The Contract Template You Need
This post is chock full of great stuff on the legal side of video production and the greater professional creative services in general. Over the past 13 years we’ve been in a couple of sticky situation before and luckily we had a contract in place to protect us. Had we not had a contract, we would have been in serious jeopardy of going out of business, filing for bankruptcy or maybe been sued.
However, we learned a lot from our experiences and recently consulted with our lawyer to rewrite our entire contract from the ground up. It’s solid, and we spent over $2,500 to get it there, and now we’re open sourcing it for everyone.
Contracts protect both parties. When producing a video both parties have something at stake, and also have the best of intentions. Sometimes there are assumptions, sometimes there are things interpreted one way but meant another. Contracts clear all this up, and more. Contracts make sure everyone is on the same page.
Professionals use contracts, amateurs don’t.
Presenting your clients with a contract shows them that you are a professional, and you’re working with them for business purposes. We never start any work on a project without a signed contract and a deposit.
We decided to open source our contract to give back to the creative community we’re a part of. Video Production can be a tricky world, there are many variables, equipment requirements, crew members and a whole lot more, and contracts are necessary.
Our goal with this blog is to help others learn from our experiences. As I’ve said before, a rising tide lifts all ships.
Why You Need A Contract
Service Contracts are important for any business. They outline the parameters of the specific job and cover the overall relationship between the parties involved. This is where everyone gets on the same page and any confusion is removed.
Master Service Agreements (MSA) is a great thing to have, it adds credibility to the service provider and lets your customers know that they are working with a professional organization. MSAs are typically provided by the service providers.
When you have a contract, or Master Services Agreement, in place, should something unfortunate happen the contract is there to determine how to move forward. Generally speaking, most enter into an agreement with the best of intentions, but things do come up, such is life.
In the last 13 years of running a production company, we’ve only had to refer back to our contract twice to clear things up. Had we not had a contract in place we wouldn’t be in business today.
A Note To Those Buying Video
Contracts are particularly important for creative projects because so much of the result, or final deliverables, is unknown. When someone hires us for a video we have no idea what the final product will look like, but we do know the process of getting there and have done that hundreds of times in the past. We might have an idea, storyboard, creative direction/inspiration and so forth based on our initial conversations, but until the lights and camera are out and the Director yells “Action!” is still somewhat of a mystery.
The same can be said for a website designer or any other creative. You might hire someone to design a website with X pages or a specific functionality (such as local search or online ordering), but at the commencement of that job, it’s hard to know what the layouts and art direction will look like.
It’s important to note that when you are hiring a creative you are hiring him/her/them for their knowledge and expertise. You were most likely referred to them by a friend or saw something in their portfolio that made you think “Ah, ha! This is the team for me.”
So, it’s important to let the creatives do their job and be creative. Hopefully, that process I mentioned earlier allowed you, the one hiring the creative, to get all your creatives to understand your thoughts and goals. If not, back up and have that conversation again.
This is why it’s important to price projects based on value, not time involved or cost.
For Creative Service Providers
If you want to be a professional outfit you need to have a contract in place for every customer, client, and job. There are two parts to our contracts:
- Master Service Agreement (MSA)
- Statement of Work (SOW)
Master Services Agreement
The MSA is the master contract covering everything between you and your client. It’s a detailed document that states who does what, who owns what, when things are to happen and how (such as payment).
When you’re working with larger clients they will sometimes ask you to sign their contract. They usually make the terms, too, which can be difficult if you’re a smaller company or just getting started. It’s hard to wait 30, 60 or even 90 days for payment.
This is where you negotiate. If there is language in the contract that is partial to the other party you need to explain why you need it changed and ask for edits. Without asking you’ll get nowhere and be bound to their terms for the rest of your relationship or project.
The MSA is only executed once between you and your client, so it’s important to talk about all terms at the onset of your relationship. Remember, you’re a professional, negotiation is not a bad thing.
As an aside, I’ve always felt that agreement is a better term than contract. The agreement sets the foundation for a healthier relationship with those who you work with.
Statement Of Work
The Statement of Work (SOW) is attached to the MSA and covers each project individually. This document is more job-specific than the MSA and covers what the scope is for each project.
Say you’re hired to produce a video for a client. When it’s all said and done they love it (of course) and want you to produce another video for them.
In this situation, all you have to do is create a new SOW that is tied to the MSA you already have with them and get working. Easy!
Our SOW covers what we’re shooting, where, how many shoot days, what is being delivered and when payment is due and any other additional notes that are project specific. The SOW covers the variables that change from project to project.
