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After 10 years performing contract marketing services, you might expect that I would have figured out the best ways to deal with the legal side of doing business as a creative. But like many freelancers, the truth is that I still find the business side of creative services to be a bit confounding.
I’m not a salesperson nor an accountant, and I’m definitely not an attorney. Like most of us, my value as a creative is to provide great content marketing materials, not legal documents. So naturally, I expect to spend my time putting my creative chops to work, not scouring the Internet for stronger contract language.
To help get a clearer picture on how to structure these agreements, I sat down recently with Scott Comerford, an attorney specializing in freelancer contracts. We reviewed some basic information on how to think about the legal issues when it comes to freelancing and we discussed some of the most common mistakes that freelancers make with their contracts.
Thanks for sharing your thoughts today, Scott. To start, can you explain some basic things about our judicial system? Why can’t a freelancer just call the police when their clients don’t pay for their work? Isn’t that the same thing as theft?
The judicial system is divided between criminal and civil matters, though there is often overlap between the two. For instance, a criminal fraud case can also give rise to civil liability.
While fraud is a crime that a person may equate with theft, there are differences between the two. Fraud involving contracts typically falls under the “civil” category. The basic difference between theft and fraud is that theft generally involves taking something through force.
On the other hand, fraud involves the knowing misrepresentation of facts. District Attorneys prosecute criminal fraud cases. Civil fraud cases are pursued by the victim of the misrepresentation through civil actions.
Can you explain some basic terms for us? What does “litigation” mean? What’s the difference between filing a lawsuit and filing a complaint?
SC: Litigation is the process of taking legal action or “suing” and is an adversarial process. Litigation is typically started by a filing a “Lawsuit” or “Complaint” which are synonymous.
The Complaint is one of the initial documents filed with the Court in order to start a lawsuit. A Complaint sets forth the causes of action made up of facts and legal reasons that the filing party (plaintiff) believes are sufficient to support a claim against the party whom the claim is brought (defendant) that entitles the plaintiff to a remedy (typically money).
Just as every freelancer operates their business a little differently, I assume every attorney and law firm is going to operate their practice in their own unique way. But that being said, what should freelancers know in general about approaching an attorney to discuss a potential case?
SC: There are many different ways that attorneys organize themselves within the profession to offer legal services. An attorney can operate on his/her own as a “solo practitioner” or with other attorneys as a legal entity such as a Limited Liability Partnership or Corporation.
Regardless of the size of the law firm, each firm usually focuses on specific areas of law that they practice, i.e., business, real estate, divorce, etc. Some firms only represent plaintiffs. Some only represent defendants. Some firms will represent either the plaintiff or defendant depending on the type of case at issue.
When approaching an attorney to discuss a potential case, the freelancer should try to find an attorney that matches their legal needs.
How much does it cost to take a case to court? How much should freelancers be prepared to spend and what kinds of costs are involved?
SC: Litigation is generally expensive and time consuming. The “fees” and “cost” of litigation will vary depending on many factors including the type of case, remedy being sought, and even personalities of the parties and attorneys involved. Fees are what the attorney charges. Costs cover things like court filing fees, experts, postage, etc. Currently, the initial cost for filing a standard civil Complaint in California Superior Court is $435.00.
Depending on the case, there are a number of ways to structure the fee arrangement, i.e., hourly, contingency or flat fee. If an attorney decides to accept your case, they will prepare a “fee agreement” or “retainer agreement” that defines the scope of the attorney’s legal services and duties of the client during the litigation.
So if I can’t afford the hourly rate, how do I know if my case is valuable enough for an attorney to consider taking my case? Do you have any tips on how a freelancer can find an attorney who is willing to work on contingency?
SC: “Contingency Fee” means the sum of money that the attorney is paid only if the case is won or settled. The sum is based on a percentage of the money that the client recovers. An attorney will often offer a free consultation to discuss the merits, or lack thereof, of a potential case.
Because the legal profession is also a business, attorneys usually only take a contingency fee case if they believe in the merits of the case and the amount of money sought makes it worth their time to pursue. If the monetary recover is potentially minimal, there are a number of avenues that the freelancer can take to still pursue their case, i.e., representation through a pro-bono legal clinic or self-representation in small claims court.
As artists and “creative types,” most of us in the freelancer community don’t know much about law and the legal system in general. When it comes to contracts, one of the common misconceptions I see in our community is the belief that having a contract is solid protection to make sure we get paid. Because, as this saying goes, if they don’t pay, we’ll just “take their butts to court.”
Is there such a thing as a “bullet proof” contract for freelancers that guarantees we will get paid?
