Written by Alyce Evans and Principal, Jennifer Tutty
At Studio Legal, we’re passionate about working with designers from all disciplines.
We recently had the pleasure of presenting a master class on key legals for interior designers to The Design Society. Founded and led by Lauren Li (founding director of interior design studio, sisällä), The Design Society is a group of emerging and established interior designers, with members granted access to expert knowledge, tools, inspiration and community.
During our masterclass with The Design Society, we discussed the key legal documents and considerations for interior designers. Our team spoke about intellectual property law, consumer law, law, employment law and more, from an interior design perspective. Now, we’d like to share this knowledge with you.
In this week’s blog, we’re providing a crash course for interior designers on:
– Client Services Agreements.
– Employee Agreements.
– Freelancer/Contractor Agreements.
– External Supplier Agreements.
– Key Liabilities and Risks.
Client Services Agreement
A key contract for any interior designer is a client services agreement (or, in your case, an interior design services agreement).
When a client engages you for a new interior design project, this is the contract you’ll use to set out all the terms of your engagement. This contract should be presented to and signed by your client before you begin any work for them.
It ensures that both you and your client understand each parties’ rights and obligations. It also provides clear terms to cover a variety of possible scenarios, such as:
– Is a deposit required before you commence work?
– What happens if the client changes their mind during a project?
– What if you cannot meet deadlines due to circumstances out of your control?
– And much more!
Key terms of an interior design services agreement
These agreements cover the general rights and obligations of both parties, as well as project specific terms (which will likely vary for each new project). We like to include the general terms as ‘Contract Terms’, and then accompany this with a ‘Project Brief’ (Schedule), which can be tailored by the interior designer to each project.
Some of the key contract terms include:
– Services and Deliverables
– Supplier Contracts
– Permitted Revisions
– Client Obligations
– IP and Credit
– Payment Terms
– Liability and Indemnity
– Australian Consumer Law
– Cancellation
Some of the items included in a Project Brief / Schedule include:
– Key information (project name, dates, party details)
– Project Stages
– Deliverables
– Scope of work
– Fees, Expenses and Rate Cards
– Payment Schedule
We find that most of our interior designer clients have their own specific processes and ways of working, which is why having an interior design services agreement tailored specifically for their business is so important.
Employees and Contractors
As a general rule, it’s very important for business owners to understand whether their staff are classified (at law) as employees or contractors. Simply entering a contract that calls them an employee or contractor may be deemed ‘sham contracting’, if this label does not reflect the actual circumstances.
For further information about the difference between employees and contractors, check out our blog:
‘Are You Hiring Contractors? The New Legal Test Explained‘.
For interior designers, understanding whether your staff are employees or contractors is particularly important. This is because the ownership of the intellectual property (IP) created by that staff member is dependent on their position and any relevant contracts you enter with them.
Read this, then read it again: Just because you hire someone to do work for you, doesn’t mean you automatically own the IP in the work they create.
Employees
If you hire someone as an employee, the general position under the Copyright Act 1968 (Cth) (Copyright Act) is that the employer will own the IP in any works created by the employee in the course of their employment. Having a signed employment contract with a corresponding intellectual property clause will help to reinforce this position.
Employment Agreements
If you are hiring employees, we recommend that you have them sign an employment agreement. Simply, this contract outlines the terms of their employment. It confirms the type of employment (i.e. casual, part time, full time, fixed term) and key conditions, so that you and your employee are on the same page.
Ideally, this contract should be signed before the employee starts to work for you. However, you can always ask an employee to sign after they start, or update their agreement along the way.
Tip: Make sure to check if a Modern Award applies to your employees before preparing their employment agreement!
Contractors
With contractors, there is a notable difference. If you hire a contractor to create work for you, the general position under the Copyright Act is that the contractor owns the IP in the work they create. Therefore, you will need that IP to be formally assigned or licensed to your business if you want copyright rights.
For example, if you hire a freelance designer to assist you with some sketching work for your business, they will own the IP in the sketches they create for you. If there is no written agreement assigning the IP in those sketches to your business, they remain the copyright owner.
For this reason, it is crucial to enter into a formal agreement (contract) with any freelance contractors you work with. Freelance contractors might include other interior designers, graphic designers, photographers, draftsmen and more.
Freelancer / Contractor Agreements
This is an agreement between you and your freelance contractors, setting out the terms of the engagement. As noted above, freelancers will retain ownership of the IP they create for you, unless it is transferred to you in writing.
These agreements can also help protect project confidentiality, set out attribution rights, and outline what happens if something goes wrong with the project.
For all of these reasons, these agreements should be signed before you start to work with a freelance contractor. They can be signed for one-off projects, or as a ‘master services agreement’ for ongoing projects or freelancers that you work with often.
Managing External Suppliers
As an interior designer, do you often obtain goods and services from external suppliers?
Some examples of suppliers providing goods include lighting shops, furniture manufacturers and retailers, and tiling companies, while service suppliers might include tradesmen, property stylists and cabinet designers.
External Supplier Agreement
If you’re engaging with external suppliers, it’s important to consider an external supplier agreement. This is a contract between you and your suppliers, setting out the terms of the supply arrangement.
For example:
– When can you expect to receive the products?
– What happens if the products don’t arrive on time?
– Who is responsible for paying any delivery costs?
– Can you get a refund if your client changes their mind before products arrive or services are supplied?
– What happens if a tradesperson is no longer available on the scheduled date? Will they send a replacement?
