On contracts and why you need to include a kill fee

Basically, a kill fee is a clause in your contract that says that if the client decides to back out or terminate the project mid-way through, after a contract has been signed and project begun, then a fee to “kill” the contract must be made. I recently worked on a project that did not include a kill fee, and unfortunately it cost me time and money.


What’s that you say? You don’t have a contract? Well that’s a topic worthy of it’s post (or several) of it’s own. I’ll just say this for now: If you’re not working with a contract in hand, you are not acting like a professional. Get a contract in order now!


My client’s reasoning for backing out was that she was teaming up with a colleague to start a new project together, making her current project and brand identity redundant. And thus, the project was dead. I could have argued a bit, and asked that the contract be honored anyway, but really at that point it was too late. 


Had I set it up the contract correctly, with a kill fee, the pay structure should have looked something like this:


50% upfront, 50% on delivery, With a 25% kill Fee.


On a $1000 project, I would have been compensated the 50% upfront, (which I was) and 25% when it was decided to not continue the project. We were past the halfway point in the project, about 3/4 of the way through, so had I had a kill fee in place, I would have been able to recoup some money (25% of the total) and time I put in to the project. So, even though I would have still lost out on part of the project, I would have been compensated more fairly for my time. Luckily, this was not a huge project, so the loses were minimal. But had this been a larger project, I would have been in a bad spot. 


Committing to the Design Process


Having a kill fee in place also commits everyone to the project, and makes it less likely that your client will waffle. It’s important to emphasize that planing is important when it comes to creative projects. As it pertains to this project, my client had maybe not planned as well as she could have. It’s possible even that she was just not that into what she was seeing and decided to go another direction. But even if thats the case, she still forfeited the initial 50% deposit. Better planing could have avoided this. Now of course, things do come up, and that’s ok. But, that’s why having a contract in place and a kill fee protects you as a designer.


Contracts Protect Everyone


I’ll point out that contracts are actually meant to protect both parties, so if you’re reading this from the client side, don’t think of contracts as a place where you sign away your life or give up all your rights in the relationship. To the contrary, a contract is meant to protect you as well. A contract specifies what happens should “X” or “Y” occur.


Lets say you are working with a designer, something comes up and the designer is not able to finish the project. What happens then? Are you stuck with nothing? Do you get back a portion of your money, etc. The specifics of what happens from that point are what should be negotiated in the contract.

 
What it boils down to is that contracts, are meant to be negotiated. If you don’t like the terms, or feel like you are not being properly protected in your interests, than negotiate better terms. And for goodness sake, please at least read the contract before you sign it. It’s most likely that your contract is easy to read unlike the terms to your health insurance policy! If it’s not, ask questions.


Understand the Terms


If you provide creative services, be sure you understand what the terms of your contract are and honor them. Also be sure you actually understand your terms so that when a client asks you to clarify, you can tell them exactly what a kill fee is and why it is there. 


Here’s a very informative (beware of the vulgar tittle) video from Mike Monteiro of Mule Deign Studio on contracts between designers and clients.