Agency as Intermediary vs Direct Contractor
When you hire a marketing or design agency, the agreement structure depends on the agency's role. Under Australian law, the agency can be:
1. Direct Contractor to You — The agency is responsible for all deliverables and bears full liability. You have one contract. Subcontractors are the agency's responsibility.
2. Intermediary/Reseller — The agency acts as a broker, connecting you with freelancers or other contractors. You may have direct relationships with individual contractors, or the agency manages all relationships.
Most agency agreements structure the agency as a direct contractor, meaning the agency is responsible for managing subcontractors and delivering results.
Benefits of direct contractor model: Single point of contact, clear accountability, agency manages subcontractor relationships and quality. Drawback: Agency markup on subcontractor costs.
Subcontracting Permissions & Quality Control
Most agencies subcontract portions of work (design to designers, copywriting to copywriters, video production to video studios). Your agreement should address:
Define subcontracting rules:
- Right to subcontract: Does the agency need your written approval before subcontracting? For all work or only certain roles?
- Subcontractor vetting: Will the agency provide names and qualifications of subcontractors? Does their contractor agreement flow down key obligations (IP ownership, confidentiality)?
- Quality assurance: Agency remains responsible for subcontractor quality. Include language: "Agency is solely responsible for subcontractor performance and liable for any breaches."
- Confidentiality obligations: Your confidential information must be protected. Require written confidentiality agreements between agency and subcontractors.
- IP ownership: Clarify that subcontractor IP assignments flow to the agency, who then assigns to you.
Example clause: "Agency may subcontract portions of work only with Client's prior written approval of the subcontractor's credentials. Agency remains fully liable for subcontractor performance and IP compliance. Subcontractors must execute written confidentiality agreements with substantially equivalent terms."
Scope of Work & Change Management
Agency contracts often suffer from scope creep. Define scope clearly:
Include a detailed Scope Attachment listing:
- Services (design, copywriting, strategy, production, management)
- Number of deliverables (logos, ads, campaigns, pages)
- Revision rounds per deliverable
- Timeline and milestones
- Out-of-scope items (training, staff recruitment, post-launch support)
Change management clause: "Any changes to Scope require a written Change Order signed by both parties. Change Orders specify the impact on timeline and cost. No changes are effective until approved in writing."
Without this, agencies will bill extras, and clients will complain about costs. A change order process protects both sides.
IP Ownership & Portfolio Usage
Define clearly:
What agency owns vs what client owns:
- Final deliverables: Client owns logos, videos, campaigns, websites delivered by agency
- Agency processes: Agency retains ownership of methodologies, templates, processes, tools
- Pre-existing materials: Agency's pre-existing frameworks, systems, or libraries remain agency property but are licensed to client
- Portfolio use: "Agency may reference this project in portfolio and case studies with Client approval (not to be unreasonably withheld)" or "Agency waives portfolio rights"
If client requires confidentiality, be explicit: "Project is confidential. Agency may not reference in portfolio without written consent."
Liability & Indemnity Allocation
Who is responsible if something goes wrong?
Common liability scenarios:
- Copyright infringement: Agency warrants it won't infringe third-party IP. Agency indemnifies client for copyright claims.
- Defamation or privacy: If campaign inadvertently defames someone or violates privacy, who pays for legal defense and damages?
- Performance failures: If a campaign flops or website crashes, is the agency liable?
- Data breaches: If client data is exposed due to agency's negligence, who bears liability?
Standard approach: Agency warrants deliverables don't infringe IP and indemnifies client for third-party claims. Agency's liability is capped at fees paid (e.g., "Agency's total liability shall not exceed fees paid in the 12 months preceding the claim"). Exclude indirect damages (lost profits, business interruption).
Example: "Agency shall defend, indemnify, and hold Client harmless from any third-party claim that deliverables infringe IP rights, provided Client promptly notifies Agency of the claim and allows Agency sole control of defense."
Payment Terms & Milestone Structure
Clarify payment timing to avoid disputes:
Example payment schedule:
- 30% upfront upon signing
- 40% upon completion of deliverables
- 30% upon client approval
Or: "Monthly retainer of $X, due on the 1st of each month. No work commences until payment is received. Retainer is non-refundable."
Also specify: Late payment penalties, payment method, invoice due date, and what happens if client requests changes after final approval.
Termination & Transition Provisions
What happens if you need to end the relationship?
Include:
- Termination for convenience: Can either party end early? Is there notice required (30 days?) or a termination fee?
- Termination for cause: Can you terminate immediately if agency breaches? What constitutes material breach?
- Work product delivery: Upon termination, agency delivers all files, passwords, accounts, unfinished work, and documentation
- Ongoing support: Is there a transition period where agency supports handover to a new contractor?
Information to Prepare Before Generating
- Services scope: What will the agency do? (strategy, design, copywriting, production, management?)
- Deliverables: List all final outputs (logos, ads, websites, campaigns, etc.)
- Timeline: Project start and end dates, milestone dates
- Budget: Total project fee or monthly retainer
- IP ownership: Does client own all deliverables? Can agency use in portfolio?
- Subcontracting: Can agency hire freelancers? Approval required?
- Liability cap: Any limits on agency liability?
- Confidentiality: Any sensitive information the agency must protect?