Considering contracts

  • Containers - a pair of Airtex by Ikuko Iwamoto (Ceramics & Glass, 2006)

Are you happy with your latest completed client project? Was the project content clearly agreed at the outset? Did you receive your up front fee? Did you get prompt turnaround of all the drafts submitted for client approval? Was it easy to agree necessary changes to the project as work developed? Did the client supply the materials he was responsible for in good time? Is the client content for you to use the work in publicity for your business? Are you clear how you stand as regards design rights, copyright and trade marks in the work? And did you receive the final fee within the time agreed?

If all went well, you enjoy an excellent client relationship - and you probably had a good contract signed before you started work!

Contracts are all about relationships - you, your work and the people in your business life. Designers and artists often have especially diverse connections.

The closer and more personal the relationship, the more rewarding but also the more hazardous it may be. Before moving on to a contract, it is vital to think who you want to work with, on what and how. The contract just expresses clearly your mutual agreement to go ahead.

This is not a lawyer's article. Instead we aim to point out some practical points to bear in mind and offer you links about the details and how to find a lawyer when you need one.

The lawyers tell us that the essentials of a contract are an offer, acceptance and consideration (that is, some sort of payment in money or kind) with the intention to form a legally enforceable relationship. A contract can be spoken or written. The danger of an oral agreement is that the parties may in case of subsequent dispute have - or choose to discover - different recollections of what was agreed. Do you really want to be open to problems about what you were to deliver or when you should be paid? What if a gallery damages your work or shows it somewhere quite different without your agreement? Or if a retailer sells a range of goods looking remarkably like a design you developed for them but was not taken up?

Hence a written agreement is advisable. The process of putting the project in writing and ironing out any differences at the outset is itself a valuable aid to success. You can, indeed should, do this yourself in plain English without lawyers. This may be all you need. However, the more money involved - or the more risk to your finances, intellectual property or reputation - the more important it is to set up formal written contracts with legal input. A contract is likely to have (in addition to the basic terms of the deal) statutory terms, implied terms and conditions (ie. what happens if...).

The form of a written contract depends on the situation, such as consultancy, freelancing, sales, licensing a design, copyright or product, gallery commission, insurance, finance and so on. Some contracts, such as contracts of employment, have to meet exacting statutory requirements.

You can find sample agreements for a vast range of situations online for free or for modest cost - these assume that you will tailor them to your own situation and take legal advice before actually signing up in real life. Our links also point to support services to help you through many of these issues.

With these angles in mind, we will look at some of the most common contract relationships.

People You Sell To or Through

When selling, put yourself in the driving seat by offering terms and conditions that suit you and defining the job as you understand it. You can start with a ready-made template (see links) or get a solicitor to tailor standard terms to suit your practice. Then, for each job or project, you can add to your standard terms a schedule that defines the work to be done and any terms specific to that case. You will want to be especially protective of your intellectual property. You may also wish to retain title to your product or artwork even after delivery to say a shop or gallery until it is paid for. Both you and the client should sign the agreement on paper and each keep a signed original for your records.

Big organisations such as companies, public authorities and colleges tend to impose their own terms and also include wider policy obligations about such matters as diversity, environment and insurances. You should understand these thoroughly and decide whether you can meet them. You can try to negotiate but in the last resort it is your decision whether you are prepared to take the work on the available terms.

Large commissioned projects may have extensive specifications. It is vital to understand these details before signing up and to check throughout the project whether you are on course to deliver the final results and any intermediate landmarks.

Selling takes many forms - our diagram shows some common examples - so special types of agreement are needed for some situations (for example, with a gallery or art agent or if you are subletting studio or office space to another person or firm).

Special statutory protections apply to individual consumers (as distinct from limited companies) and to distance selling including telephone and internet sales, so you should consider these carefully before putting yourself into the marketplace.

People You Buy From

These are the converse of the people you sell to. In other words - suppliers, manufacturers, landlords, freelancers, employees…

Many of these situations are straightforward - but if you are sourcing prototypes in China or selling paintings in Russia, life can be a little more demanding.

It is important to assess the benefits and risks before agreeing terms. To take the example of sourcing from China - what do you know about the Chinese firm and what guarantees do you have of their performance? How will this arrangement affect your cash flow and funding needs? How quickly can you increase supply if your product sells well? How will you get defects rectified? If you have to take the firm to court, where will this take place and under which country’s law? Would it be better to pay more in the UK - or maybe Poland - as the price of greater control? Can you use an agent to take some of the hassle and risks for you? If you are making a significant commitment to such situations, you certainly need advice from UK trade promotion organisations and eventually from lawyers with relevant experience.

Buying property or taking a lease or licence on office, studio or workshop space is a major decision for your business. Other than for very short-term, flexible arrangements that you can readily get out of, you should take professional advice.

You may be able to negotiate advantageous terms with suppliers and take up discounts for early payment, on line payment and the like. Subject to such terms, pay your suppliers’ bills promptly - this helps to build your reputation as a business.

Where you are using freelancers to contribute to your projects, it is your responsibility to make sure that you get their status right - are they really employees who should be on PAYE income tax and National Insurance or truly freelance providers of services to you? If you get it wrong it is you that the tax man will pursue for the tax. There is plenty of information on line about the tests to apply (see links). While the tax man will assess what happens in practice, it is helpful to clarify the position with your freelancer at the outset and to ensure that a suitable contract is signed and invoices provided.

People You Work With

Going into business together - maybe with people you have done projects with at college - is attractive and can be highly creative. Before you get too far, it is only practical to take a snapshot together of what business you are intending to do and how you will organise it. Write down your intentions in plain English between yourselves. When you have something you can all sign up to, get a solicitor to put it into legal form (such as a shareholders’ agreement or partnership deed).

Some of the questions you should ask yourself: Who will do what and how is this decided from time to time? Will you work solely through the joint enterprise or are you permitted to do other work? Who will put in how much money and how will the profits or losses be shared out? In the case of a company, who are the shareholders and who are the directors? To whom can you sell your shares? How will you collectively decide whether someone else can join you, how someone can leave the group and on what terms? Who owns the intellectual property of the joint work? What happens if a partner dies - do his / her rights pass to their spouse / former spouse / partner / children and do you really want such people having a say in your business? If someone wants out and has to offer their share for purchase - how do you find the money to buy them out or do you have to accept a stranger joining the group?

These basically practical matters can become complex, especially if later on there is a dispute about meeting losses or - sometimes even more painful - distributing profits or selling the firm.

If all this is just too formal, perhaps what you really have is not a business enterprise but a series of joint projects that you and your colleagues opt into or out of as they come along.

Finally - where do you go from here?

We hope this quick tour helps you to think about your business relationships in a realistic way. All the issues touched on have come up in enquiries to the FuelRCA help line or in other real cases.

There are many sources of free or cheap information to get you started - see our links.

But it is wise to use professional advice at the right time, even if it costs money, to avoid blood and tears later. Your first port of call may be a good accountant who knows creative businesses and you will at some stage need a lawyer to put your terms of business and specific contracts into proper form.

By thinking through your relationships, getting written agreements and taking good advice, you should avoid problems and enable your professional work to flourish unhindered!