Contracts make sure everyone is on the same page.
Let Lawyers Do the Talking
You should get a lawyer and contract in place before you need one or both. Having a relationship with a lawyer is always a good thing. It’s unfortunate when situations get sticky, but sometimes that happens, sometimes it’s beyond your control.
Getting to know your lawyer will pay dividends in the long run. As your business grows, having someone to call on who is familiar with your line of work will make everything easier.
When negotiating an MSA with a new client, it’s best to let the lawyers do the talking. Your lawyer will have your best interests in mind and can talk with your clients lawyer about all the touchy subjects included.
They’re very comfortable talking about this, they do it all day, every day. Plus, when you remove yourself from these situations you can focus on having a great relationship with your new client and focus on the creative at hand.
Should you be the one doing the talking with your client about anything contractual, please do this in person- never over email. Sometimes a phone call or Skype will work, but in person is always the best for this kind of stuff.
Contracts can be a tricky business and the last thing you want to do is provide a false impression at the onset of a relationship.
Finding a Good Lawyer
Who’s ever asked their friends for a crappy lawyer? No one. Everyone wants a good lawyer. Once someone has a good, life-saving or relieving experience with a lawyer they tend to keep that relationship on good terms (same goes for storytellers and video producers, just saying).
The best way to find a good lawyer is to ask around. Ask friends, people you trust, colleagues or peers in the workplace. Ask your competitors (seriously). Lawyers by referrals are just like a you getting a referral from a client. If the project went well between you and your former client, odds are this potential project will go well, too. It’s the same with lawyers- we are all professional service providers, after all, aren’t we?
If you come up short with your friends you can try lawyers who practice different areas of law. Typically the business or litigation lawyers will stick together, as will family lawyers or criminal lawyers, but you’d be surprised how big their legal networks are.
The point is to get a lawyer before you need one. Should you ever need a lawyer having one in your rolodex or someone you’ve worked with before will behoove you.
Remember, your lawyer can only do so much. It’s your responsibility to have him/her understand your business and/or job functionality. This limitation can be erased after a few conversations or working together for a bit. That’s why I say a relationship with your lawyer will pay dividends in the long run.
The more your lawyer knows about your business, and the more you work with him/her, the greater the asset you will have. In these conversations with your client’s legal team, you lawyer will stick up for you and help you get the terms best suited for your growth as a business.
It’s a good idea to budget for legal with new clients. Expect a bit of negotiation and the last thing you want to do is take money that should be profit and have it all go to legal expenses. So, budget accordingly for the first couple of jobs since this is where a bulk of the negotiation will occur.
Anytime a larger client delivers you their contract have your lawyer review it. We’ve received contracts that state a project must be delivered on ¾” video tape- the state of the art video format of the 1970s.
Imagine being contractually obligated to deliver a project in a format that is extinct. I doubt the sender knew what was in the contract and sent it blindly.
My point is that contracts can be old. They can be something someone found somewhere on the Internet without even reading it.
To save cost on your lawyer reading and redlining a contract you should read it yourself first. Highlight anything specific you want to review with your lawyer- remember, you probably know more about the creative world and video production than your lawyer does, so this will behoove both of you.
Watch our reel.
A Horror Story
I fully believe that everyone enters into an agreement with the best of intentions. We once had a project where we were all set to do a video for. We had met a few times, reviewed creative, signed a contract and received a deposit. Everything was good.
Until it wasn’t. Less than 24 hours before we were scheduled to shoot we got an email from our contact saying that the company was going in three different directions and that our video was no longer needed. We had no idea this was coming and there was nothing we could do about it.
It was the 11th hour. We had already made all arrangements for the remainder of the project, including pre-production, strategy, renting gear, and booking crew. We’re screwed.
The good news, our contact said, was that he was now in need of 3 (three!) videos- but they needed a month-or-so to figure it all out. Our client assumed this was an easy switch and swap, but from our point of view, it was a completely new project. Our contract covered what would happen in this situation and we began the process of getting paid what was rightfully owed to us based on the work we had already performed.
Our client saw it differently. They assumed that since we didn’t actually shoot the project they didn’t owe us anything.
Here we were, with a lot of expense- gear rented, a crew hired and all the research, strategy, creative direction, pre production, script writing completed. These attributes are project specific and cannot be transferred over to a new project a month-or-so down the line. Worse, we had hard cash spent on a lot of these.
