Alphabet Soup

Sign 'em Up with an MOU
(Memorandum of Understanding)

by Wendy Peck

If you have been in the Web design business for even a few months, you know it can be difficult to separate the serious client from the one who wants a Cadillac product for a discount beer price. If you are relatively new, it may also feel like you are doing something wrong, since you cannot seem to close the sale with a client. They just want more and more and more information. Some of you may have designed a rough site "look" to help your potential client understand what you are saying. You then burn with indignation when the hard work does not turn into a contract. I've been there! In a worst case scenario, you may even find that your "look" has appeared on the client site with no involvement from you.

The secret for me has been a quasi-contract called the Memorandum of Understanding (MOU). I am not a lawyer, so you must take what I say as no more than a laywoman's way to operate. NOTE: If you are working with a large client, especially one with in-house counsel, I would strongly advise that you sign nothing unless your lawyer has reviewed the document. However, if you are working with a small business, or discussing a simple site, the scope of the project makes legal intervention impractical, yet you do want protection.

When should you use an MOU?

I will not begin a project without a written contract and a deposit. My business has been much more successful since I wrote this policy in stone, but what do you do when the client comes to you and says, "I love your work. It is right for me, but I do not know what I want or need." How can you create a contract without all the details spelled out (and what good is a contract without that detail?) when you have no idea what the scope of the project will be? I have also had clients who think I am the right designer for them, but are reluctant to enter into a large contract without some proof that their instincts are right. The MOU covers these and many other situations where detail definition is impossible.

What's in an MOU?

There are as many types of MOUs as there are designers and client combinations. This is part of their power. Since you are only entering an agreement to "work towards working together," the terms and language can be much looser than for a contract. Here are a few examples where an MOU may be the perfect way to begin a project.

An MOU is simply a step between casual discussion and the finality of a contract. It covers the period when neither party is confident about where the project will lead. Your client needs your expert guidance to make decisions, yet you do not want to give away the expertise you have worked so hard to gain without compensation - a classic Catch-22 situation that can be solved with an MOU.

I have not had a serious client balk at signing an MOU. Yet in every case, a contract prepared at the same point would have been amended many times, a situation to be avoided whenever possible. With the MOU to cover finalizing project scope, both you and the client are protected.

I will not begin a project without a written contract and a deposit. My business has been much more successful since I wrote this policy in stone. The MOU covers situations where detailed definition [of a contract] is impossible.

What is the protection?

Your client receives protection for their ideas, and a trial period to test your skills and determine whether they can work with you to accomplish their goals. They do risk some money if it does not work out, but that is far safer than entering a much larger and longer contract, only to discover that you are not the right designer for their needs.

In the words of one client who was thrilled when I proposed an MOU: "That's great. I only have to risk x dollars to find out whether I am going to hate working with you." We have gone far past the MOU now, and he has happily paid me many times the amount specified in the MOU, and we have a fabulous relationship. But he was really afraid that he would sign a contract that bound him to working with me for six months or a year, and that he would hate me. He faxed a signed MOU to me within 15 minutes, and I received a cheque two days later.

For your protection, you receive a deposit as part of the MOU, positive proof that the client is serious. You are paid for your development time, no matter whether you move to a contract or not. You should also retain copyright for your work under an MOU agreement, so if a contract does not result, the client has acknowledged, in writing, that you own the work that results from the contract.

I have never had an MOU that did not lead to a contract - not one. In fact, since I rarely talk seriously with a client before I bring the MOU into the conversation, I waste almost no time discussing projects with clients who never follow through. To be honest, I suspect that bringing the MOU into the conversation at a very early stage presents a very professional image. Suggesting that you sign a contract during initial discussion can seem aggressive, and make the client feel they are being hustled - quite a contrast.

Creating your MOU

I have found that each MOU is unique. I have included a sample of the base MOU that I use, but it is never offered without modification. I spell out any firm details, and include the requirement for a deposit that is equal to 50 percent of what I feel the eventual contract cost will be. For an hourly MOU, I state the rate, what is to be covered under the agreement, and specify a maximum number of hours. This is a very simple MOU.

For larger contracts, I will spell out the amount of any non-refundable portion, and specify what will happen to the deposit if we do not move to a contract. I keep track of my hours while under an MOU agreement and will refund the amount of the deposit, minus payment for the hours I have worked on the project. As I mentioned, I have never had to do this, but it is only fair. Remember that your client walks away with nothing but experience if the MOU does not lead to a contract, since they cannot use your work.

You will develop your own MOU. If you have the resources, it is never a bad idea to have your lawyer look over your basic MOU to make sure that the basics are covered. However, beware that you do not let it get too long. One of the reasons that clients love the MOU is that it is really easy to understand. Yes, there are holes in it, but from bitter experience, the best contract in the world, tight as a drum, is hardly worth the paper it is written on if you are not prepared to gamble huge legal fees for litigation.

MOUs are not meant to provide total legal protection or help you sue your client. They are really no more than the paper equivalent of a handshake, but they have encouraged a great deal of business for me, and my clients love them. By the time a potential client has contacted you, in most cases, they are ready to buy. An MOU can be the tool that lets you lead them comfortably to where they want to be - part of your client base. Be ready!

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