9 steps to a better contract

Winter 2023 digital asset feature2 contracts
Winter 2023 digital asset feature2 contracts

magazine | Mar 29, 2023

A contract isn’t just a get-out-of-jail-free card if something goes wrong. A strong but approachable letter of agreement can establish positive ground rules for the designer-client partnership in addition to protecting your business. Here’s how to get it right.

A sword and a shield—that’s how lawyer Wendy Estela wants you to think about your contract. A Connecticut-based partner at Aeton Law Partners, Estela often helps interior designers retool their one-size-fits-all documents into personalized letters of agreement that outline how they want to work, get paid and move through a project in addition to offering safeguards in case the relationship breaks down. “Your contract gives you the opportunity to be the aggressor if needed, but it will also protect you,” she says. “If somebody is threatening you with legal process, picture yourself with your contract over your head—it’s a gigantic shield that is going to fend off those lawsuits, because while they might sue you, it will likely get dismissed from court.”

Wendy EstelaCourtesy of Cheyney Barrieau Photography

Contracts aren’t the most fun part of the design business to talk about with clients—sometimes, designers don’t use them out of an overwhelming desire to avoid all of that legalese. (For the record, that’s not something we recommend.) That impulse makes sense: Designers are often scared that a client won’t hire them if they present a robust contract—or set boundaries, or charge what they’re worth. But Estela says that a colloquial contract can have the opposite effect. “There’s this natural inclination to devalue what we do—believe it or not, even lawyers need a pep talk about billing their actual time,” she says. “But our society is such that people expect that piece of paper. When it’s presented in a nice way that makes sense and only has the stuff that really needs to be there, clients respect it, and it sets the framework for that relationship. You’re presenting yourself as a professional—you are a business, not just somebody who’s going to make their space beautiful.”

Just as important as the content is the tone. “Most designers think it has to be very formal—that there have to be a lot of ‘whereas’ clauses and Latin—but I avoid legalese as much as possible,” she says. “The contract needs to be a framework for the relationship. It’s a starting point for discussions, but it is also the final say in how you’re going to interact, so it’s got to be something that people understand. If you have this really formal contract that’s only understood by lawyers, you’re going to have problems.”

Estela recommends dividing the contract into two sections: a conversational letter of agreement, followed by a more technical document detailing the terms and conditions. Which information goes where? It depends on your priorities. “For my clients, we decide which elements are so important that they need to be up front to say ‘This is how I work,’ and which ones are in the back to protect you,” she says. “Things like payment terms should be right on the first page; how we resolve a dispute or your limit on liability can be in the attachment. When you get toward the back of the document, people view that as boilerplate—it’s there, and you should go over it with your client, but the letter of agreement is front and center.”

Estela structures the documents this way so that her clients’ contracts reflect the way they work. “This is a uniquely personal industry—you’re in someone’s home,” says Estela. “I think a lot of lawyers get it wrong because they take an off-the-shelf document and slightly modify it, instead of completely tailoring it.” Even worse, she adds, are the prefab contracts available online for as little as $100: “You’re offering bespoke services, right? Your contract should be custom as well.”

No matter how you organize it, there’s one step you shouldn’t skip: Reviewing the contract with your client. Don’t force them to sign on the spot—that could be considered duress and give them wiggle room to void the terms of the agreement in court—but do make a thorough explanation of the contract part of your process. That may seem like overkill, but if your client signs a contract they didn’t fully read or understand, it’s not just a “them” problem. It very quickly becomes your problem when they break all of your rules down the road. “You’re basically showcasing how organized and professional you are and establishing that you have standards and boundaries,” says Estela. Hard to find any downsides there.

If someone manages the business side of your firm, have them do the explaining. If you don’t have someone in that role, it’s worth the short-lived discomfort of doing it yourself. And either way, you should know what your contract says (and means) inside and out. It’s the document that governs your relationship with your client—and, in turn, your business. Once you’ve talked through the document, give them time to sign on the dotted line. They can sign it that day, but don’t put any pressure on them to make it happen. You can, however, simplify the signing process—and complicate the client’s ability to mark up the document—by sending the contract via DocuSign. Above all, resist the temptation to get a quick signature, which probably means the client doesn’t understand what they’re signing.

» Related reading: How a contract overhaul helped one designer find her voice

Designers are often wary of client pushback once the contract is in the client’s hands. (Who hasn’t had a client return a contract that’s completely gutted with red ink?) But in Estela’s view, you have a war chest of verbiage at your disposal to fend off a client’s heavy-handed revisions. Chief among them is, quite simply, No. Other winning phrases: These are standard provisions in all of my contracts. I’m fully insured, and my insurance company has certain conditions. My contract was written by attorneys, and they require these terms. I’m happy to answer your questions, but I’m not going to negotiate the entire document. Remember: You’re establishing the rules of engagement for the coming months or years of collaboration. Along the way, there may come a time for compromise—but that isn’t now.

