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Legal Aid: Effective Contracts

Make sure your interior design contract covers all your bases
By Peter J. Lamont
January 10, 2011

For many interior designers, the contract with their clients are rarely given much thought—that is, until an issue arises with a client over payment terms or scope of responsibility. In order to maximize profits, interior designers need to get a little more creative with their own design contracts. With the new year approaching, there is no better time to review your old contracts, reflect on any negative customer issues that you may have encountered during the year and craft a new comprehensive contract that fully address your needs and will remedy past negative issues. While there is no magic formula for a good contract, there are a number issues that designers should include in their agreements. Below are some of the critical issues that should be included.

SCOPE OF WORK

It is critical that design contracts clearly spell out the limitations of the designer’s scope of work. Often designers find themselves practically replacing the general contractor on certain types of jobs. For example, if your scope of work is not clearly stated in your contract, a difficult homeowner may blame you for the failures of an electrical contractor or other trade even though both should have been monitored by the general contractor. .

In order to avoid this, a good design contract should state exactly what the designer is responsible for. It should not contain generalities such as “designer will design and oversee the overall transformation of Mr. Smith’s home located at…” This language was actually contained in a designer’s contract. Unfortunately, her client was savvy and litigious and ended up negotiating a much lower final payment than he was originally obligated to pay because he threatened her with a lawsuit over drywall, insulation and lighting issues.

The designer could have avoided this situation if she had listed those items for which she was responsible and included a disclaimer concerning the tasks that were not her responsibility. A general disclaimer could state, “Designer has been retained to provide interior design services only. Designer is not a general contractor and will not act in such capacity. Any issues concerning construction elements must be discussed between owner and his/her contractor.”


CONFIDENTIALITY & PROPRIETARY PROPERTY

One of the designer’s most important tools is their subcontractor contact list. The list contains the names and telephone numbers of the designer’s go to painters, electricians, etc. For most designers, a good list takes years to develop. The last thing that a designer wants is to have to give up their list to a client and have the client start making direct calls to his or her subcontractors.

In another real-world example, a designer on an large project was challenged by the homeowner concerning delays and the work of her subcontractors. He demanded her contact list. Unfortunately, her contract was poorly worded and the homeowner was able to force her into giving up her list. The homeowner then used it to make side deals with her own subcontractors.

Separately, some designers want their drawing and sketches to remain their proprietary property. The same designer discussed above was also forced to provide the homeowner with all of her drawings and sketches.

In order to protect your contact list and drawings your contract should include confidentiality and proprietary information clauses. The clauses should clearly state that the designer owns all of the drawings and sketches, as well as any other documents or information that the designer wishes to maintain control over. It should also forbid a client from directly contacting the subcontractors without the designers consent.


PAYMENT TERMS

This is one of the most important clauses in the contract yet it is often the most neglected. Most contracts simply state the hourly rate, design fees and commission percentages. In order to fully protect your profit, your contract should be broken down into separate sections for design fees, commissions and hourly rates. Each section should specifically state when payment is due and the manner of payment accepted. It should also specify how often you will bill the client and how your bill will be broken down. The more detailed the payment terms the better.


REMEDIES FOR BREACH

Finally, a solid design contract should specifically state what happens if the client does not pay the designer in accordance with the payment terms. For example, “an interest charge of x% will be applied to all past due balances.” It should also state that “failure to submit payment in accordance with the payment terms will constitute a material breach of the agreement.” The key to writing a good design contract is to spell out all of the terms and conditions that are important to you in plain language. You would not take shortcuts with your designs and you should not take them with your contracts. It is a good idea to have all of your contacts looked at by an attorney who is familiar with the design industry.


—Peter J. Lamont, Esq., is a commercial litigation attorney with offices in Hawthorne, NJ, as well as Massapequa, NY. His practice focuses on the representation of small- to large-size companies in the building and design industry, as well as individual designers and architects. To contact him with questions and suggestions on topics for future articles, please email him at plamont@peterlamontesq.com or call him at (973) 949-3770.
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