There are a lot of serious risks associated with procuring goods and services from suppliers. Having a written contract will ensure that both you and your supplier understand your rights and obligations and can help to protect your business if things go wrong. You might ask your suppliers to sign a contract you have prepared, or the supplier may ask you to sign one they have prepared.
Key terms of an external supplier agreement
Some of the key terms you’ll find in an external supplier agreement include:
– Types of Goods and/or Services being Supplied
– Timelines for Supply
– Fees and Expenses
– Trade Discounts
– Payment Dates
– Approval and Sign Off Process
– Ownership and Usage of IP (if relevant)
– Liability and Defects
– Disclaimers
– Cancellation
– Insurance
Q: What if it’s not practical to sign an external supplier agreement?
We understand it’s not always practical to present your suppliers with a formal agreement. For example, when purchasing furniture online for a client, it might seem strange to send that store your own contract for signing.
So how can you protect your interests in these situations?
If the supplier has any terms and conditions (or other terms of purchase/engagement), then it’s likely you’re entering into a contract when you purchase goods or services from them.
Therefore, if you’re not already reading the T&Cs of all your suppliers, it’s time to start.
Locate their terms and conditions and read them carefully. If you can’t find them, we’d recommend contacting them and asking about their supply terms (we always recommend doing so in writing, such as via email).
Once you understand your rights and obligations, you can determine whether you’re comfortable with that supplier’s terms. If you’re not, you can make an informed choice to shop elsewhere.
Also, don’t forget you are free to request changes to supplier’s standard terms or ask that additional terms be added. Changes and additions to your supplier’s terms can easily be recorded in an email exchange between you and the supplier.
Liability and risk
A liability is something that you are legally responsible for (e.g. refunding a faulty good). A risk is something that renders your business vulnerable, and can cause you to be held responsible for certain losses (e.g. financial loss, property damage, personal injury).
Running an interior design business comes with a lot of legal responsibilities, as well as potential liabilities and risks.
Key liabilities
– Delivering an agreed scope of work for a certain price.
– Meeting agreed deadlines.
– Directly hiring third party suppliers to supply products or services for projects.
– Dealing with defective goods and services from suppliers.
– Meeting client expectations for design work based on agreed brief.
– Managing various budgets (i.e. furnishings, fixtures and fittings).
Key risks
– Scope creep – doing too much for too little payment.
– Approval delays from client.
– Clients changing their mind on supplier products once ordered.
– Your inability to meet deadlines due to circumstances outside your control (e.g. covid, supply delays).
– Suppliers failing to deliver products on time or to brief.
– Supplier products being faulty.
– Being the ‘middleman’ between suppliers and clients (and being left out of pocket if clients are not happy).
– Clients expecting you to control a construction budget.
– Accidents on site.
Tips to mitigate liabilities and risks as an interior designer
Engaging a lawyer to create tailored, watertight contracts for your business can help to protect your business against risks. Some ways that a contract can address possible risks include:
RISK: Scope Creep.
SOLUTION: Clearly define the scope of work and fees in the contract. Fees may be quoted as ‘estimates’. Charge by a set hourly rate for out of scope work.
RISK: Clients change their mind.
SOLUTION: Insert a clause in the contract that states you do not allow ‘change of mind’ unless you agree.
RISK: Force majeure events (think floods, supply delays, global pandemics!).
SOLUTION: Include the right to suspend your services without penalty if unforeseen events occur.
RISK: Being the ‘middleman’ with suppliers.
SOLUTION: Have your clients enter directly into contracts with suppliers. If you are procuring the supplier’s services, charge a procurement fee for your time (rather than entering the contract yourself and taking a trade discount, as this attracts a lot of risk).
RISK: Accidents on site.
SOLUTION: Include an indemnity in the contract that protects your business against third party injury caused by others on site. Take out public liability insurance.
The examples above are just some of the many scenarios a lawyer can work through when drafting your contract, to mitigate potential risks to your business as much as possible.
Contracting with suppliers and risk
Entering directly into contracts with suppliers for your design projects come with serious liabilities and risks. In terms of liabilities, you are ultimately responsible to your client for the supplier’s goods and services, even though you didn’t actually make the good or perform the services. Additionally, you’re responsible to pay the supplier, regardless of whether your client has paid you (or intends to pay you).
Some of the risks that flow from this include:
– Supplier not delivering stock on time.
– Supplier delivering products or services that don’t match the samples or client’s expectations.
– The client changes their mind and doesn’t want to pay you (but you still owe money to the supplier).
– Stock breaks in transit.
– The client doesn’t want the products and demands a refund, but the supplier doesn’t offer one.
– The client withholds your design fees because of issues with suppliers or their products.
Tips
As much as possible, supplier contracts should be between your client and the supplier. You could then charge a procurement fee for your time spent procuring this arrangement.
Alternatively, in certain circumstances, you may be able to act as an agent for your client (and enter the contract on their behalf). For some interior designers, this is a more attractive option, as it may allow you to use your trade discount (on behalf of their client). We recommend speaking to a lawyer if you are considering entering supplier contracts as an agent for your clients.
Written by Alyce Evans and Principal, Jennifer Tutty
Published 16 November 2022
Further Information
Stay tuned for Part 2 coming soon, where we break down intellectual property for interior designers.
If you’re an interior designer looking for legal advice or assistance, contact us through our online form or at hello@studiolegal.com.au.
Photo supplied by sisällä with their kind permission – Interior design and styling by sisällä, photography by Tess Kelly.
DISCLAIMER
The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.