3 Types of Freelance Contracts and Which Ones to Avoid

3 Types of Freelance Contracts and Which Ones to Avoid

Because pretty much everything runs on design and other forms of visual communication, the role of the visual communicator (designer, illustrator, photographer) is more in demand than ever, and also more misunderstood than ever. Misunderstanding is reflected in how many freelance creatives are mistreated by clients who operate under the assumptions that they are employees or personal assistants, and that the client is purchasing everything when commissioning the services of a independent creative professional. Freelance contracts clarify the creator-client relationship and expectations.

Freelancers need to be very clear about why they are being contracted to do a project. They also have to make sure their clients understand what the working relationship is.

Clients need to understand what visual creators actually do. It’s the responsibility of both the client and the creative to maintain a healthy working relationship. Begin with a contract.

 

Healthy client relationships begin with written contracts.

Written contracts describe the project, deliverables, specifications, schedules and the terms of service. There are a variety of freelance contracts, but I’m going to focus here on three types of project-based contracts.

Before I dive in, I want to first establish this as a disclaimer:

I am not an attorney. I am not offering legal advice. If you need legal advice you should seek the counsel of an attorney directly. 

When you first meet with your prospective client, you should discuss the project in terms of what the client wants to accomplish, possible solutions, how the work will be used, creative fees, expenses, and terms of service. Address all expectations and requests. You will use this information to write a contract for the project.

If your client is an agency, design firm or publisher, or government agency, they will usually offer a contract to you. You should then expect to negotiate terms. In other cases, you should write the contract because it needs to be based on your business practices.

There are three basic types of freelance contracts that you can consider: the buyout, work for hire and rights managed.

When you’re creating intellectual property, copyright is involved. Copyright and usage rights must be transferred in writing. So you need a contract of some sort in order to transfer any rights.

Copyright belongs to you automatically as the creator, and you transfer part or all of your copyright to the client. So when you are dealing with a rights managed type of contract you are considering at how your work will be used by the client, where it will be used, and for how long.

Rights-Managed Contracts

Rights-managed contracts include limited-use and multiple-use options. You want to give the client what they need, but not more than what they need.

Limited use places limits on what is used, and where and when.  A limited rights contract will be very specific and usually deals with one type of use. For example, a limited rights contract can specify a particular region; it can specify a particular medium such as print or digital; it can specify a platform (for use on a particular website only); it can allow one-time print reproduction rights; and it can allow a time limit. You can get very specific as to what rights you are transferring to the client. In all cases, you retain the original copyright.

Multiple use contracts allow for a broader scope of use. Multiple rights are appropriate for clients who will use the art extensively in marketing and promoting their products and services over long periods of time. You should require higher fees for multiple rights contracts because your work will be used more.

With both types of rights-managed contracts you need to know what client needs. If you are creating a logo, the client needs full use of that intellectual property and the ability to use it at will. If  you are creating a brochure, you need to consider if it’s print, digital or both, how it will be distributed, and for how long.

Rights can be exclusive or nonexclusive. Rights to a logo would be for the clients exclusive use, and you will not sell the logo to another entity to use. Non-exclusive rights means that what you create for this particular client may be sold or used elsewhere (by you, not the client) in a non-computing market.

Selling your original art files or original artwork is not included when selling rights. Ownership of the original art is separate from the use and reproduction of the artwork. You can sell the original artwork, but the sale does not include copyright or use.

Unlimited rights means that the client is purchasing all rights to use the final designs in all places at all times on all media and platforms. The designer as the creator of the work retains the original copyright, and may sell the work to others in unrelated industries. Unlimited rights is also known as all rights.

Exclusive unlimited rights means that the designer cannot sell the use of the work to any other party. Currently, under US Copyright law, unlimited rights revert back to the artist after 35 years. With both unlimited rights and exclusive unlimited rights the artist may use the work in their own self-promotion and the original art files and preliminary work maybe sold separately by the designer.

 

The Buyout

Under a buyout agreement, the client’s expectation is that the original copyright is actually sold. Usually you don’t want to do this, because you will lose all control and all ability to gain additional revenue from your work. Additionally, you’re not able to showcase it in your portfolio or use it for any sort of promotional purposes, because you essentially have given up your rights to the work.

Buyout is a vague concept, full of assumptions and most likely detrimental to the creator of the work.

Instead of a buyout, use Unlimited Rights.

 

Work for Hire

Works for hire contracts are standard in some industries such as film and publishing, where you’re contributing to a larger collective work, but they should be avoided otherwise.

Work for hire puts the creator at a disadvantage. It automatically establishes the client as the owner of the artwork you create, and in total control of all usage for all eternity. Work for hire is allowable under current copyright law, and authorship and ownership are given to the commissioning party. The creator has no rights whatsoever. Certain conditions must be met for a work to be a work for hire.

Employed designers, being part of an organization, do do not have the authority to claim copyright for the work they create in their role as employee. Their work belongs to the employer.

But freelancers are independent contractors. When a freelancer enters into a work for hire agreement, they are in essence employees without the benefits given to employees. So the freelancer can’t realize additional income from the work they create if it’s created under a work for hire agreement.

 

Freelancers should avoid work for hire arrangements.

You want to avoid work for hire if you are an independent contractor. Conflict can arise when clients assume that you are working for hire and expect full ownership and even authorship status of your work.

I just had this happen with a long-time client who moved to another region and decided to work with a local designer there. She requested that I hand over my working files so that she could give them to her new designer. When I refused, she reacted poorly, stating that she had paid for them. But she hadn’t. She evidently had not read my contracts thoroughly even though she had signed them.

Under current US copyright law there are particular conditions that make something a work for hire.  There must be a written contract stating it’s a work for hire arrangement, the work must be specifically commissioned, and it has to be created for a collective work. If all 3 conditions are not met, it is not a work for hire.

 

Freelancers should educate themselves about copyright.

I strongly recommend that all freelancers who create intellectual property for their clients gain a basic understanding of copyright law. This knowledge will protect your revenue and reputation.

Since work for higher agreements put you at a disadvantage, you should avoid them. If it’s an industry standard, you should be compensated well enough so that loss of potential income is offset by the amount of money you earn from the project.

If you are a freelancer who does not use written agreements as a normal course of business, I strongly recommend that you begin to do so immediately, and that you begin to educate yourself about copyright and contractual relationships. You don’t have a business until you treat it like a business.

 


Disclaimer: I am not an attorney or CPA. This information is offered in good faith for general information purposes only and is not exhaustive. It is not intended as legal advice or opinion. I do not make any warranty about the completeness, reliability, or accuracy of this information. Any action you take based upon this information is strictly at your own risk. I am not liable for losses and damages in connection with the use of this information. You should seek legal and other professional advice when establishing or conducting a freelance business.

Your Turn:
Have you had experience with buyouts or work for hire?  Share in the comments below.

Alvalyn Lundgren

Alvalyn Lundgren is the founder and design director at Alvalyn Creative, an independent practice near Thousand Oaks, California. She creates visual branding, publications and books for business, entrepreneurs and authors. She is the creator of Freelance Road Trip — a business roadmap program for creative freelancers. Contact her for your visual branding, graphic and digital design needs. Join her on Twitter, Facebook, Instagram, and subscribe to her free monthly newsletter.

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