Speaking of compromise, when is the right time to throw the client a bone and let them change the language in your contract? That depends. “I would say, ‘If you have questions about one or two things, or have a few small changes, we’re happy to enter-tain them,’” says Estela. “When I’ve gotten a document back and it looks like it’s been bled all over, we go back and say, ‘Get this down to your three or four main points and let’s have a discussion.’” Then talk it out. One thing to avoid at this stage is going back and forth on email. While it might seem like a good way to avoid an uncomfortable chat, it’s likely to entangle things further rather than help you reach an understanding. Before you embark on that conversation, know internally what provisions you are unwilling to change. “Some of these things are small—sometimes people go through and they’ll find a typo, change it and send it back,” adds Estela. “Let them have their typo, but if they’re trying to cross out the language that says, ‘In no event will my limit of liability exceed 100 percent of amounts received under this contract for my fee,’ and now they’re opening you up to unlimited liability for a $50,000 project—absolutely not. You have to know ahead of time what will make you walk away.”

Sometimes the process can make you feel like you need to bend in order to close the deal. Estela says to resist that pressure. “It’s not always about landing the contract at all costs; it’s about getting something that works for both of you,” she says. “If they’re pushing you and trying to have their way, that might not be something that’s going to work for you.” Or maybe you have a high tolerance for clients with big personalities, and your breaking point is something else—that’s OK, too. What’s important is to identify your nonnegotiables so that you don’t end up making concessions that could hurt your business.

If you need a confidence booster, remind your-self that the negotiating phase is when you have the most power. “They want you. They picked you. Only on day one do you have that kind of honey-moon phase,” says Estela, who encourages designers to make the most of it. “Three months into the relationship, the leverage does change.” With that in mind, we asked Estela to share the nine contract components designers need to get right.

1. The Basics 

Your letter of agreement should clearly identify the scope of work, how you charge and what’s included for those fees. “People often think that the designer will be in charge of everything, including managing other contractors and third parties,” says Estela. Unless you agree to do so (and are compensated accordingly), you’ll want to specify that even if you’ve referred the client to a tradesperson, you are not necessarily taking over the management of that relationship—or the related liability. “That’s the homeowner’s contract, and it’s important for the homeowner to know that is their deal,” she says. Even if you were the matchmaker, establish that you’ll be charging for any contractor management and you’re not on the hook to fix their mistakes just because you made the introduction. Using your contract to make the terms of your relationship with the client and other third-party vendors crystal clear from the get-go will save you from more challenging conversations down the road.When outlining the basics of how you work, you can also incentivize the client to work your way—after all, this is your opportunity to set the terms of the relationship. “If there’s something you really don’t want to be doing, make your rate for that kind of service very high,” says Estela. Managing third-party vendors is a great example: “You can say, ‘Listen, we take on a lot of liability when we do this, so the rate will be much higher.’ Meanwhile, it could really be, ‘I hate doing this type of work, so I’m going to charge more.”

2. Photography Rights

Firmly establish your right to go into the completed project and take professional photographs so that you’re never left in the lurch at the end of a job. Here, Estela says it’s useful to get extremely detailed about the logistics of the shoot and how you will use the photographs. “You have to explain what that day is going to look like—how long it’s going to take, what you’re going to have to do in their home, [the fact that] they’re not going to be there for it—as well as how and where the photos are going to be used, including sharing them on social media,” she says. “Those photos are so important to your career that you want to make sure this step is locked down and understood.”

3. Ownership of the Design

When you create a space for someone, you are effectively giving them a license to use your design. It’s not unlike hiring a photographer to capture your work—those might be images of your work, but the photographer owns the picture. Estela says designers tend to hand over their design scheme between the design and purchasing phases, putting that intellectual property in the hands of the clients—but legally, they probably don’t have to. “It’s important to be very clear that you’re the owner of it at all times,” she says. “When things go sour, the client will say, ‘Well, I bought that, so it’s mine.’ Not necessarily.”

While this provision might seem like overkill, it’s an important cornerstone of protecting your brand. Erstwhile clients who try to realize your design on their own and then credit you with the work can do significant reputational damage. Estela has seen this nightmarish scenario play out more than once. “They go to a shopping center to execute your design, but do everything wrong. Then they photograph it, tag you on social media and talk about what a great design it is, but it looks terrible,” she recounts. “You don’t want to be in that situation.” It’s even worse if they think they’re following your design and then are unhappy with the end result. “Let’s say we’re talking about a design that has some elevations, but they execute it poorly and then come back and try to sue you,” she says. “If they’re paying you just for the design, then fine, give it to them. But if they’re hiring you for a larger scope, you really shouldn’t hand it over—you want to make sure you control the design from start to finish.”

4. Purchasing Power 

If you don’t want to get shopped, let your contract do the heavy lifting. “Some people put a full prohibition on the client buying anything, saying, ‘If you do it, we’re done,’” says Estela. The most important thing is to lay out the ground rules and create incentives for the client to follow along. “You can be flexible, but some designers say, ‘Absolutely not’ because it’s going to double or triple your work. And now when you take your photos, what are you going to take a picture of? Something you didn’t even want in there?”