SC: Unfortunately, having a contract does not guarantee payment if a client decides not to pay. Because of this, freelancers need to have an understanding on what it will take to enforce a contract or collect on a debt. It is best for freelancers to have a certain level of trust with their clients, or require payment prior to services being rendered.
Sadly, I’ve learned over the years that having a contract signed by a client does not necessarily mean a freelancer has leverage to enforce payment for work performed. What are some things freelancers should know about contracts when it comes to nonpayment problems?
SC: When a party to a contract does not hold up their end of the bargain, the burden falls on the aggrieved party to enforce the contract which can be costly and time consuming. Even if the plaintiff wins a judgment at trial, the judgment then would need to be enforced if it is still not paid by the losing party.
Depending on the solvency of the losing party, a judgment may actually never be collected if there are no assets or the judgment is discharged in bankruptcy in which case the losing party is deemed “judgment proof”.
What are some of the most common mistake you see freelancers making in their contracts?
SC: Contracts should always be clear and in writing. Often times, parties can get complacent if they are dealing with friends, family or are too busy to prepare a contract. If a contract is only verbal or the duties of the parties are unclear, this will often lead to disputes that end up in court.
What are the most important terms a freelancer can include in a contract to make it most enforceable?
SC: When a legal dispute arises and the matter ends up in court, the general rule is that each party pays their own attorney’s fees unless a specific statute or the contract allows the prevailing party to collect attorney’s fees. Attorney’s fees provisions in contracts can either work for or against you. If you conduct your business responsibly and carefully, an attorney’s fees provision makes sense.
The advantages of an attorney’s fee’ provisions are as follows:
- If you file a lawsuit against a party and prevail, you will be entitled to your reasonable attorney’s fees
- If you are sued by someone and you prevail in defending yourself, you will be entitled to your reasonable attorney’s fees
- It is more economically feasible to file a lawsuit for a smaller amount of money, and an attorney is more likely to take your case, if you are also able to collect your attorney’s fees
- Attorney’s fees provisions can discourage frivolous lawsuits from being filed
Disadvantages to attorney’s Fees Provisions are as follows:
- If you file a lawsuit and don't prevail, you will probably be required to pay the prevailing party's reasonable attorneys fees
- If you are sued and don't prevail, you will probably be required to pay the prevailing party's attorney’s fees and your own.
Many of us in the freelancer community are familiar with the unspoken squeamishness some clients show when the topic of contracts comes up. So rather than rock the boat and threaten the relationship, a lot of us will sometimes just take our clients word as bond and do business trusting that everything will work out in the end.
What are your thoughts on doing these kinds of “handshake” deals?
SC: Some types of agreement require a written contract in order to be enforceable, i.e., real estate purchases. For example, in California, Civil Code Section 1624 sets forth a list of types of agreements that need to be in writing.
If a contract is not required to be in writing, “handshake” deals can work if there is a large degree of trust between the parties, if the parties have a history of working together that way, and/or the freelancer requires payment up front.
Having said that, it is always better to have a contract that spells out with specificity the obligations of the parties in order to avoid any misunderstandings. If a potential client wants to work with you but does but is unwilling to sign a contract, then that this a harbinger of things to come.
So say I do have a strong case and an attorney is willing to work with me, how long is it going to take before I get paid?
SC: The time is takes to resolve a dispute once an attorney is involved depends on a number of factors including the type of dispute and personalities of the parties involved. In that sense, it could take hours, days, months or years also depending on whether filing a Complaint becomes necessary. Your attorney will be able to give you a better idea of the length of the process.
A lot of freelancers dealing with nonpayment problems might be a little nervous about appearing in a courtroom, so rather than going through the whole ordeal, we might be more inclined to take the loss and just move on.
What can you say about the process that might make freelancers more comfortable with bringing their case to an attorney?
SC: There is little downside in bringing a case to an attorney for a consultation. Often times, attorneys are able to resolve disputes prior to litigation being necessary. An attorney should be able to explain all the options available in terms of resolving a case and the time/cost involved in each option, so that the freelancer can make an informed decision.
While consulting an attorney can be a good idea, retaining an attorney is not always the best course of action. Often times, a plaintiff can invest a lot of time, resources and emotions into pursuing a claim and then either break-even or end up losing more money in the end. Whether to pursue a claim is a highly personal decision and should not be taken lightly.
Scott Comerford is an attorney based in Santa Rosa and representing clients throughout Northern California. He has previously practiced at a small law firm, a large national law firm and an international insurance company. The Law Office of Scott Comerford specializes in helping individuals and businesses with their civil litigation needs related to real estate law, construction litigation and breach of contract disputes.