Storm Wiggett is trading in her capacity as a sole proprietor. This form of business structure minimises administration, and lowers tax obligations and operational costs but makes the individual trader liable for the business’s liabilities according to Manilall (2022).
To limit this liability, a sole proprietor relies on robust contracts, containing detailed terms and conditions of trade.
A review of the current contracts revealed several shortcomings. Therefore I sought specialised legal advice to draft new standard contract forms for CAS.
SPECIAL LEGAL ADVICE
Peer recommendation resulted in CAS acquiring legal counsel from Visagie Vos Inc.
Visagie Vos Inc.
https://visagievos.co.za
Pieter Simon Basson – Director
BA LLB
pietersimon@visagievos.co.za
021 591 9221
181 Vasco Boulevard, Goodwood, 7460, Cape Town
REDRAFTING CONTRACTS AND AGREEMENTS
As part of this study, I approached a specialised legal firm, Visagie Vos Inc, to update and modernise the following set of standard documentation:
- Non-Disclosure Agreement (NDA)
- Standard Service Agreement
- Supplier and Affiliate Commission Contract
- Consultancy Contracts
- Freelancer Contracts
- Supplier Contracts
- Terms and Conditions for Invoices, Quotes, and Conceptual Presentations
- Copyright clauses for Conceptual Presentations and Portfolio Items
LEGAL TEAM BRIEF
The brief to the legal firm identified various aspects as part of the requirements for the updated documentation.
1) Transparency and ease of use:
- Documents should be concise so as not to intimidate
- Documents should be concise and clear to show transparency.
- Clauses should be worded and structured on the premise that the business model will require contracts to be signed before any work commences. Clauses also need to outline the rights and responsibilities of all parties involved according to Dudson, Poulter and Mayner (2021).
2) UK and European clients:
- The wording and risk clauses in the contracts should reflect legal sophistication. This needs to be considered because the increase of work internationally comes with a greater risk of non-payment and legal recourse to enforce payment.
3) Clear and concise payment terms to mitigate risk:
- Payment is due 30 days from a statement to avoid cash flow constraints and ensure timely VAT payments.
- A 50% upfront deposit is required before work commences to offset the potential risk.
- Late payments are subject to interest levied at prime plus 2%.
- Clients are liable for work briefed outside of the quoted project scope.
- Should a client reject conceptual work, they are still liable for 50% of the cost, the work remains CAS property, and the client may not use the work until paid in full.
- If clients terminate their relationship with CAS, they are liable for all work completed to date.
4) Intellectual property protection:
Protection is needed against clients seeking to terminate CAS engagement prematurely, after the conceptual phase. Specifically, the contracts should make clients liable for the additional increased cost of conceptual design work should they aim to:
- Opt to use only concept art, and execute in-house.
- Opt to use only concept art, and execute with other third parties.
- Opt to use concept art and expand ranges or lines utilising a third party.
5) Optional buy-out clauses must exist to allow clients to terminate a contract with CAS at the end of the conceptual development. Usage rights can be purchased at a negotiated price.
6) Contracts must allow and specify the following contractual gates and client responsibilities. This is to limit and protect against excessive design iterations and associated costs.
- Creative work signoff.
- Traditionally, designers placed client prints for a percentage of the print fee and were liable for any errors that occurred on press. A shift in industry trends has resulted in clients placing their printing, and designers charging hourly print production fees. Designers do this to pass work on to the press, which lessens their exposure to financial risk when things go wrong. This shift in expectation needs to be clearly stated in separate clauses as some clients may still expect the former.
- Clients need to sign off each stage of the design process so reverts can be accurately calculated, documented, and billed for.
- CAS is not responsible for barcode placement, as errors result in retail fines and costly reprints. These fines are too big a risk for a single entity.
7) Insurance
- The risk of indemnity insurance in design is a topic of contention with polarising opinions. The risk of liquidation damages can be reduced to near negligible through diligent contract processes. Typically the discussion centres around the following insurance policies:
- Professional Indemnity Insurance.
- Public liability insurance.
- Employer's liability insurance.
CAS has experienced no legal recourse from clients since inception and believes that the costs are not warranted, and risk can be mitigated through legal contacts, terms and conditions.
8) Confidentiality
- Confidentiality needs to be outlined and agreed to by the designer and client in initial contracts. There needs to be specific mention that CAS has the right to showcase work at any stage of development, envisioned or re-imagined, as opposed to being limited to the final executed product in their portfolio.
9) Copyright
- Copyright law is difficult and expensive to enforce and doesn’t favour the designer.
- Emails, quotes, and invoices need terms and conditions stating work is copyright to CAS until the quote is settled in full. This stipulation offsets the risk of clients stealing conceptual work and executing it elsewhere to save on costs.
- Open artwork files remain the property of the designer unless a buy-out rate is negotiated. This offsets the risk of clients taking the master file and executing range extensions elsewhere.
10) Commission Work
- A contractual option to enter into a commission relationship through affiliate links or referrals based on a % of turnover between a client, supplier or CAS must be available. The contractual details should be subject to specific confidentiality and include all stakeholders involved.