When it comes to product, it’s also wise to stipulate that your firm is not providing a warranty on any procured goods—you can offer to pass along any manufacturer warranties if you’d like (some firms don’t), but be clear that you’re not administering them and establish that there’s no coverage for things like stains, animal damage or breakage. The same goes for prohibiting returns—or if you do offer them, clearly stipulate that there’s a restocking fee to compensate your team for the effort. “It’s not that you want to charge, it’s just that you want to disincentivize people from bad behavior,” she says. “I suggest incorporating the phrase ‘administrative fees apply’ for anything you shouldn’t be doing, whether that’s managing a contractor or doing returns—anything that is outside of the scope of what you were originally hired to do.”

5. Waiting Game 

As the never-ending fallout from the pandemic continues to upend business as usual, it’s even more important than ever to include clauses in your contract to cover product delays or project pauses. The language should explain that timelines will be automatically adjusted for “delays beyond the control of either party,” which accounts for everything from waiting for fully booked tradespeople or out-of-stock kitchen appliances to force majeure events like earthquakes, floods, or, yes, COVID-19. (While no one could have predicted a global pandemic, using language like “including but not limited to” and a list of examples should cover your bases.) “You can’t work around those delays, and the client has to understand that you are not in charge of all of that,” says Estela. “You’re basically going to share in that delay, and no one’s getting penalized.”

For commercial projects, it’s especially crucial to cover delays in your contract. “If a client is trying to open a restaurant and they’re waiting for tables, that delay is really painful and money is being lost, but it’s not the designer’s fault,” explains Estela. “The stakes are higher with a commercial project. You have to be absolutely clear that you are never on the hook for any loss of profits for the business, no matter what the cause of the delay, so you’re not going to get sued or brought into dispute resolution.”

6. Real Talk

Do you hate texting with clients? Concerned that phone calls don’t have a paper trail? Trying to put a stop to late-night requests? You can outline the terms of designer-client communication in your contract, including the medium (emails only for decisions and selections, for example) and business hours when clients can expect a response. If you bill hourly, you can also specify that clients should expect to see the charges for those conversations on their invoice. And after working with several designers who dealt with aggressive or abusive clients, Estela also suggests adding a clause that allows you to quickly end the relationship if the conversation starts to feel out of line: “You can say, ‘The designer has the right to terminate this agreement if the communications become unprofessional, uncomfortable or harassing.”

7. Online Reviews 

Speaking of harassment, you also want to get ahead of any negativity a disgruntled client can threaten (or act on) if the relationship breaks down. That’s why Estela recommends including a clause prohibiting online disparagement, especially in reviews. “Look, you can’t prevent people from exercising their First Amendment rights, but you can say that if things go wrong, we’re going to talk to each other first,” she says, emphasizing the mutual nature of the agreement. (That means you can’t be venting about a troublesome client, either.) That type of provision isn’t ironclad—there are arguments about whether or not that type of clause is actually enforceable—but just including that line in your contract can still do a world of good if you think of it as a litmus test for bad behavior. “Chances are, if it’s in there, the expectation has already been set that that’s not how you’re going to play,” adds Estela. “If somebody crosses out that part of the contract, beware.”

8. Arbitration 

Even after all of this, there’s still a chance that an unhappy client will threaten to sue—but there’s a clause for that, too. Including a stipulation that all disputes go directly to mediation, then arbitration, can save you a boatload in legal fees by keeping the case out of court. “While they might still sue you, it will get dismissed from court because of the arbitration clause,” says Estela. “Now you’re in a private dispute resolution situation where you can choose an arbitrator who understands this industry.”

Arbitration is better than going to court, but it can still be expensive—at least $5,000 to $10,000. To minimize your financial exposure, Estela suggests adding a clause that in case of a dispute, the losing party pays the winning party’s legal fees. Again, it’s not always enforceable, but it’s worth a shot. “It sets the tone with the client that, ‘If you lose, you’re paying,’” she says. “Who is hurt by that provision? The angry client who is going to harass you through the legal process. You’re telling them, ‘Look, don’t even bother.’” (It’s worth noting that you also have to be in the right for this to work—a good reminder to get familiar with the provisions of your contract and follow them to the letter so that you’re not liable.) One last thing: Be sure to include a limitation of liability in your contract to cap the amount a client can try to recoup. That might be the design fee, or a percentage of the fee; either way, it places a limit on damages a client can sue for and might dissuade a suit in the first place.

9. Termination 

You may hope to never need to fire a client, but it’s smart business to write yourself an exit plan in case a job goes south. There are two ways to terminate a contract: for convenience, which means you can end the agreement for any reason with enough notice, and for cause, which requires misconduct or a violation of the contract to take place. Keep in mind that whichever you choose, it applies in both directions—to you and the client. “Usually the next question is, ‘How do I know which one I need?’” says Estela. “That’s where you and your lawyer need to figure out what works for your business.”

Illustration: Danlly Domingo | Interior: A guest bedroom by Kristen McCory in a recent Junior League of High Point showhouse | Photography: Iris Photography

This article originally appeared in Winter 2023 issue of Business of Home. Subscribe or become a BOH Insider for more.