The State of Our Contracts

By Terry Stone

February 22, 2006

For most designers business is what they have to do in order to be able to do what they love—design. It does happen, however, that some designers embrace business as a game to play and win. Others grudgingly see business as a necessary evil. Whatever the philosophical point of view, a key business practice used by the majority of designers is a services agreement or contract with their clients.

Since the late 1980s, AIGA has made available to designers a standard agreement written by designer Roger Whitehouse, that was simplified and shortened by creative business consultant Emily Ruth Cohen in 1995. This contract has recently been significantly updated and modified by creative services firm management advisor Shel Perkins and designer Jim Faris, along with a team of attorneys and designers, to form an entirely new AIGA Standard Form of Agreement for Design Services. The new agreement takes a modular approach, focusing on terms and conditions, acknowledging that most designers will use the AIGA document as a starting point and reference to develop their own proprietary agreements. The agreement was published in December 2005 as booklet 9 in the AIGA series “Design Business and Ethics,” in addition to being available online.

This new agreement should be welcome, especially since it incorporates critical knowledge important to expanded areas of design practice. But are designers actually using contracts now? What are the issues and ongoing challenges they face in managing their business paperwork? I surveyed 122 designers to see what's happening in the field, including AIGA chapter presidents, academics, design firm owners (large and small companies), freelancers and recent design school graduates. Sixty designers were polled, this is by no means an exhaustive scientific study, but the findings provide an accurate snapshot of the industry at this time.

Do Designers Use Contracts?

When asked if they used a contract for every project, less than half (48 percent) said yes. The majority either said no, or indicated that the use of contracts was not applicable to them and/or their practice. Why wouldn't a designer use an agreement for each and every assignment? The most common response was that with existing, especially long-standing, clients there was trust, and/or they had a professional services agreement pre-negotiated that covered all terms of engagement. These umbrella agreements mean that each project, particularly small ones on tight deadlines with limited budgets, can be agreed upon by email confirmation or with an estimate and still be fully covered.

Whether they used them every time or not, the majority of designers stated that contracts are absolutely essential in new client relationships. The scale of the project often affects the type of contract prepared. Many designers cited that larger jobs get a formal contract, while smaller ones generate simple letters of agreement only.

“A good contract prevents confusion and protects everyone's interests. You realize how important this is after you've been burned a few times,” says management expert Shel Perkins. Nearly everyone indicated the value of a formal written agreement of some sort—be it a multi-page document with extensive terms and conditions or a quick email confirmation of work description, compensation, and deadlines, even if they didn't consistently employ them.

Further, 62 percent said that they get these agreements signed by clients. This critical step formalizes the relationship, not just legally, but psychologically, providing a firm sense of commitment by both parties. A few designers indicated that they work with only a “hand-shake agreement,” which causes me concern, especially since these comments came from academics. Design teachers not personally implementing known best practices certainly could be one factor in explaining an all too frequent lack of basic creative business training in undergraduate design programs. Additionally, there are still designers eschewing the concept of a formal agreement as “too tedious,” unnecessary because they have “business relationships that are friendships” or simply because “there is not enough time.”

Why Use Design Contracts?

“Contracts are about making sure that everyone is on the same page from the beginning,” says David Lai, CEO of Hello Design. Contracts are also “something to fall back on if the job does go south. A close second would be that your client sees you in a professional light,” states Yee-Ping Cho, whose Los Angeles firm specializes in print design.

These are compelling reasons to use contracts, but that doesn't mean that they are easy to prepare properly, even if designers are committed to using them, Angela Shen-Hseih of S+A Visual I/O, who is also chapter president of AIGA Boston, explains, “I think the challenge to getting a good design contract is finding that narrow line where you've been specific enough to protect yourselves against scope creep and additional unexpected responsibilities, but broad and flexible enough to be able to accommodate a certain amount of design and creative freedom.” Ansel Olson, vice president of AIGA Richmond, warns, “There are plenty of ways contracts can bite you if they're not properly written in the beginning. A good relationship with the client is often a better safety net than any contract.” Designers also suggest that practically speaking, client agreements are also good project management tools. “They are a guidepost for both parties to track scope and schedule,” says Jan Lorenc of Lorenc + Yoo, an Atlanta-based environmental design firm.

Is There a Standard Approach to Paperwork?

A little over half (51 percent) of the designers responded that they create only one document which becomes their binding agreement once signed by the client. This cuts down on the paperwork and allows the creative work to begin more quickly. However, it may also alienate new business. According to contract expert Emily Ruth Cohen, “I recommend that designers first issue a proposal and then, once the proposal is negotiated and approved, they send a separate contract or terms of agreement. The proposal is meant to interest the client, get them excited to work with the design firm and allow the client to focus on the design firm's services and fees. Once the client agrees to the proposal, the contract (or terms) is a much easier sell. Where a combined proposal/agreement may be relevant is with existing clients or with a rush project.”

For some designers, just the thought of doing paperwork, let alone managing the negotiation of agreements, sends them into a tail spin of doubt and paralysis. So you might think that designers would just use the old pre-existing AIGA Agreement? Yet, 83 percent of the designers I spoke to don't use it. Many designers did tell me that they had taken the AIGA document as a reference in creating their own contract, sometimes in conjunction with the Graphic Artists Guild contract, or those provided in Tad Crawford and Eva Doman Buck's excellent book, Business and Legal Forms for Graphic Designers. Some designers didn't even know AIGA had a Standard Agreement or couldn't find it online.

What About the Intimidation Contracts Cause?

One huge barrier to the use of the AIGA agreement, or any thorough contract, is that it's often intimidating. The “legalese” turns off many designers and their clients, slowing the process, and even creating conflicts that torpedo a working relationship before it begins. As designer/educator Gunnar Swanson explains, “People think that contracts are for resolving disputes, but their real purpose is in preventing them. Long legalistic contracts work against this. Clear, but fully explanatory prose works best.” Melony Bravman, a San Francisco based interactive designer says, “Clients seem to feel intimidated by contract language. To be honest, I find client intimidation a bit perplexing since design is of course a business, and contracts protect both parties. I think there is still prejudice out there among some businesses that creatives are somehow not truly professional and shouldn't need legal protection.” Co-president of AIGA Pittsburgh and design educator Hyla Willis echoes this, “There is also the expectation that design is a fun job, and that we should be grateful for the creative opportunity presented by the client. It is, and we are, but we also are stewards of other people's creative work (including photographers, writers, and font designers) and furthermore have just as much right to benefit from our labor as anyone else.”

Maybe it's not just the clients who are intimidated. Perhaps designers themselves share the blame. One designer expressed a fear that clients would use another designer who conducts business without requiring a contract. It seems like any client not willing to form a basic agreement is not worth having. This fear is unsupportable. Austin based designer Marc English expresses designers' culpability when he says, “I think that as a rule designers are eager to sink their teeth in to the projects that come their way. And often in the name of expediency they neglect the paperwork that lays out the essentials: deliverables, deadlines, and budget. We like to talk about creative, not money, we like to discuss ideas, not payment schedules.”

As we move into ever more complex business situations, with designers invited to participate in a variety of ways that impact business and culture, it's time to take ourselves seriously as business people. Too long have graphic designers held on to the misconception that they aren't really “in business.” This ambivalence cripples us. The only way to be taken seriously is to act serious. A well-thought-out contract is a great start.