A proposal is a detailed project document that defines the scope
of work, the process, the schedule, and the total price (usually in
the form of a fixed fee). It is a discussion document where the
designer puts forward a recommended course of action for the client
to consider. Many proposals go through several rounds of changes
and negotiations before they are finalized. Some negotiations with
the client may relate to project specifications while other
discussions might focus on the legal terms and conditions. The
final goal is to have one comprehensive document that, when signed
by both parties, serves as your contract for the project.
Start with some general preparation that is relevant to all of
the work done by your firm:
Now you can zero in on the particular project that you are
This internal preparation and planning has been just for you.
The next step is to begin drafting a document that the client will
Written proposals include specific details that vary quite a bit
based on the individual project and the creative firm. However,
there is a fairly standard structure for the proposal document
itself. Typical components include:
You may want to include some extra items, particularly if the
client's approval process involves routing the proposal to an
executive who has not met you:
When finalizing a proposal package, always include a cover
letter. It will be written last. Keep it short, professional and
enthusiastic. Don't repeat any of the details that are in the
proposal itself. The letter is simply an invitation for a follow-up
conversation and it should indicate your willingness to update or
revise the scope of work if necessary.
Next, consider the best way of getting the proposal package to
the client. Whenever possible, present it in person. This allows
you to explain the contents, to address any concerns that the
client might have, and to begin building your relationship.
There are some basic terms & conditions that apply to all
creative disciplines. For the most part, these have to do with
ownership and license issues, payment issues, and general legal
issues. Each of these is briefly defined and discussed below.
Beyond these basics, contract language varies by design discipline.
For example, Web developers have particular concerns that are
different from those of advertising agencies. There are so many
possible variations that this article cannot be comprehensive. An
“additional issues” section is included with a few items specific
to print design, interactive design and 3-D/environmental design,
but beyond this you'll want to be aware of your own potential risks
and do as much additional research as you can. Go to www.aiga.org and download the
publications in the Design Business and Ethics series (the AIGA
Standard Form of Agreement for Design Services includes sample
contract language, which will be updated this year). Go to the
bookstore and buy a copy of the Graphic Artists Guild Handbook:
Pricing and Ethical Guidelines. For creative disciplines other than
those mentioned above, look at publications from relevant
professional associations (for example: the American Society of
Media Photographers or the Industrial Designers Society of
America). Once you've gathered as much reference information as
possible, review it all with your own attorney.
OK, so what are the basic concerns that all designers have in
Work made for hire. This
phrase comes from U.S. copyright law. It refers to original work
made by an employee, in which copyright ownership automatically
belongs to the employer. It can also refer to original work made by
an independent contractor or a design firm, in which copyright
ownership might automatically belong to the client, but only under
certain limited criteria: if the work was specially ordered or
commissioned, and the work is a contribution to one of nine
specified types of collective works (for example: encyclopedias,
atlases, and possibly, websites), and if a written agreement is
signed saying that it is a work made for hire. If your work doesn't
meet all of these criteria, copyright will belong to you unless you
assign it to your client. More information about copyright is
available in the AIGA publication Guide to Copyright and directly
from the U.S. Copyright Office at www.copyright.gov.
Assignment of rights. An
assignment is a full transfer of intellectual property rights to
your client. It might include copyright, patent, trademark, trade
dress, or other types of intellectual property. For example, when a
new corporate identity is developed and sold to a client, the sale
typically includes an assignment of all rights. The client will go
on to complete U.S. and international registration of copyright,
trademark, patent and other rights in their own name.
License. A license is a
limited grant by a designer to a client of rights to use the
intellectual property comprising the designer's work in a specified
Scope of license. The
extent of the license that you grant will vary based on the nature
of the work involved. The rights may be limited to use on certain
products, in particular media, in a certain territory, and/or for a
specified time period. Another basic issue is whether or not you
will allow the client to turn around and license your work directly
to a third party. (Specific licensing issues for print design and
interactive design are discussed below.)
Full payment. If you
have agreed that you will be transferring some or all rights to
your client, you should definitely make any transfer of rights
contingent upon receipt of full payment from the client for your
Inclusion of third-party
materials. Many creative projects include elements that come
from outside sources such as photographers or illustrators. Your
design contract should specify that usage rights for those elements
must be licensed by the client directly from the source. The Design
Business and Ethics series from the AIGA includes two publications
relevant to this topic: Use of Photography, and Use of
Portfolio use. You
should state that, once the project has been completed and
introduced to the public, you will have the right to add the
client's name to your client list and the right to enter the work
into design competitions. You'll also want to be able to show and
explain portions of the completed project to other companies when
you are pitching new business. Sometimes clients who are in highly
competitive industries have concerns about this. They may ask for
the right to review and approve such promotional activity on a
case-by-case basis. On a related note: you may want to ask for a
credit line to be included in the work itself.
