with estimate of time given and approved by the client. All changes should pass through a singed change order form.

All this may seem very corporate for a one person operation, but there will be times where you will have more than one project at once, and that turnaround thingy might just save your healths.
Yes, "healths" with an "s".
Physical health, mental health, family health...

- Fix delays for client comebacks (be generous, unless the clock is already ticking) and set a fee for each day passed that limit. When a client linger on and on for each approbation, this jeopardize many things like reserved time with a printer, or working schedules, as said above.

- Expenses: All expenses you make—for that project only (like couriers or taxi)—should be paid by the client—including their sales tax—as an advance. That means before the next milestone...

- Late fees. Don't forget it. The percentage is applied to the base price PLUS previous late fees. i.e. if you charge 2% per month, it is more than 12% per year. You can also offer a discount for fast payers. It's a great way to incite them to pay promptly. This is often called something like a "two in ten", meaning 2% off if paid 10 days after billing. Usually, the amount on late fees and early discount mirror themselves.

- (moral, copy)Rights and ownership. There are two types of rights: moral rights (paternity) and copyrights (usage, ownership). Moral rights on original creation are yours, unless you freelance or work under an artistic director (who gets them). Moral rights cannot be transfered, but they can be waived.
Specify that all copyrights + properties on original creation are yours until full payment of full contract. In cases of cancellation, you should also keep full ownership of those rights. You will still have to define the transfer of rights and its scope in your contract, otherwise you will have created something your client cannot legally use.
Unless it's a logo, don't give away the copyrights for all time. Let them go on specific period of time, for a specified number of publications, a territory, etc. All these factors will influence your price, and it generates a fair income if it's successful and the client wants to re-use the work or expand its territory.
Original work (physical or electronic like photoshop, ill. or inDesign files) remain your property with limited usage and are not transferable to the client. (some let them go for a 200% buyout). Even if you give (or sell) the working files, this does not mean the client can use it as he likes. He's still restricted by the copyrights and moral rights related to the work(though now it's harder to control), and I'm not talking only about your part. Font, pictures and all other elements you did not create also have to be taken in consideration. You cannot give those without being sure the clients has them, either by proofs (copy of invoices) or a signed affirmation from the client that he has paid for those rights (with detail for each elements). If you forget to deal with one element' rights, you will be held responsible in case of a suit for infringement. Some designers will not give/sell the working files unless the client is ready to pay for a full copyright transfer.

There's a lot to say about ownership, and I think it will deserve a post of its own soon.

- Alterations: No work by outside intervener may be done on your original material unless you agree to it first.

- Cancellation (kill fee). Sometimes, things go sour in a project and parties have to part ways, budget reasons prevents client to continue, product gets discontinued... Basically, this section should say that if the contract gets canceled, you should be paid for the amount of work done.

All good. Any Examples?
I suggest you get the Graphic Artist Guild (GAG)'s "Pricing and Ethical Guidelines Handbook" (the PEG) which many consider the best start in contract reality, even if it's a U.S. book where laws and pricing differs from here.

Also, check with your local professional association (SDGQ, RGD Ontario or GDC) to see if there aren't any templates available. BTW, get your membership to your professional association. It's full of useful stuff like templates and documents to help you navigate that business sea, a grat place for networking and an unbelievable source of mentoring goodies.

Even with all of this, get a lawyer to work with you and review your contracts. Just, don't do work for him/her. You know, conflict of interests and all.