Terms and Conditions for Freelancers (Use These, Avoid Those)

Three Types of Terms and Conditions

You can group terms and conditions into three categories:

1. Payment terms
2. Service terms
3. Legal terms

For most freelancers and agencies, the most important are payment terms.

Why are Terms and Conditions Important?

Terms and conditions outline the rules of your business. For example, they might include when you expect to get paid, what you’ll deliver, and who owns what at the end of the project.

Terms and conditions can also protect you against liability. Some of your terms may state what you are NOT liable for or delivering as part of the project.

With New Clients, Review Your Terms and Conditions

The first time you work with a client, you should review and explain your terms and conditions. Don’t just put them at the bottom of the estimate and assume the client will read them.

Have the discussion, and ensure the client understands and agrees to them.

You want to protect yourself against future disagreements. For example, one of your terms might be payment within 10 days of the invoice. You don’t want the client telling you later that their accounting department can’t pay that fast.

Better to have an explicit discussion before you do the job. (Would you work for them knowing they don’t pay for 90 or 120 days?)

How to Decide Which Terms and Conditions to Include

If you’re reviewing your terms and conditions, there’s one critical criterion to help you decide what to include:

?Will you enforce it, and will it need legal action?

Let’s review.

Let’s say one of your payment terms is a deposit of 50% before you start the job.

Will you enforce that? In other words, no work until you receive the deposit? If the answer is yes, then sure, keep that condition. But if you’ll start the job before getting paid, why would you include it? It weakens your credibility.

Here’s another term you often see on invoices: 1.5% interest per month for late payment. If you include that, will you enforce it? What if the client pays late but doesn’t pay the interest? Would you pursue it or take legal action to collect it? Not likely, right?

So, the first rule of terms and conditions is to use only ones that you will enforce.

In general, you don’t want any term that needs legal action on your part to enforce. The cost of lawyers makes it prohibitive.

In an ideal situation, you will have reviewed your terms with your client. They will have agreed to abide by them. If they slip up, say by being late with a payment, they will make sure you get paid promptly when you remind them. People do make mistakes, so there needs to be some grace.

At first, you may be uncomfortable talking about money like this with your clients. But if you don’t have this talk, you’ll always be running after them for payment. I wrote about how to talk to clients about money here.

Payment Terms are Usually the Most Important

All freelancers and agencies should include payment terms on their estimates and invoices.

What are typical payment terms?

• For a monthly retainer, 100% payment on the first of the month.

If you’re billing by the project, your terms could be any of the following:

• 100% due upon acceptance of the estimate, before work starts
• 50% due upon acceptance of the estimate, remaining 50% due upon project completion
• 100% due upon project completion
• Net 10 days
• Net 30 days

You may also want to offer discounts for faster payment. For example, “Net 30 days, 2% discount, net 10 days” has been common.

I wrote a post on 5 money strategies for freelancers or how to use discounts for faster payment.

For bigger projects, you may have progress billings. This is good for your cash flow. It could be a variation of:

• 50% due upon acceptance of the estimate, 20% upon concept presentations, final 30% upon project completion

For progress payments, don’t create too many payment dates. It’s more work for both you and the client, sending and paying invoices. Settle on something reasonable.

Figure out what payment terms work for you. Remember, you don’t have to offer the same terms to every client. Your company, your rules. Use the terms that work best for each client.

You May Need Service Terms and Conditions

Service terms will define what you’re delivering. Sometimes, they’ll also state what you’re not including.

For example, if you’re a developer, you may recommend a hosting service for a client website. Your terms should make it clear that you’re not providing it. The client should enter into a contract with the hosting company. The terms should state that you’re not responsible for the hosting company’s service levels.

The same applies to any purchases with annual fees, such as plug-ins. The client should sign directly and be liable for the ongoing payments.

If there’s any doubt about who is responsible for part of your deliverable—you, the client, or a third party—you should clarify this in your terms and conditions. This is especially so if your deliverable depends on the client or the third party. You don’t want to be liable for any issues they may have that affect you and your deliverables.

Service Terms You May Want to Avoid

You and the client may agree on a delivery date for your project. However, think twice before putting this into writing. What if the client is late with the information you need for your deliverable? In that case, you don’t want to be held to the date.

What about performance? For some types of projects, the client may have projections for performance. How many units sold, whether a blog post shows up on the first page of search results, how many times a file is downloaded, etc.

Many variables have an impact on performance. Be very careful about putting projected results into your estimates. What happens if the project doesn’t hit the numbers? Are you liable?

If the client insists on these types of terms, both parties should be clear on their obligations.

Be sure the language in this type of agreement is straightforward. It’s tempting to use ambiguous words such as “good faith” or “best efforts”. These terms are vague and open to interpretation. Good for lawyers, but no one else.

Complex Projects May Need Legal Terms and Conditions

Legal terms often pertain to rights and ownership. For example, there may be many conditions attached to the use of a stock photograph. If you’re a design studio recommending the use of an image with specific usage rights, be sure the client understands those rights.

Again, you’ll want the client to sign that contract. You don’t want to be liable if the client uses the image outside the defined rights.

It’s similar if you’re working on a project where you’re using a SaaS platform. Often, costs depend on the number of users. Again, the client should know the contract details and sign the agreement.

You don’t want to be in the middle of this.

Try to Avoid Signing Client Terms and Conditions

Sometimes clients will want you to sign legal documents which are versions of terms and conditions.

For example, they may ask you to agree to a non-compete clause that prevents you from working with a competitor.

Or, they may want you to sign a non-disclosure agreement (NDA) that binds you to keep certain information private.

Some clients insist on non-solicitation clauses to prevent you from soliciting or hiring their employees.

These are all terms that restrict you. If a client demands them, you may have no choice but to sign. However, you’ll want to get legal advice to ensure that the terms are not overly restrictive.

For example, a non-compete clause should define who they see as competition. A non-disclosure agreement should expire once information is public, e.g., the website launches.

If you can’t resolve any differences, your last resort is not to work with the client.

Be Sensible with Terms and Conditions But Don’t Ignore Them

Take the time to review your current terms and conditions. Be sure that they’re still working for you. Above all, don’t overdo it.

Keep your life simple, get paid, do great work. As much as possible, stay away from lawyers.

Learn more about terms and conditions in my book, How to Start a Successful Creative Agency. It’s the essential business guide for graphic designers, copywriters, filmmakers, photographers, and programmers.

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