The second group of common issues to be negotiated includes:
Fees. If you are
charging for your services on a fixed-fee basis, the total amount
will be specified in the body of the proposal. However, if you are
billing on a time-and-materials basis, your standard hourly rates
will be listed here. You should also state that your standard rates
would not change without 30 days advance notice to the client.
Expenses. Every project
will involve at least a few expenses. They may be small like
reimbursements for photocopies or taxi rides, or they may be large
like the purchase of printing. You should spell out for the client
exactly how project expenses will be handled. Some clients may want
to receive photocopies of receipts for reimbursable expenses while
others may simply request the right to audit your project records
if they ever feel it's necessary to do so. It's not unusual for a
client to require pre-approval if a purchase exceeds a certain
amount. In most design firms, project travel expenses are passed
through at cost but all other expenses are subject to a mark-up (20
percent is common). If a client wants to avoid a mark-up on a large
expense, you might consider allowing them to purchase it directly.
However, your fee for services must cover the time that you put
into vendor sourcing and quality control.
possible, you should ask for a deposit at the beginning of a
project. There are different approaches to this. Some designers
apply the deposit to the first progress billing (making it
essentially a pre-payment of phase 1). Others state that the
deposit will be held until the end of project and applied to the
final billing. If that's the case, point out that no interest will
be paid while it is being held. If the project is cancelled, the
deposit will be refunded less any amounts due to the designer.
Invoices. Your schedule
for project billings should be stated in the body of the proposal.
Progress billings can be based on phases or milestones, or they can
be weekly or monthly. Here you might specify that you will print
hard copies in duplicate and send them via regular mail to the
accounts payable address given to you by the client.
Payment terms. When you
send an invoice to a client, full payment is due within a certain
number of days, counting from the day that the invoice was issued.
For example “Net 30” means that the client must get full payment to
you within 30 days. Some corporate clients stretch this a bit by
saying that the days should be counted from the date they receive
the invoice. It's common for design firms to establish client
payment terms of “Net 15” because client cash must be received in
time for the design firm to pay for related project supplies
purchased from vendors on terms of “Net 30.” Related to this, you
may want to put a limit on the amount of credit that you are
willing to extend to a new client. This would be a judgment call
based on the client's credit history and your own financial needs.
You may also want to state that a project may be put on credit hold
if required payments are not made.
Late payment penalties.
Most design firms charge clients interest on overdue payments. The
standard rate is 1.5 percent per month (which is the equivalent of
18 percent per year). Separate invoices are not generated for the
interest amounts. Instead, they appear as line items on monthly
statements sent to clients to remind them of unpaid invoices.
Change orders. A change
order is a document drafted by the designer to acknowledge a client
request that is outside of the original scope for the project. The
designer describes the amount of additional time and money required
and sends the change order to the client for review and an
authorized signature. It is essentially a mini-proposal. You'll
want to reference the original proposal and state that the same
terms and conditions will apply. Compensation can be calculated as
a fixed fee or on a time-and-materials basis, in which case you
would list your standard hourly rates here. As the work involved is
completed, each change order should be invoiced separately.
Client delays. It's
paradoxical that the typical client will negotiate for a very tight
schedule yet, in the middle of the project, that same client may
cause serious delays by failing to provide necessary information,
materials or approvals. Most design firms specify that if a client
causes a lengthy delay it will result in a day-for-day extension of
the project's final deadline. During that client delay, you may
also have to reassign some of your resources to other projects, if
you have any. You might have cleared the decks for the fast-track
project by delaying or turning down other assignments. The danger
for you as a businessperson is that an unexpected delay could mean
that you're temporarily unable to produce billable hours. To offset
this risk, some creative firms attempt to charge a delay penalty or
a restart fee. However, most clients are not receptive to the
the process for canceling a project, from notification through
calculation of your final invoice. That final billing might cover
time and materials for actual services performed through the date
of cancellation, or it might be a lump-sum cancellation fee, or
perhaps a combination of the two. Cancellation also raises
questions about ownership of the unfinished work. Typically the
designer will retain all preliminary art, including any studies and
comps already rejected by the client, while the client might
receive the most recent approved version of the work in
Taxes. It's a good idea
to state that the client is responsible for any applicable sales or
use taxes, even if they are calculated after the fact (as in a
subsequent audit of the designer's tax returns).
This third group of common issues to be negotiated includes:
order for these terms and conditions to be complete and
comprehensive, confidentiality should be included here even if
you've already signed a separate confidentiality and non-disclosure
agreement (perhaps during your very first meeting with the client).
Depending on the type of work that you do, you may want
confidentiality and non-disclosure to be mutual so that your own
proprietary information is protected as well.
