Art Business Basics 101: Business Contracts for Artists – March/Apr 2000

Several years ago, NWSSA initiated a “Statement of Services” that is used for vendors and members who are paid for their work. Generally this agreement is used at our symposiums, such as Camp Brotherhood. It states the project, the name of person and the description of the services offered, the rate and method of payment, the estimated completion time and is signed by the provider and a member of the Board of Directors of the Association. This agreement serves two major purposes: each participant knows what is expected…and the association is protected in case of audit. If the IRS inquires about a particular payment, our Treasurer can produce the signed and approved agreement. This is a contract.

What is a contract? A contract is an agreement, whether oral or written, whereby two parties bind themselves to certain obligations. In order to be valid there must be an offer, acceptance and the concept of “consideration.” Consideration is the inducement to a contract or other legal transaction. This can be an act or the promise to act given by one party in return for the act or promise of the other.

Why is it needed? To protect or limit financial involvement, control risk, to comply with commercial law, to assure that work is accomplished in an agreed to manner. The list goes on and on! And remember, negotiating terms that are fair to both parties is essential if you want to get paid and maintain a cordial relationship with your clients.

“Government contracts tend to be specific about payment schedules,” says Craig Mengel, president of Multimedia Works Group, Westport, Conn. “You have to take that into account with your budgeting—you’re not going to change it.” Some government contracts pay only 5 percent to 10 percent up front, while the rule in the corporate world is one-third to one-half. After the initial payment, you’ll most likely get half of the balance in the middle of the project, with the remainder upon completion. Tying payment to your schedule helps, Mengel says. “If delays start creeping in, you can deal with those according to your progress agreement”, he explains.

Why write a contract? If some contracts don’t have to be in writing, why are we writing them? Good question and an important point. We are putting them in writing because we want a record of the true agreement. If you think that means that you’re concerned about people changing their mind or having a different recollection of events, you’re right. People hear what they want to hear and believe what they want to believe. A good contract spells out how a project should proceed and what type of product the client expects. It also sets deadlines and specifies the amount of advances, royalties and other support, such as the provision of materials, studio workspace, tools, assistants and who does what … and when.

When is it needed? Obvious occasions are in the purchase of products; enforcing warranties and guarantees; in employment and providing of services. It also serves to provide a third party, such as an arbitrator with information as to an agreement.

Another purpose of a contract is to control overlooked or unforeseen conditions. Michael Heiser, under a municipal arts grant, installed a monumental granite sculpture, “Beside, Against, Upon” at the Myrtle Edwards Park on the Seattle waterfront. The work was designed to fit within the budget of the grant with additional funding by the artist. However, in carrying out the project it was found that the structure could not be completed without a professionally designed and approved structural foundation. Tons of concrete and reinforcing steel were not in the original proposal. The only solution was to quit the project (most of the funds were already used on the acquisition, shaping and delivery of the massive granite pieces) and pay back the funds, or provide the additional funding.

Clearly the grant was a contract and certain rights and responsibilities were spelled out. But some important factors were not, i.e. local building code enforcement, professional engineer design costs, use of a licensed contractor with union labor and what would happen in regard to a crippling cost overrun. In the end the project was completed but the final design was compromised from its original vision and the artist paid heavily from his own funds. 

Five essential elements of a contract:

1. Identify the parties by name: And to help in identification, it is also customary to give the parties’ addresses, but this is for clarification.
2. Consideration for the contract: Sometimes the consideration will be money, but that does not have to be the case. What is important is that there is something mutual between the parties and that it is acknowledged in the agreement. 
3. Terms of the agreement: This is the main part of your agreement. State in as clear a fashion as possible what the parties are agreeing to.
4. Execution: It would seem clear that the contract should be signed, but things get confusing when you have agencies, corporations and partnerships. A good rule of thumb is to get everyone on the other side to sign.
5. Delivery: Even though the contract is signed, unless you deliver it and it is accepted before the work begins, you don’t have a valid contract.

If you truly can’t afford a lawyer, ask that your client start with a standard contract, and change it to fit your project’s specifics. There are several excellent on-line support sites with legal forms.2, 3 (See References.) But above all, if there is significant liability, try not to go it alone. The Washington Lawyers for the Arts and Artist Trust offer “The Arts Legal Clinic”, a 30-minute consultation with a lawyer specializing in law for artists and arts organizations. The clinic is offered every second and fourth Monday of each month from 6:30-8:30 pm. Call 206- 328-7053 for appointment.

References:
1 This resource is (c) 1995 by J.W. Dicks, and is excerpted from “The Small Business Legal Kit” published by Adams Media Corp.
2 FREE legal forms, contracts and agreements: www.smartbiz.com/sbs/arts/sbl1.htm
3 Labor Standards for the Registration of Apprentices: www.legalresource.com/legalforms.htm

Resource list:
The Complete Guide to Nonprofit Management, Smith, Bucklin & Associates
Basic Contracts: www.doleta.gov/regs/fedregs/notices/96_19989.htm
Comprehensive Resource for Sculptors: www.sculptor.org