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Contract War Stories from the Trenches

Written by: Marijo McCarthy

Article Overview: Yes, indeed, oral business contracts are enforceable… but written contracts are preferable. If I offer to sell you my product for a specific dollar amount, you pay the amount asked, and I deliver to you my product... voila, we have completed our contract! Would that they were all so smooth (hint: they aren't).

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Contract War Stories from the Trenches

Yes, indeed, oral business contracts are enforceable… but written contracts are preferable.

If I offer to sell you my product for a specific dollar amount, you pay the amount asked, and I deliver to you my product… voila, we have completed our contract! Would that they were all so smooth (hint: they aren't).

Here is a more likely scenario —
  • Party A is a graphic designer and Party B is a marketing consultant who needs graphic design services as part of her marketing contract with her client. [This is just an example, so please, my graphic designer friends, refrain from sending me hate e-mails or clogging my voicemail with angry diatribes!]
  • Parties A and B have several telephone conversations, each of which is followed up with a few e-mails. Both parties work with each other on a fairly regular basis and believe that they have communicated and understood the parameters of this particular project.
  • Party A completes and delivers to Party B a word and logo design for an event announcement, with accompanying collateral materials.
Questions which arise immediately include —
  • Payment. Party A expected to be paid upon delivery of the design; Party B expected to pay upon receipt of payment from her client.
  • Ownership. Parties A and B have worked together in the past, however they have never gotten around to discussing — let alone, signing — a "work for hire" contract. Party A, as the designer, therefore, currently owns the rights to the design upon which Party B's client is building a multimillion dollar marketing campaign.

Yes, it's true. The creator of the work (i.e., Party A, the graphic designer) is its legal owner (assuming that Party A is an independent contractor and not an employee), unless and until she transfers that ownership via an agreement with Party B or Party B's client.

This is a particularly sensitive issue since Party B has a signed, written contract with the client which promises to vest the ownership in the client of the new logo at the conclusion of the project.
  • Confidentiality. Party A is frustrated and vents her ire at a local pub. In the process, she names Party B's client (who required absolute confidentiality in their written contract with their marketing consultant!).
What's a marketing consultant to do?
  1. Take a breath. A long time relationship, by its very nature, fosters trust and an ability to amicably discuss business challenges as they arise. Fighting under these circumstances benefits neither party.
  1. Agree on the priorities. For instance, if Party B's client becomes aware of an underlying rift between the two creative consultants, the anxiety level of that client — who has budgeted $100,000.00 for a new marketing campaign — may go off the charts. A calm and united front is essential as Parties A and B work through their issues.
  1. Focus on a resolution (and put it in writing this time). In this case, simply have the graphic designer sign a work-for-hire agreement — so that Party B can legally satisfy the creative ownership requirements of the underlying client contract, the project can get completed, and everyone can get paid. With that taken care of, there shouldn't be much left to argue about.
The result? You've already figured that out. A written contract upfront would have prevented angst and heartburn, saved time and probably money on both sides, and eliminated the need to get the lawyers involved. [Yes, we lawyers frequently advise our clients against litigation as a problem-solving tool. Few of us enjoy hurling that legal cliché... "See you in Court!"]

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Home > Legal > Marijo McCarthy > Contract War Stories from the Trenches
Article Tags: business contracts, marketing consultant, oral contracts, written contracts

About the Author: Marijo McCarthy
RSS for Marijo's articles - Visit Marijo's website

Marijo McCarthy is principal of Widett and McCarthy, a Boston-area law firm that helps small business owners grow their businesses with pragmatic legal advice, mentoring and a solid team of professional advisors.

Click here to visit Marijo's website Dashed Line

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