We work with a lot of hired freelancers on a per job basis. Once these guys are booked for a day or a job, they’re getting paid no matter what. We rely on our team to complete jobs and expect them to work hard for us. Once they have committed to us they are turning down work from others, and if we cancel on them they’re out of work. Morally, I can’t promise work and pay for our crew and not pay them, it’s just wrong.
If we back out on our end of the commitment to our team do you think they’ll continue to work for us? Our relationship with our team would deteriorate and have serious negative long-term effects on our business and reputation. (Notice how many times I’ve mentioned relationships in this post?)
Fortunately, we had a contract that covered us in this unforeseen situations. And, this is exactly why you should build a relationship with a lawyer.
It took us time to get paid, a long time. In the meantime, the company laid off 15% of its workforce and guess what, our contact was one of them. So, now we had to start the entire process of tracking our money down all over again and talk with new people. It was a disaster. The supposed promised 3 videos in a “month or so” were also gone and dusted. Just another reason why we needed to get paid for work already performed.
Learn from our mistake here and make sure your contract has a clause in there to cover you in situations such as these. This has only happened to us twice in 13+ years of business. It’s never fun, but you only learn the hard way once. Luckily for you, you found your way to our blog and will hopefully prevent it from ever happening (keep reading…).
Working With Friends
It’s really easy to work with friends, right? Or worse, family! Someone who knows you, likes you, know who you do and thinks you’d be the perfect fit for this job. Great! You trust this friend and think they’d never hurt you, overwork you or use the project in the wrong way. Until they do.
It’s really easy for friends or family to assume something is easy, ask for more revisions, expect more from you and belabor you in producing much more than you should have. Or, your friend might make recommendations that you don’t have the heart to tell her your professional opinion is different based on your experience in this world.
I wholeheartedly encourage you to work with friends, but please do it in a professional manner. Many times, when working with friends on an assumed handshake projects can take a turn for the worse and friendships are broken, time is wasted and nothing meaningful is created.
I recommend having friends and family sign contracts for any and all projects. This might be a bit awkward, but it will show them that you are a professional, and your time, knowledge and expertise are valuable and not to be overlooked. This starts your project off on the right foot. I also recommend charging a fair fee, and this fee, of course, is based on the value of the project (value pricing).
When we had our contract reviewed a couple years ago we gave our lawyer our base template and a list of about 9 things we needed to be rewritten or added. To be honest, we got this template from a former business advisor and I have no idea where he got it from. It’s legitimacy was never questioned by us, which means it could not have been sufficient should we really need to rely on it.
The 9 or so additions or paragraph rewrites we requested were notes that we had been making over a couple of years. We took note of what clients asked for clarification on, or what they asked to be stricken or rewritten. We took many notes of language that we found didn’t stand up to the project we were taking on. We had scenarios arise during projects and found out after the fact that our contract didn’t cover us in certain, precarious situations. So we needed this fixed because it was repeatedly costing us time and profit.
Apparently, the contract template we got from our former business advisor wasn’t so great afterall. It may have worked for him, but for our video specific needs, turns out it wasn’t great. Our lawyer ended up writing us an all new contract.
Want a bullet proof contract? Include these points:
- Services Provided: What you will be providing to your client?
- Deliverables: What constitutes a “final” or “accepted” deliverable? (our revisions are stated in the specific SOW)
- Compensation: How you will be paid and when? (don’t forget about expenses as in example above)
- Confidentiality: Being professional means not sharing your client’s trade secrets with the world.
- Ownership: Who owns what and when. The service provider should retain ownership until the job is paid in full, always. Otherwise, you have no leverage to get paid after delivering final assets.
- Indemnification: You should have insurance in place, but this is also good to have in your contract.
- Timeline: How long you expect the project to take and key dates.
- Termination: What happens if a project is terminated. Make sure to cover reasonable costs and commitments already scheduled.
Open Source Contract Template
Now that you know all about what a contract does, why you need one, how to talk about contracts with your clients, working with friends and what it should include, you’re convinced you need one. Great! But where can you find a good contract? The Internet is full of crap.
Well, you’ve come to the right place. I’ve decided to open source our contract that we use with all our clients. Our contract has gone through several revisions and additions as things have come up over the years. So, it’s been developed over years of practice and real world situations.
However, we might be missing something, or your needs might be a little different than ours. We’re based in California, and our state might have different laws than yours. So, be sure to get this contract reviewed by a lawyer before using it.
Use our contract as a template for your business or as a starting point. Remember, we’re not lawyers, this is not legal advice, we’re storytellers, and this template is being offered as a starting point only.