Warranties. A warranty
is a promise in a contract. It is a written guarantee that the
subject of the contract is as represented. As a designer, you might
warrant that your work is free from defective workmanship or that
it is original and does not infringe the intellectual property of
others. If some portion of the work turns out to be defective (for
example, a problem with some bit of custom computer code in an
interactive project) then it is your responsibility to repair or
replace it. Legal issues related to originality can be a bit more
challenging. You can only infringe a copyright if you knowingly
copy someone else's work. However, trademark, trade dress and
patent rights can be infringed even if you create your work
independently. Thus, it's best to limit your warranty of
non-infringement to “the best of your knowledge.” If you are going
to provide a guarantee of non-infringement without such limitation,
then at some time before the end of the project a formal search
should be conducted to determine whether or not your work
inadvertently resembles a third party's trademark or patent (“prior
art”). It's best to place responsibility for this type of prior art
search on the client. If you agree to arrange for the search, then
your schedule and budget for the project must include the hiring of
an attorney or legal service to actually carry it out. On a related
note: the client should make similar warranties to you for any
project components that they supply.
Infringement is the unauthorized use of someone else's intellectual
property. It is the opposite of seeking and receiving permission,
using correct notice of ownership, and contracting for payment of a
royalty or fee. Even though the infringement may be accidental (you
may independently create a logo for your client that looks like
someone else's trademark), there may be infringement liability, and
the infringer may be responsible to pay substantial damages.
Compliance with applicable
law. Your work must comply with all applicable laws,
including those related to product safety. (For more information,
see the “product liability” and “additional items” sections
Indemnities. In the
event that you breach any warranty that you have given, you agree
to provide security against any hurt, loss, or damage that might
occur. You would have to make the client “whole” by giving them
something equal to what they have lost or protecting them from any
judgments or damages that might have to be paid to third parties,
along with attorney's fees. For example, you might be asked to
provide indemnity against third-party infringement claims. At the
same time, however, you need to have the client indemnify you
against any breach of warranties that they have made.
Indemnification is a very important issue for designers because the
scope of potential liability can be considerable.
means legal responsibility for the consequences of your acts or
omissions. Your accountability to the client may be enforced by
civil remedies or criminal penalties. For example: a Web developer
who has agreed in writing to complete an e-commerce site by a
specific date will have liability to the client if the project is
not completed on time.
Product liability. This
refers to the legal responsibility of product designers,
manufacturers, distributors and sellers to deliver products to the
public that are free of any defects that could harm people. If a
product is defective, the purchaser will probably sue the seller,
who may then bring the distributor or manufacturer or product
designer into the lawsuit. Any one of the parties may be liable for
damages or may have to contribute toward a judgment.
Large clients often specify minimum insurance levels for the
designer's business. Standard business requirements include general
liability, worker's comp and automobile coverage. In addition, you
may need to carry professional liability insurance to cover such
things as intellectual property infringement or errors and
omissions. You must provide proof in the form of a certificate of
insurance that is sent from your insurance agent directly to the
Remedy. A remedy is the
legal recourse available to an injured party. It may be stipulated
in a contract or a court may order it. A remedy might require that
a certain act be performed or prohibited, or it might involve the
payment of money.
Acceptance. All work
that you deliver to the client should be considered accepted unless
the client notifies you to the contrary within a specified period
of time (usually 10 days).
Cure. In this context,
cure means to repair, correct or re-design any work that does not
conform to the project specifications in order to make it
acceptable to the client.
Mediation. Mediation is
a non-binding intervention between parties in an informal setting
in order to promote resolution of a dispute. It involves the active
participation of a third party (a mediator) who facilitates
discussion in order to clarify issues, find points of agreement and
encourage cooperation. A commitment to mediation is often included
in contracts. There are professional mediators and lawyers who
offer mediation services.
Arbitration. The next
step beyond mediation is arbitration, in which an impartial third
party (an arbitrator) hears both sides of the dispute in an
out-of-court setting. The arbitrator is an attorney who acts much
like a judge, listening to both sides of the story but not actively
participating in discussion. You and your opponent will have the
opportunity to present evidence and witnesses. After hearing the
facts, the arbitrator will make a decision. In your contract, you
will specify whether the decision of the arbitrator is binding or
non-binding. Binding arbitration imposes a legal obligation on the
parties to abide by the decision and accept it as final.
Arbitration proceedings are held in an attempt to avoid a court
trial. However, contract-required arbitration may later be
converted into a legal judgment on petition to the court. The fees
involved might be large, but usually they are less than those
involved in pursuing a lawsuit.
means that you are pursuing a lawsuit through the court system in
order to resolve a dispute.
