Part 1 covered the appointment of the creative agency, the obligations of both parties entering into a creative agency agreement, and the process for development and approval.

Part 2 of this series will cover the monetary items such as payment of the creative agency’s fees, invoicing and third party expenses.

Fees

As with any commercial arrangement, the fees should be agreed upfront. If you are the client, you should request that the creative agency provide you with a document detailing their fees, for example, if an hourly rate is charged, the document needs to set out the hourly rates for each of the relevant personnel. This will help avoid disputes in the future.

Once the fees have been agreed on, the parties also need to agree on what the fees will cover. Do the fees include all services, functions and activities that are performed by the creative agency and its staff? Will the client be required to pay any additional fees and charges on top of the hourly rates for its personnel?

Invoicing

Invoicing and payment terms need to be agreed and set out clearly in the agreement. Both parties need to consider and agree to the following:

  • What are the invoicing and payment terms?
  • Will the creative agency invoice the client for each individual campaign/project or will it invoice on a fortnightly/monthly basis?
  • Once an invoice is issued, how many days does the client have to pay?

As the creative agency, this clause is important because you want to make sure you get paid for your services.

As a client, this clause is also important because you need to know when you are expected to make payments, and you need to be comfortable with the payment terms to ensure that you can meet your obligations.

Third party expenses

This clause will cover how third party expenses will be incurred, and how they will be paid for.

Generally, the creative agency will invoice the client for third party expenses that it incurs in connection with the services. As the client, it is important that you set out the conditions on which you will be required to reimburse the creative agency for such third party expenses. For example, you will only pay such third party expenses if the creative agency obtained your prior written approval and you were provided with an estimate of such expenses.

Conclusion

The payment section of the creative agency agreement is an important section to get right. Many commercial disputes arise because of disagreements over fees and resolving such disputes can often be time-consuming and costly for both parties. If you are entering into a creative agency agreement and you are not comfortable with any part of the payment terms, do not sign the agreement! Instead, seek the assistance of a contract lawyer who can talk you through the terms to ensure that you understand your rights and obligations, regardless of if you are the client or the creative agency, and if necessary, renegotiate the terms on your behalf.

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