11) Freelancers and Collaborators
Engagement contracts with freelancers or collaborators should be clear on payment and ownership of work, and should specifically include the following:
- A non-competitive clause that prevents freelancers or collaborators from engaging directly with, or soliciting work from CAS clients.
- Freelancers cannot display CAS work in their portfolio without explicit consent and approved wording on their part in the project.
- Freelancers are responsible for all their tax payments. This requires less financial and administrative work for CAS.
The implementation has resulted in security for CAS, including a better adherence to payment terms by clients. This results in increased cash flow and a clearer understanding of copyright. These clarifications have reduced infringement, increased business professionalism through sophisticated contracts, and improved clarity between clients and contractors. The overall result has been more efficient working relationships.
Visagie Vos Inc. provided all legal documentation attached.
Fig. 1. Wiggett, 2022a. NDA.
Fig. 2. Wiggett, 2022b. Standard Terms and Conditions.
Fig. 3. Wiggett, 2022c. Standard Service Agreement.
Fig. 4. Wiggett, 2022d. Client Information Form.
Fig. 5. Wiggett, 2022e. Supplier Information Form.
Fig. 6. Wiggett, 2022f. Commission Affiliate Contract.
Fig. 7. Wiggett, 2022g. Consultancy Contract.
Fig. 8. Wiggett, 2022h. Freelancer Information Form.
Fig. 9. Wiggett, 2022i. Freelancer Contract.
Quotation Terms
“Basic Terms and Conditions of Quotation:
This quotation includes VAT.
This quotation is valid for 14 (Fourteen) from the date of issue after which this quotation shall lapse.
We require written acceptance of this quotation.
We require payment of a deposit of 50 (Fifty Percent) before work will commence.
Written acceptance and proof of payment to be delivered to storm@creatingastorm.co.za.
This quotation is based on the information provided by you, the client, and any change to the required service details may affect the quotation.
Additional work not included in this quotation is charged R900 (Nine hundred Rand) per hour.
Subject to acceptance of the terms and conditions of our service/consultancy agreement.”
Invoice Terms
The VAT Act prescribes that a Tax Invoice must contain the following details for it to be considered valid:
1. Must contain the words “Tax Invoice”, “VAT Invoice” or “Invoice”
2. Name, address and VAT registration number of the supplier.
3. Name, address and VAT registration number of the recipient.
4. Invoice or serial number.
5. Date of issue of the invoice.
6. Accurate description of goods or services.
7. Quantity or volume of goods or services supplied.
8. Value of the supply or service and VAT thereon.
It is advisable to include your banking details and standard contact details which would normally be on your letterhead on the invoice.
“Basic Terms and Conditions of Invoice:
Strictly payable within 30 (Thirty) days from the date of this invoice.
Interest on overdue amounts is charged monthly at 2% above the prime bank rate.
Proof of payment to be delivered to storm@creatingastorm.co.za.
All completed work is the property of Creating a Storm until payment of tax invoice in full; this excludes conceptual work which shall remain the property of Creating a Storm.”
Presentation Terms
IMPORTANT NOTICE: Creating a Storm is the lawful and valid holder of the rights and title of Copyright in all conceptual and/or copyrighted work contained in this presentation. All rights and title of Copyright in these conceptual and/or copyrighted works shall remain vested in Creating a Storm until lawful transfer by Creating a Storm. Creating a Storm‘s rights are strictly reserved.
Portfolio Images
DISCLAIMER:
1. The designs and images contained herein are conceptual, alternatively conceptually completed, and mock-ups only and do not constitute completed commissioned work.
2. Where applicable, the owner of the name and mark has assigned the rights to and provided the required consent for such name and mark to be displayed as part of conceptual work herein.
3. Creating a Storm is the lawful and valid holder of the rights and title of Copyright in the conceptual work contained herein.
4. Creating a Storm’s rights are strictly reserved.
References
Corporate Finance Institute (2018). Outsourcing - Learn About the Advantages and Disadvantages. [Online] Corporate Finance Institute. Available at: https://corporatefinanceinstitute.com/resources/knowledge/strategy/outsourcing/ [Accessed 4 Mar. 2022].
List of Figures
Figure 1. Wiggett, S. (2022a). NDA. [Digital Presentation] Brand and Business Report.
Figure 2. Wiggett, S. (2022b). Standard Terms and Conditions. [Digital Presentation] Brand and Business Report.
Figure 3. Wiggett, S. (2022c). Standard Service Agreement. [Digital Presentation] Brand and Business Report.
Figure 4. Wiggett, S. (2022d). Client Information Form. [Digital Presentation] Brand and Business Report.
Figure 5. Wiggett, S. (2022e). Supplier Information Form. [Digital Presentation] Brand and Business Report.
Figure 6. Wiggett, S. (2022f). Commission Affiliate Contract. [Digital Presentation] Brand and Business Report.
Figure 7. Wiggett, S. (2022g). Consultancy Contract. [Digital Presentation] Brand and Business Report.
Figure 8. Wiggett, S. (2022h). Freelancer Information Form. [Digital Presentation] Brand and Business Report.
Figure 9. Wiggett, S. (2022i). Freelancer Contract. [Digital Presentation] Brand and Business Report.