The Letter of Agreement you present to your clients might be the most important document you as an interior designer will create for your business. The Letter of Agreement stipulates exactly what you both, designer and client, will be responsible for during the course of the project. It also states the timeline and the budget. It addresses your design and project management process, your pricing structure, your standard of ethics, and clearly outlines the contract violations that can lead to the cancellation of the project.
When you first meet with a client, the spirit of the meeting is typically brimming with excitement and positivity. Building a friendly rapport with your clients is important to the success of your relationship; that said, once you have an initial consultation with your client and decide to work together, the next step of crafting a Letter of Agreement is a little more serious. Once you draft it, take the time to walk the client through it, point by point. In doing so you will be protecting yourself legally, and your client will respect you for having a standard way of doing business.
The following is a checklist of everything your Letter of Agreement should include, as well as notes on who else you should consult with to make sure your liability is covered. Remember, there is nothing unfriendly about having your clients sign a legal contract. If your attitude is friendly and professional, signing a Letter of Agreement should not be a negative experience. In fact, it should provide them with the same peace of mind it does for you.
When To Sign a Letter of Agreement
- Before a project begins: After your initial consultation and reaching an agreement to work together on a project, you should present your prospective clients with a Letter of Agreement.
- Ensure it’s fully executed: All parties mentioned in the contract need to sign the contract and have it notarized. While the contract is still legally viable without notarization, that extra step makes it able to stand up better in court, should the need arise.
- When a Letter of Agreement needs to be amended: The Letter of Agreement will describe the scope of work for a project, but sometimes things change. Make sure these changes are formally documented as addendums to your Letter of Agreement.
Note that a client may present you with the contract, instead of you being the one to present them with it. This is typical in commercial jobs, where the client is experienced and has a standard contract they present to their designers. This is completely above board, just be sure your legal person or team goes over it with a fine tooth comb; be prepared to negotiate points that you do not agree to.
What Goes Into a Letter of Agreement
- The scope of the work: The first thing to do before drafting the agreement is to agree on the scope of services. This is what you should do in your initial consultation. Going outside of this agreed-upon scope is going to cost your client because it’s going to take up more of your time and likely more of your contractors’ and other crafts people's time.
- Defining responsibility: What are you, the interior designer, responsible for? Similar to your own agreements with your contractors, it is imperative to outline exactly what you are responsible and liable for, what the clients are responsible for, and what any other what involved parties are responsible for.
- Pricing methodology: Pricing structure for interior design can be somewhat of a black box. Each designer has their own way of doing things, whether that is capturing the upside on trade discounts, charging a flat fee per room, or billing by the hour. The Letter of Agreement should explain how the interior designer gets paid and what pricing penalties occur should the client hold up the project (through indecision or late payment, for example).
- Project management: Include a budget, timeline, and payment schedule. Specifically state which party is responsible for keeping these three crucial elements in good order. Include stipulations about how long each party has to make decisions and respond to communications. The industry standard for response time to a query is 72 hours, but the sooner you can communicate and resolve an issue, the better. Also include how you expect to be paid and how long a client has to pay you after receiving an invoice.
- Expiration on quotes: How long are your quotes good for? In this case, we are referring to the cost of materials and the cost and availability of labor, which can change in the matter of days. How much time do clients have to respond to you before there is a penalty or a change to the timeline? This point refers to decisions that have tangible financial consequences. Include this in your Letter of Agreement if you want to keep your project running on time.
- Contractors and subcontractors: Not only should you and your client have agreements with the contractor for the project, use your Letter of Agreement with your client to reinforce the responsibility of the contractor and subcontractors, and include a copy of their certificates of insurance.
- Ownership of drawings:The Letter of Agreement should specifically say who owns the drawings that the interior designer produces. This protects the designer from having a client take the designer’s drawings to another designer or contractor without paying or giving proper credit to the original designer. It’s a good idea to copyright your drawings to provide that extra level of protection.
- Rights to photography: Once a project is complete, an interior designer will want to photograph their finished work to include in their portfolio. Address this in your Letter of Agreement. Will the client allow pictures to be taken? Posted on public forums such as websites and social media? Who will own the photographs once taken?
Protect Yourself, In Writing
- Avoid promises of fixed fees: With supply chain issues wreaking havoc on the building industry and labor in short supply, do not guarantee pricing for materials or labor.
- Assume nothing and document everything: Take no responsibility for things you can't control. For example, with supply chain issues causing delays across the home building and renovation industry right now, put in writing that you cannot guarantee the timing of material delivery. In another example, your agreement between you, your client and your contractor likely assigns specific responsibility to your contractor for installation; of course, you would still be smart to oversee the work of the contractor/subcontractor, but you cannot assume control of, or liability for, their work.
- Know your local laws: Make sure you are abiding by laws on the local level where you are working. Each state has its own specific set of building laws and requirements for obtaining permits, so save yourself the time and money by doing your due diligence ahead of time.
- Lean on your team: You are an interior designer. Rely on others with expertise beyond your own. You need your lawyer, your operations manager, accountant, and insurance provider to review all of the legal documents you will use in your business, particularly your client Letter of Agreement.
The Letter of Agreement between you and your client is the most important document you will sign during the course of a project; it should be fully executed before the project even begins. Starting off on solid legal footing will give confidence to everyone involved and will get your project started off on the right foot.
If you are a new designer seeking legal resources to get started before you can afford to hire a lawyer, ASID has a lot of great resources and legal templates (they are not free). Ultimately, however, you will need the help of a trusted lawyer and operations experts to give your business the protection it needs to succeed for decades to come.