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Are Simpler Contracts Better?


A recent story in BoingBoing highlighted a Chicago design firm’s simple, one page client contract. As someone who writes, reviews, and negotiates a lot of business contracts, I thought it was worth taking a look at the document and seeing if I thought this approach was workable from a legal perspective.

Let’s start with this: I think that simplifying standard client contracts and avoiding legalese wherever possible are laudable goals. I’m constantly going through the documents that I’m working on, seeing if there’s a way to make something more clear or to resolve any ambiguity. I’d like to give credit to Segura, the design firm, for putting in the work to create a document that’s intended to be helpful to both themselves and their clients, and one that reflects their values and goals. This type of effort is genuinely important and worth recognizing.

However…

OK, before we get to the “however…”, let’s look at the contract itself. Here’s the document, from beginning to end:

You give me money, I’ll give you creative.
I’ll start when the check clears.
Time is money. More time is more money.
I’ll listen to you. You listen to me.
You tell me what you want, I’ll tell you what you need.
You want me to be on time, I want you to be on time.
What you use is yours, what you don’t is mine.
I can’t give you stuff I don’t own.
I’ll try not to be an ass, you should do the same.
If you want something that’s been done before, use that.
PRO BONO
If you want your way, you have to pay.
If you don’t pay, I have final say.

Let’s create something great together.

Pretty cool, right? A lot of this is valuable. I’m not going to deconstruct and criticize every word, clause, and sentence. “I’ll start when the check clears” – that’s good stuff. “I’ll listen to you. You listen to me.” – that’s a principle that I wish more businesspeople would adhere to.

Alright, now it’s time for the “However…”

Let’s focus on this sentence:

What you use is yours, what you don’t is mine.

That’s a concept that’s common in design firms’ client contracts – they often provide the client with a bunch of different concepts, and they reserve the right to re-use those concepts that the client doesn’t select. No problem.

Well, not exactly “no problem,” because there might be a serious problem down the line for the client.

Here’s one scenario: Client X hires Segura to create a logo for their new energy drink. Segura creates a logo, X accepts it, Segura gets paid, X slaps it on their cans and bottles and the product becomes a big success.

A few years later, Big Energy Drink Company (BEDC) comes along and wants to buy X’s product for a big pile of cash. X starts planning their early retirement. Meanwhile, BEDC’s lawyers start doing “due diligence”, combing through X’s documents just to make sure everything’s taken care of. They come across the contract with Segura and red lights go off.

The issue has to do with the concept of “work for hire.” Under the U.S. Copyright Act, if you create something that’s subject to copyright protection (like a logo), you own the copyright…even if you’ve been paid to create it. The only exception is when it’s a work for hire. And for something to be a work for hire, there must be specific written language stating that it’s a work for hire (in addition to meeting other requirements.)

Need to know more about work for hire? Check out this blog post.

BEDC’s lawyer suddenly gets concerned that X may not really own the logo that appears on every bottle, can, ad, social media account, and piece of packaging that X has. Is BEDC going to risk that previously-mentioned “big pile of cash” when one of X’s most important assets has questionable ownership? Suddenly X’s retirement plans are put on hold while they try to figure out what to do about this.

OK, you say, no problem…Segura is an upstanding company; they’ll just sign a new document that has the proper work for hire language and that’s that.

But it’s been a few years. Maybe Segura is out of business. Maybe their owner is nowhere to be found, or is unable to provide consent. Maybe Segura sold their business, and the new owner sees dollar signs related to a dispute over an incredibly valuable corporate logo they created way back when. Lots of things can happen in a few years.

This isn’t some wild, million-to-one nightmare scenario. These are the kinds of issues that my clients deal with on a day-to-day basis. When I’m working on a client’s contract, part of my job is to look out for these types of potential problems and come up with a solution that’s in black-and-white so nobody has to deal with a nasty legal battle down the road.

Sometimes that means that the short and elegant contract has to give way to a wordier, less user-friendly version…but as long as both parties understand the terms that they’re agreeing to, it’s usually for the best.

So, whether you’re creating a contract or you’ve been given a document to sign, you definitely should strive for simple, clear language. But the realities of how the legal system works will sometimes necessitate a bit of extra terminology. In the design industry, there may be no such thing as a design that’s too elegant or too simple…but the rest of the business world isn’t quite there yet.

  • Good Post, David. You’ve highlighted one of many scenarios that pose big risks for entrepreneurs who try to do it with “just a one pager”. Keep up the great work!

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