21 Jun Four Reasons Why Freelancers Should Care About Contracts
This is the first in a series of guest blog posts by one of my colleagues, Noel French of Thrive Legal, LLC. Noel is a Detroit-based attorney who focuses on transactional work for high growth startups, businesses, and nonprofits in Michigan. Services include business and nonprofit organizations, trademark review and applications, contracts, and M&A.
Contracts are boring, but they’re important. They do things that we care about most of the time, like helping us get paid for our work and manage our clients, while also helping preserve rights and avoid liabilities that we often don’t care about until it’s too late. In this post, I set out a few reasons that freelancers – and creative freelancers in particular – should spend some time occasionally thinking about their contracts. Because I’m a lawyer, I have to take a moment to say that the following is not legal advice and you should consult an attorney for any legal needs. With that out of the way, let’s jump in.
Increase Your Odds of Getting Paid
This is the strongest point I can make in trying to convince you of a contract’s value. Everyone likes getting paid. Freelancers often have trouble getting paid. Contracts help solve that problem.
One way contracts do so is by establishing evidence that you and your client entered into an agreement under which they are obligated to pay you for your work. Clients sometimes conveniently forget or misremember how much and when they’ve agreed to pay you, and having a written document with the client’s signature is good to have on hand when your memories need refreshing.
Contracts can also be used to create incentives for clients to pay in full and on schedule. For instance, a contract might include a late fee for every month or week the client is late in payment, or provide a discount for early payment. Building mechanisms like these into your contract gives clients more reason to pay on time.
Finally, contracts can help you enforce the agreement when a client simply refuses to pay. If you have to take a client to court, it’s much easier to win with a written agreement than without one. Of course, whether going to court makes sense will depend on how much the client owes you. If you were stiffed for $20,000, then a lawsuit is much more viable than if you lost out on $200.
Establish Good Client Relationships
If your field is one that thrives on repeat business or client referrals, then contracts are a critical tool for managing client relationships and growing your customer base. While contracts are legal documents, at their core they are about defining relationships, and a good contract will help you build and develop relationships by giving you an opportunity to set expectations and boundaries up front and in writing.
As an example, an issue I hear frequently from freelancers is that they complete a project but the client requests endless revisions because the client just isn’t quite satisfied with the final product. To freelancers and anyone who understands how freelancers work, the client’s behavior in this situation can seem unreasonable. Indeed, standard practice in most creative industries is to limit client revision requests to a set number – but there’s a good chance your client doesn’t know that unless you tell them. A contract gives you the opportunity to unambiguously state your business practices up front so your client can know what to expect.
Other matters to think about in your contract include deliverable due dates, your flat fee and hourly rates, the scope of the work, the fact that the client needs to pay even if they don’t like your work, and how long your client has to give you feedback. Really though, anything that is important to you in the relationship with your client should be stated in your contract. This is so important not because you will necessarily need to enforce the contract against the client, but leaving important points unspoken is to invite misunderstandings that will leave you and your client frustrated. Making the key points of a business relationship explicit up front is key to developing happy clients who will come back to you for additional work and send you referrals.
Protect Your Rights
In addition to making sure you get paid, there are a few other rights you should be concerned with. The specific rights will vary depending on your industry, but one that is applicable to many creative professionals is copyright.* If your work is copyrightable, your contract should clearly state who owns the copyright and what other rights are reserved or granted to the other party.
At a minimum, is important to determine ahead of time who will own the copyright in your completed work – you or your client. The standard for ownership can vary from industry to industry and project to project. For instance, an artist contributing work to an advertising campaign will almost certainly need to transfer copyrights to the client, while that same artist will probably maintain copyright in a commissioned mural. The most important thing is to make sure ownership is clear in the contract.
If your client will own the copyright in your finished product, you should consider whether there are any ancillary rights you want to maintain. For instance, if you want to use the work in your portfolio even though you will not own the copyright, a portfolio right should be included in the contract. If you will own the copyright, then you should think ahead of time what sorts of licenses and waivers you will need to grant to the client. Think about what the client is paying you for and how they intend to use the work, and whether there are any ways you can monetize some or all of the work in ways that won’t impact your client’s use.
Limit Your Liabilities
Being in business means that you risk being sued, but some businesses are riskier than others. Creative freelancing is probably on the lower-risk end of the spectrum, but there are definitely still relevant legal risks and there are concrete steps you can take in a contract to reduce those risks. One common concern is copyright infringement liability.* A common way copyright infringement can arise for creative freelancers involves the freelancer creating something they believe to be unique but that someone else believes is a copy of their work. As an example, let’s say you write a jingle for a commercial. Another musician hears the jingle and believes you stole their work, even though you didn’t. They may sue your client, and your client may try to hold you liable for their legal fees. Limiting your liability to your client in scenarios like this example is something to handle in your contract.
Another potential liability arises when you breach your duties to your client, or when they think you did. Continuing the jingle example, imagine that you wrote and delivered the music, but the client was unsatisfied and hired a new songwriter to create a new jingle in time for their advertisement to go live. They may try to sue you for the cost of hiring the new jingle writer. That’s just one of many possible examples, and there are a number of things you can do to reduce such risks. For instance, make it clear that you reserve the final say regarding whether the final work satisfies the contract to help avoid a situation like the example above. Additionally, limit the damages the client can recover to the value of the client’s payment, and specifically disclaim damages for lost business or other unforeseeable economic losses.
Got any other reasons that freelancers should be thinking about contracts? Let me know in the comments below.
*If you’re a creative freelancer and you haven’t already had an opportunity to learn a little about copyright’s practical applications, then I highly recommend you spend a little time to do so. There are a lot of misconceptions about copyright law in creative communities, and knowing a little bit about the law will help you protect yourself, protect your clients, and establish yourself as a professional.
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