When working with agencies, you will generally be working with a bigger operation than with a freelancer. They might have a sales team who recruit you initially, who then pass you on to their account management team, and who also work with a project manager.
In some ways it can be more reliable, because they are easier to track, and if one person is away, there is usually someone else to contact.
In other ways, you also need to be more careful to ensure that you do not sign up to an unfair contract which unreasonably reduces the pressure on the agency to deliver what you have agreed. For example, you want to ensure that them delivering what you have requested is a condition for payment. You DO NOT want to find yourself in a situation where you have paid a large sum of money to get your project going, and not have anything to show for it (or at least anything worthwhile).
Here are the top 5 things we think you need to consider when negotiating your contract with an agency:
- Agree a Comprehensive Scope of Work
Plan out what you need in advance. If working with design agencies, be clear on all the pages and variations you want to be designed. If working with marketing agencies, be clear on all the deliverables and outputs, including what you expect to do yourself, and what you expect them to do.
Planning ahead and knowing what you want is going to make their life easier, your project more successful (hopefully) and make it less likely for disputes to arise about whether work is completed or not.
Try not to find yourself in a situation where the agency’s scope of work is complete, but you only have half of what you need because you didn’t think of half the necessary things when hiring them.
- Include Acceptance Testing
Ensure your contract has a mechanism which covers acceptance testing. What is acceptance testing?
This is where you, as the client, have an opportunity to test what is being put to you. Until the job is deemed ‘complete’, you have a chance to accept the work or not, and if not, then you are entitled without additional cost to have the agency go back and fix any errors or issues (provided you are not changing the scope of work when doing so – see point 1).
- Fixed Project Fees, Rather Than Ongoing Hourly Rates
Keeping fees under control when working with any agency is significant. Even if they are the experts in their relevant field, which is why you are using them, you need to make sure you are on control of the relationship. Otherwise you can end up continuing to add things, and fix things, and change things, and before you know it, you are at double your budget.
The best way to keep control on your side is to agree fixed (or capped) fees so that the agency does not have the option of simply charging you for all the time they spend – even if that time is spent inefficiently.
Whilst agencies will often charge hourly or daily rates, it is perfectly feasible to agree a fixed or maximum price for your project (as long as you are clear on what they are) based on a time estimate.
e.g. hourly rate is £Y. Project estimate is 100 hours. Fixed fee is £Y x 100. Or Maximum fee is £Y x however many hours it takes up to a maximum of 100 hours (even if it actually takes a bit longer).
That way, the developer is not incentivised to go over time (and charge more) – rather, they want to complete it sooner rather than later because unless agreed otherwise, they won’t get paid for the time over and above the original estimate.
Equally, you should be fair and reasonable, so that the people working for you are incentivised to do it well.
- Payment Conditional on Delivery – Not Up Front
You should have sufficient protection that if what you ask for is not delivered, you should not need to pay for it. Therefore you should agree to pay once the product or work has been delivered.
You can pay in instalments – e.g. by splitting the scope of work up into different milestones – but other than a small deposit, you should not be paying for development work up front. It sets the wrong tone and from the outset, you are totally out of control.
- Ensure you Own All of the Intellectual Property Rights
Most importantly, you need to ensure that once the work is delivered, you absolutely own it and all intellectual property rights in it without any ambiguity or uncertainty.
You need to ensure you have a strong intellectual property clause in your agency services agreement for this. This also included putting an obligation on the agency to confirm they haven’t effectively stolen material from other projects that don’t belong to them.
This Basic Training article was written by Legal Sidekick. Legal Sidekick is the legal platform for startups. We offer automated contracts and loads of startup legal resources and guides. For queries on negotiating commercial documents or generally, contact us directly.