My name’s Anibal. I split my time between Los Angeles and New York helping artists, creative practitioners, and entrepreneurs with their businesses and legal issues. Today, I’m here to help shed some light on working with contracts—both why using them is a good idea, and common sections most contracts will contain. This guide will also help you know what some important contract terms mean, so you’re fully informed when making any deals. My goal with sharing these tips is to give you enough contract-related knowledge that you’re able to confidently negotiate with galleries, employers, or anyone else—without necessarily having a lawyer.

— Anibal Luque

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Why do I need a contract?

Many people decide to opt out of a written contract because it feels like a lot of effort to create one, or because it seems too costly (or confusing) to write one up. You might also think you trust who you’re dealing with, which makes drawing up a contract feel unnecessary. However, opting out of a contract could cause some serious problems down the line. For example, the other person might change their mind about how much they want to compensate you, you might have misunderstood what was expected of you, or you both might end up disagreeing on something you initially thought you agreed upon. Because there are so many ways that miscommunication can happen, a written contract is the best way to ensure peace of mind in any deal.

Before writing a contract, know what you want.

Before getting into the different types of contracts, first think about what you and the other party actually want from each other. The creation of a contract is, after all, a mutual agreement between two parties. What can you offer each other, and how can you make that clear in the contract you use?

What’s in every contract?

1. Goods or Services. This part of a contract will expressly state what is required of you, or what item(s) the other person wants from you. This could mean creating artwork by commission, selling artwork, or giving someone a license to use your artwork.

2. Term. This will specify how long your agreement to provide services will last. If you are selling goods, there will not be a specified term. Make sure the term is not automatically renewed, and pay attention to any requirements you have to meet to end the term.

3. Payment. How and when you will be paid must be clear. Sometimes the timing of your payment will be contingent on when the other party gets paid. If that’s the case, make sure you understand how long you may have to wait.

4. Termination. Surprisingly, many contracts are missing a termination clause. This can put your rights in limbo or become a costly expense if you ever need to exit a deal. So, always make sure you understand how you can terminate the contract, and how much notice you have to give. Also, note that including a “Cure Period” could require that you give the other party a certain amount of time to cure any breach before you can terminate the contract.

5. Governing Law. Laws vary from state to state, and certain states may provide more or fewer rights to you than others. For most contracts, the state where you reside or where the transaction occurs is usually considered the governing law. However, if the other party resides in another state, try to avoid having their state serve as jurisdiction for the matter. This is because in the off chance that you have to sue to enforce your rights, you don’t want to have to travel to another state to do so.

The different types of contracts

Consignment Agreements

This is a basic deal between an artist and a gallery. Here, an artist delivers their work to a gallery for the purpose of selling the work to someone else. The artist is called the “consignor” and the gallery, either an individual or an entity, is called the “consignee.” When someone else buys the work, the gallery takes a commission and gives the rest of the profit to the artist. If no one ends up buying the work, it may be returned to the artist.

Tips for entering into a Consignment Contract:

• Keep written proof of everything. Send two copies of your inventory list when more than one work is consigned. The gallery will sign one copy when they receive the works, and then return the signed copy to you. This confirms that the works have been delivered and inspected, and are now the gallery’s responsibility.

• Negotiate your pay cut. The commission fee that the gallery is entitled to is always negotiable. The typical percentage that the gallery gets is either a 50/50 even split between the artist and gallery, or a 60% artist and 40% gallery split. Remember to not agree on giving the gallery a commission that’s more than 50%.

• Decide on discounts. The gallery may decide to reduce the retail price of your work under conditions specified in the contract. This is referred to as “offering a discount.” If you do not want the gallery to ever reduce the retail price of your work, you can include a “No Discounts” policy in your contract. If you do allow discounts, include explicit language that explains: (1) who absorbs the discount, and (2) if the discount is shared, how much of it you will personally incur.

• Plan a payment schedule for when you should be paid. The standard term is payment in full within 30 days after the work is sold. Do not forget to include a payment plan that you both agree on in the contract.

• Shield against creditors. I highly recommend negotiating to retain the title or a security interest in an artwork when consigning it to a gallery. Including a security interest clause protects you, because it guarantees that the work is yours until you are paid in full. Not many states have laws that specifically protect an artist’s ownership of their work when it’s in a gallery’s hands. This clause protects you in the event that a gallery forecloses by stopping creditors from taking ownership of your work when collecting from the foreclosed gallery.

License Agreements

These are the most common opportunities for artists to make money outside of selling their work. This agreement is used when an artist gives another person or company a license giving them permission to use the artist’s work for promotional or commercial purposes, usually for a period of time. Here, the artist is called the “licensor” and the client is called the “licensee.”

In addition to basic contract terms, ensure that your licensing agreement:

• Specifies the context of where and how your work will be used.

• States how much the client will pay you in advance or in royalties, and how frequently you will get paid.

• Provides instructions on what happens when you want to end the agreement, or if you no longer want your art to be a part of it.

Commission Agreements

A commission agreement is an arrangement that happens when a person requests that an artist create a new work specifically intended for the client, instead of selling them a finished work already made for sale.

• Payment. With a typical commission, the agreed-upon payment is made in two parts: at the signing of the contract, and at delivery. Remember to completely outline the prices you want to charge for your labor, and how much you’ll receive at signing versus at completion. You can break down the price outline to include specifics based on size and style, and how much time was spent on production. Include whatever taxes are required to be paid, necessary expenses, and shipping costs you may need.

• Create a step-by-step list. Outline the various stages of the creative process and what each stage entails. For example, if the first stage is to draw rough sketches, say what else that stage actually means and how long it will take to complete. Give yourself enough time to work at your own pace.

• What does the commissioner want? Elaborate on what you require after the commissioner informs you of what they need. Basic negotiation is to make sure you’re both on the same page. Get as many details of the deliverables as possible. For the creation process, clearly state whether or not you will show visual updates for feedback, or if you will cap the amount of revision rounds. If you do, specify when and how you will show the previews.

• For the wrapping-up stage, clearly discuss the final payment for the completed work, what the approval process is of the work, and the best shipping strategy.

• Kill Fee. You should negotiate a Kill Fee so that if the client ends the project early or decides to replace you, you are still entitled to all or some of the agreed-upon compensation.

Further resources

If you’re looking to create a contract for a transaction without the help of a lawyer, here are some websites that are good for sourcing contract templates:

• Docracy
• Upcounsel
• NVCA
• Y Combinator (discusses alternatives to formal contracts in start-up context)

In summary…

Yes, contracts are hard. Yes, there are different options and different terms you can include. Yes, it requires a little research. However, know that you can customize your contract to include whatever you would like (as long as it’s legal). Now that you know what agreement you should have and what the basic standard terms are, you just need to get the other person to agree. Have this guide with you whenever you’re about to make a new deal so you can get what you want.