Damages. Damages are
financial compensation for loss or injury suffered by a plaintiff
(the person suing). The amount of money awarded in a lawsuit can
vary greatly. There are several different categories of damages,
including: actual damages, such as loss of money due on a contract;
general damages, which are more subjective and might relate to loss
of reputation or anticipated business; and punitive damages, which
may be awarded if the defendant acted in a fraudulent way.
Limitation on damages.
It's smart for a designer to ask a client to agree that they may
not recover any damages from you in excess of the total amount of
money agreed to in the proposal. While it's possible for you to
limit the amount that each of you might owe to the other in this
way, you should keep in mind that you cannot contract away the
rights of any third party to make a claim.
Jurisdiction. In this
context, jurisdiction refers to the state whose laws will govern
the signed agreement. Your client will usually request the state
where their main office is located.
Legal expenses. When a
dispute has been adjudicated by litigation or arbitration, the
losing side may be liable to pay the winning side's costs and
attorneys' fees. Under copyright law, a winning plaintiff is
entitled to recover his or her attorneys' fees if the copyright was
registered before the infringement occurred. For other types of
liability, the obligation to pay the prevailing party's attorneys'
fees must be established in your contract.
Relationship of the
parties. Your contract should reiterate the fact that you
are not an employee of your client and you are not forming a joint
venture or partnership with them. As an outside supplier of
services, you are functioning as an independent contractor. You may
want to add that the relationship between you and the client is not
an exclusive one. You sell services to a range of clients and some
of them may be competitors. If a company wants to be your only
client in a particular category, your pricing will have to reflect
that. An exclusive relationship would require you to turn down
projects from similar firms. Higher rates are necessary in order to
offset that lost business.
Force majeure. This is a
French term that means “superior force.” It refers to any event or
effect that cannot be reasonably anticipated or controlled. If such
an event occurs (for example: a war, a labor strike, extreme
weather or an earthquake) it may delay or terminate the project
without putting the designer or client at fault.
Now let's look at additional issues that relate to specific
Terms and conditions can be negotiated separately for each and
every project, or they can be negotiated just once for the entire
relationship. If you start with a complete set and state that it
will apply to all projects, then future proposals can just refer
back to it. This can save on paperwork, time and legal expenses for
both you and your client.
It can be a challenge to find the right attorney and to use his
or her time in an efficient way. Most attorneys specialize in a
single category of law, such as real estate or labor law. As a
creative professional, you need to find an attorney who specializes
in issues related to intellectual property (copyrights, trademarks,
patents, trade secrets, privacy, publicity, defamation, and moral
rights). Attorneys are licensed state by state, so you need to find
one in your own area. Start your search by visiting these online
It's a good idea to look for an attorney who has other designers
as clients. Speak with established members of your own design
community-one of them may be able to provide you with a local
recommendation. Seek out an appropriate attorney when you are first
establishing your business. Getting preventative advice on basic
issues is much better than waiting until you're already in some
sort of legal difficulty.
Initial discounts are sometimes available through groups such as
Volunteer Lawyers for the Arts, but in general legal services are
not inexpensive. Attorneys may charge a flat fee for assisting with
certain basic transactions such as setting up an LLC, but for the
most part services are billed on a time-and-materials basis. For
this reason, you need to be efficient in the way that you interact.
Make the best use of your attorney's time by being very well
prepared. Bring copies of any correspondence that you have already
received from or sent to the client. Gather sample documents from
your industry and become familiar with the basic legal issues
relevant to the creative services that you offer. You may be able
to use one of these reference documents as a draft for further
discussion with your attorney. Be completely honest and ask
questions about anything that is not clear to you. Together you
will then craft a final version to send to your client.
If your client is a small business, they may respond with some
basic questions that you will have no trouble answering. With large
clients though, you may find that your document is routed to an
in-house legal department. If questions come to you from an
in-house attorney, consider having that person negotiate the fine
points directly with your own lawyer. If the in-house counsel is a
specialist in some other area of law, your intellectual property
attorney can explain the context for the contract language that you
are requesting. Attorney to attorney negotiation creates additional
expense, but if the resulting terms and conditions can be accepted
as the basis of an ongoing relationship, then you won't have to go
through the process a second time.
Shel Perkins is a graphic designer, management consultant and educator with more than twenty years of experience in managing the operations of leading design firms in the U.S. and the U.K. He has served on the national boards of AIGA and the Association
of Professional Design Firms. He has been honored as an AIGA Fellow "in recognition of significant personal and professional contributions to raising the standards of excellence within the design community." The third edition of his best-selling book, Talent
Is Not Enough: Business Secrets For Designers, is available from New Riders.
As the largest professional association
of designers in the world, AIGA is committed to advancing the value and
impact of design, both locally and globally, and working together to
inspire, support and learn from each other, at every stage of our
careers. Whether you're an established designer looking to give back or a
student just starting out, there's a membership level for you.
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