Some Legal Terms Every Freelance Graphic Designer Should Understand
As a graphic designer running your own business, you know the importance of using contracts with your clients to clearly describe the terms of each project. A well-written contract can do much more than simply protect your legal rights in court; it can actually prevent problems from arising by spelling out who is responsible for what during the course of the project, and signalling to the client that you will not be pushed around. But do you know what is required to make a contract enforceable? Does it need a signature? What can make a contract invalid?
Firstly, A CONTRACT is an agreement between two parties. For a contract to be legally binding, it must satisfy all of the following four conditions:
- Agreement. There must be an offer, and that offer must be accepted. Both parties, essentially, must show serious intent to be bound by the terms of the contract. The acceptance does not need to be in writing, and a signature is not required, so long as there is some kind of acceptance of the offer. For example, after seeing your proposal, a client might email back that they'd like to move forward with the project. This is a legal acceptance of your offer. What if you're on the phone with your client discussing your proposal and your client says "Ok, let's do it" - does this qualify as an acceptance of your proposal? The answer is yes. The courts recognize this as indication of a serious intent to be bound by the terms of the contract, and therefore consider this to be legally binding. Of course, it's a good idea to have the terms of the contract in writing to avoid any confusion about who's responsible for what, but in the vast majority of cases, a verbal agreement is every bit as valid as a written one. Attorney Francine Ward points out that the challenge with oral agreements is you must first somehow prove that an agreement between the parties actually existed. While difficult, it is not impossible. It can sometimes be determined by emails, purchase invoices, memos, and other written documentation.
- Consideration. Each party must give up something of detriment. You are giving up your time and your firm’s resources, and your client is giving up money. If you are doing a project for free, it would be difficult for the client to show they were giving up anything, so this might be considered a gift. Points of Consideration need to be clearly defined within the contract.
- Capacity. To enter into a legal contract, you cannot be a minor, you must have the mental capacity to agree to its terms (you cannot make a contract with someone who is in a coma or incapacitated by drunkenness, for example), and you must be able to perform the duties of the contract.
- Legality. The contract must be dealing with legal activities. You cannot have a legally binding contract to supply cocaine to all the hookers in the downtown area (for example).
If these four conditions are met, then you have a legally binding contract.
In my entire first year as a freelancer, I never used contracts with my clients, and I think there are probably many freelance designers who still don’t have a contract that they use. There are several reasons why this is a bad idea, and as members of a strong and vibrant design community, we all have easy access to free contract templates written for creative professionals. If you are among those fly-by-the-seat-of-your-pants types, operating without the use of a standard contract, stop reading and download this standard agreement available from the AIGA website. This page will still be here when you get back.
BREACH OF CONTRACT. Designers should know that a stated intention not to fulfill the terms of a contract, such as a stated intention not to pay, is a breach of contract, and the courts provide legal remedy in the form of damages in such cases. Your local chapter of the AIGA can provide you with referrals to attorneys who specialize in this practice area.
EXTORTION. Have you ever been threatened by a client? What if you get to the end of a project and your client says they will only pay if you agree to some condition not contained in the contract? For example, before the client sends any payment at all, you must agree to accept only half of the original negotiated amount? How would you handle this offer? Designers often find themselves in a vulnerable position because our product is intangible. Unlike taking your car in for repairs, knowing that you won't get your car back until you pay for the work that was performed, designers have often sent over PDFs throughout the course of a project or even final files before full payment is received. If a client chooses not to pay a designer after the work has been done, possibly due to a personality conflict or a lack of understanding of how many hours went into something, the designer frequently feels they have no recourse. I've seen so many situations of a client requesting a change that might take the designer 10 hours to accomplish, for which the client refuses to pay, citing that the designer hadn't yet provided a satisfactory design (according to the client's unarticulated opinions). Is it fair that the designer took a day away from his or her family to donate to an unscrupulous client's business?
Designers should be aware that the practice of clients threatening non-payment unless the designer agrees to a smaller amount, is considered the use of coercion to induce someone to enter into an agreement involuntarily – constituting extortion, a criminal offense.
As you already know from our discussion of the requirements of a legally-binding contract, both parties must enter into it voluntarily. If you have been coerced to agree to accept some arrangement such as agreeing to accept a smaller payment because you had reason to believe that unless you did so, you would receive no payment at all, be assured that even if you choose not to press charges for extortion, you are still not legally bound by such an "agreement."
OFFER AND ACCEPTANCE. The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it. For most types of contracts, this can be done either orally or in writing, as described above.
COUNTER-OFFER A counter-offer, by definition, is a new offer, in rejection of the original offer. For it to become a valid agreement, it must be accepted by the other party. This concept would be important to understand in a situation where a client tries to make some coercive or extortionate offer, and you make a new offer such as "I will accept half of our originally negotiated amount if you send me a new iPad." In this case, if the client sends you the money, but refuses to send you a new iPad, they have not accepted your counter offer. Your counter offer voided their extortionate offer, and you can still persue the client for the remaining unpaid money. Read this horror story of a client who acted unscrupulously with a designer, and other vendors, clients and employees, and how the designer got the upper hand, causing the client to go through a complete rebrand to try and recover from their reputation for unethical practices.
How You Can Make the Design Industry Stronger
You can strengthen the design community by passing this along to other designers - share this link, or feel free to place the entire contents of this article on your website (please keep the links intact). I also urge our industry leaders to write further on this topic and help spread the movement. Additionally, I urge all designers to call out those companies who engage in unethical business practices such as those described above, and lastly, I urge all designers to speak loudly of companies that have created great value through the ethical engagement of designers so that our industry can turn the tide away from our services becoming a commodity.