It's incredible how a single sentence in your contract can throw a total wrench into an otherwise simple mid-project negotiation.
I'm no contracts lawyer, but after living through a good number of stumbles, I've started to mandate a few critical contract terms in my client agreements. If you're looking to be professional and be clear about IP ownership in the midst of a mid- to long-term design engagement, you should see if you include these kinds of terms in your standard design contract.*
* Disclaimer: I am not a lawyer and these clauses are written in plain language, so I can't guarantee how they will hold up for you in a court of law/in arbitration based on your jurisdiction. These are intended as "good faith" measures and you should rewrite/vet with your attorney before using them in your contract to ensure that they will support your business needs.
Clause #1: After receipt of final payment for [deliverables in contract], [client name] will retain [level of rights granted] for [intellectual property and/or materials] created under this contract.
In plain language: Retain all rights to your work until you are paid in full for all work outlined in your contract.
Why would you use this clause? It protects you from a client balking on payment for services rendered at any time through a contract, and attempting to utilize deliverables that you have provided without due compensation.
This is especially important in cases where you are generating intellectual property, such as naming, brand positioning, identity and brand systems, Web sites, and so on. On these types of projects, once a key insight or idea is "out of the bag," the client can begin using it without a deliverable or material in hand. That insight or idea has value and must be retained by the designer until the contract is completely fulfilled by both parties. Which leads to #2...
Clause #2: Upon cancellation of services after having engaged [my design services], the client will be billed for all hours worked at [my hourly rate].
In plain language: If the client halts or cancels a project mid-stream, all hours to date must be billed out.
Why would you use this clause? To be clear with your client that there are repercussions for engaging your (professional) services and then freezing or canceling a project.
Ages ago, I had a client who started a project, we dutifully worked on the first round of design comps, and then we were asked to cancel the project when effectively all the work had been finished. The account manager and I had a long argument over whether we should bill the client for work to date or forgive the client and hope that he would come back for future work. We chose the latter, and never recouped the loss.
This is an even larger issue on a project like a corporate website redesign. Each stop and start can cost you big money in time to ramp up.
Clause #3: Designer will be paid for [services rendered] with the following schedule. First payment is due before work will begin on [name of first deliverable]...
In plain language: Don't offer credit to any new client, no matter what. Provide a payment schedule that mandates a payment in advance of each phase.
Why would you use this clause? Because you should never do work for a client without a deposit. That is, unless you have credit to extend to everyone you work with, you can cover three to four months of your overhead without a cashflow issue, you can afford to give clients room to balk at payment due to issues that you can't control, and you can otherwise live in fear of closing a deal because your client is having liquidity issues of their own but still wants to work with you. Can't you just be a little more flexible in the payment schedule?
The answer here should be a gentle but firm no. If they can't pay you up front to start your project, then you're already hearing the warning bells about how the upcoming work might play out. If they're a long-term client, then this becomes less of an issue as you establish credit terms. And if you're really concerned, you can run a credit check on your client to be sure they can pay that $200,000 fee. This is not outside the realm of possibility for any designer to conduct, especially when you are looking to secure large-scale projects.
Clause #4: Any unresolveable dispute between designer and client will be settled in mediation in [your place of jurisdiction].
In plain language: If a conflict becomes insoluble, protect yourself via mediation instead of entering the court system and costing both parties an infinite amount of money in lawyers and fees.
Why would you use this clause? This is another litmus test for a client's level of professionalism. When I've seen clients haggle over the inclusion of mediation versus court jurisdiction, it is a huge red flag.
Mediation is genteel, allowing both parties to have a conversation over what really happened on the project in question -- not a battle royale. Taking this route can be the high road... though if a client balks to pay after coming to an agreement in mediation -- and I've seen this happen! -- you just might end up in court to salvage your reputation. So let's hope that you never, ever have to end up in that situation.
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