Contracts 103: Copyrights, Termination, and Payment Terms

Copyrights, ownership, termination, and payment terms are inextricably linked, as the first two are often transferred between parties utilizing the last two.

When you’re in the process of creating something — in this case, a fully designed website along with the visual elements, content, structure, and other intellectual property you’ve poured into it — you can safely assume the rights of ownership over the elements that you originated.

At some point, some or all of the intellectual property needs to transfer to the client, and payment to you is the logical time for that transfer to occur (the client is effectively buying that intellectual property from you). A good contract will spell out exactly when and how this transfer does — or doesn’t — take place.

Copyrights: What’s Yours, What’s Mine?

There are a few ways to structure the transfer of copyrights and the degree to which they transfer. It’s standard to stipulate that these rights transfer upon payment in full of the final invoice and that permission to use the work is withheld until final payment is received.

This point (not transferring the copyright until you’re paid in full) is a critical element of your contract. You can include it here or include it in the payment terms section, but include it somewhere.

The primary question to keep in mind as you consider how to structure your copyright transfer is this: How do you want to be able to use this work in the future?

It makes sense to establish a legal mechanism to transfer rights and ownership of the final deliverables to the client (who is paying for those rights) while retaining the ability to display your design in your portfolio without violating their copyright.

It’s possible to wade into the waters of licensing, where you either retain ownership and offer an exclusive license to the client, or you give the client ownership and retain a license for yourself. But that’s pretty complex, and getting bogged down in those technicalities is counterproductive if you’re setting up your first contract.

I prefer to include a simple, direct phrase in my contract that goes something like this:

Unless otherwise agreed and arranged, I reserve the right to present my work in my portfolio using links, screenshots, and anything else that will showcase my work.

Here’s something else you don’t want to forget: Include a clause saying that copyrights to the preliminary work do not transfer and that you retain ownership and rights to anything that came before the final project. For example:

Designer retains all rights in and to all Preliminary Works. Client shall return all Preliminary Works to Designer within 30 days of completion of the Services and all rights in and to any Preliminary Works shall remain the exclusive property of Designer. (source)

Ownership and copyright are similar and often appear side by side in a contract, but they aren’t the same thing. In short, copyright is temporary (everything becomes public domain eventually), but ownership is permanent. It’s a good idea to transfer them simultaneously, just to keep everything crossed and dotted. If you want to learn more, here’s a great explanation of copyrights, ownership, and licenses.

Termination: How are Time and Work Protected When it’s Time to Leave?

What happens if the client changes course, but you’ve already begun work? Stipulate the contract termination process up front to know how to handle those situations. Termination can happen when a client cancels the project, but it’s also what happens when the client just doesn’t like your work and wants to start over.

Generally speaking, you’ll want to require that the client notify you of the termination in writing, at which point you’ll stop working on the project. Make sure you spell out the fees associated with termination as well.

The most straightforward way is to require a nonrefundable deposit somewhere between 33 and 50 percent of the estimated project fee, to be paid before you begin work. You’ll retain that deposit upon cancellation of the project. Otherwise, you can send a final invoice upon termination reflecting your hourly rate applied to how much work you’ve completed on the project that hasn’t already been compensated.

You also need to specify that you retain rights and ownership of all work completed up to that point, preventing the client from using your existing work on the project.

Here’s a good example of a basic termination clause:

In the event of Cancellation, Designer will be compensated for services performed through the date of cancellation in the amount of a prorated portion of the fees due. Upon cancellation, all rights to the website revert to the Designer and all original art must be returned, including sketches, comps, or other preliminary materials. (source)

Payment Terms: Who Pays for What and When?

This section of your contract should answer all questions about when and how you’ll be sending invoices and getting paid.

It should stipulate the required deposits and their due dates or milestones, when each payment is due (for example, “within 21 days of receiving the invoice”), and what additional expenses will be covered, if any. Examples of expenses could be parking or taxi fees to come to in-person meetings, any printing and mailing costs, and so on. Be clear about what methods of payment you accept, and which party is responsible for any incurred fees related to payment, such as wire transfer fees for international clients.

If your project is straightforward with a definite start time and end time, your payment terms should be easy to structure with a set of deadlines or milestones and a final due date.

On the other hand, if you’re writing a contract for more sporadic or ongoing work, you’ll need to be very specific. Specify how you’ll charge for the work you’re doing (which you defined clearly in the scope section of your contract, of course) and the billing timeframes (eg, monthly or weekly) or payment milestones (eg, invoice with each deliverable) you want in place.

Many professionals will also include late fees for invoices that are paid after their due date.

This penalty widely varies from designer to designer, and it comes in part from your personal preference and the experiences you’ve had with previous clients. I’ve seen anywhere from 1.5 percent to 20 percent tacked on monthly, though you may want to err on the side of smaller if you don’t want to make a huge splash.

Include this late fee in both the contract and each individual invoice you send. If you’re looking for wording for your invoice, refer to this study from FreshBooks, a cloud-based invoicing system built for freelancers.

In short, be nice and be clear.

That wraps up our series on contracts for designers! Of course, this discussion has in no way been exhaustive. Still, if you take the time to set up a contract that touches on each of the sections we’ve covered over the course of three posts, you’ll have a solid legal document in your corner that will see you through the vast majority of issues that crop up in this business.

Again, keep in mind that these are just the basics, and obviously WP Engine can’t make any promises about the legality of a contract you craft from this post alone. We hope this series will be a great addition to your own contract research!