Some Legal Terms Every Freelancer Should Understand
As a designer running your own business, there will inevitably come a day when you encounter a dispute requiring that it be decided by law. When this happens, being able to understand what you’re facing from a legal standpoint, and knowing your legal rights in such a matter, will make you less vulnerable, and could even give you the upper hand. To give you a basic familiarity with some important terms, I’m going to recount a situation we recently heard of with a client organization, so you can get a sense of how easily these terms can come up.
The client organization was Paradigm Real Estate Solutions, who had contracted a local designer to design their company brochure, and write content for the brochure. When the designer emailed a list of content-related questions to the three stakeholders, their responses included a one-line email from one, a sarcastic “Are we done yet?” from another, and no response from the third, the more junior stakeholder. Paradigm Real Estate Solutions had been displaying a rather combative and "not-our-job" stance, so the designer deduced that this was about as much help and input they could expect to receive on the matter and consequently tried to pull information from Paradigm's existing materials to write the content for the brochure.
The first draft of the content was not received well, as it inevitably omitted some of the key points that the stakeholders felt were necessary. In a phone call with the stakeholders, the designer raised the subject of the client's lack of input and pointed out that their participation was necessary in ensuring the content was going to meet their needs. It was decided that the designer would send over the content as a Word file for the client to make notations and insert key points that should be included. The designer received the file back, edited it and worked it into the brochure.
Paradigm reportedly was happy with the final brochure, but refused to pay for the content-writing, claiming they had to do all the work themselves. Of course, the terms of the contract were not dependent upon the amount of participation required from the client to gather the information necessary for the project, and indeed, the client’s lack of input actually required more time to be spent by the designer in ferretting out the necessary information and making additional revisions than were agreed to in the contract.
Some Legal Terms You Should Understand
Firstly, A CONTRACT is an agreement between two parties. For a contract to be legally binding, it must satisfy all of the following 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. These items 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, in the example involving Paradigm Real Estate Solutions 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. Paradigm stated in an email that before they would send any payment, the designer would have to agree to accept the reduced amount of the amount of the contract minus the amount for the content writing. 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 In response to Paradigm Real Estate Solution's demand that the designer accept the smaller payment in order to receive any payment at all, the designer said they would agree to accept the payment if Paradigm agreed to send five copies of the brochure. In legal terms, this is not an acceptance of Paradigm's offer, but rather, it is known as a counter-offer. A counter-offer, by definition, is a rejection of the original offer, and, for it to become a valid agreement, must be accepted by the other party.
How You Can Make Our 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.