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What If The Client Cancels The Contract?

What If The Client Cancels The Contract?

Mike Lenhart

This article is part of a larger series. Click here to read the entire “The Nitty Gritty on Contracts” series.

So far, we talked about the overall sections that should be included in design contracts and what to offer. Of course, all of the items in a contract should be catered to the job and client at hand and customized to their needs. A template contract can be used at times when the job is a simple one, like a quick business card, or when a consistent client is present. It’s always a good idea to add a clause or two that keeps the contract in line with what the job is. There are other kinds of clauses that need to be kept in certain contracts regardless of whether they’re considered “simple” jobs or not. Just what are these clauses? Let’s look at some of them.

What If The Client Cancels The Contract?

Even though it isn’t pleasant, there are times when the client may cancel the agreement. There may be many reasons for this, but it’s really of no importance to the designer. If the contract is canceled shortly after the agreement is signed and no work has begun, it’s probably okay to just let it go. However, if the client cancels the contract after work has started, that’s a different story.

All contractors deserve to be paid. Usually, there is a deposit that is paid with the signed agreement. The amount of the deposit is up to the designer, but is customarily 50% of the total fee. If the client ends the agreement, or “kills” it, then there needs to be some compensation paid. Kill fees, as they’re called, may vary, but are usually calculated from the deposit or from what work has actually been done. If the contract is signed, the deposit is received, and the contract is killed before work has started, then the deposit is usually returned. In the event that the signed contract and deposit are received, work has begun, and then the client kills the job, then a “kill fee” needs to be applied.

The fee is up to negotiation, but is usually a percentage of the deposit that comes in line with the actual time spent on work done. Hourly rates are taken into consideration here. The client usually should pay for what has been done and, if the deposit is more than the calculated fee, then the remainder of the deposit is returned. If much of the project has been completed and the project killed, then the fee charged will most likely be higher than the deposit. The client will pay the difference. Of course, this all needs to be spelled out very clearly and thoroughly in the original agreement.

Other than a client killing the project, what happens if theclient rejects the design work that has been done? What if the client doesn’t like any of the concepts presented and an impasse is reached on how to proceed?

In this event, a “rejection” fee needs to be assessed. Just because the client doesn’t like the work done doesn’t mean that no payment is due. Again, an hourly rate based on time spent on the design should be processed. The client will most likely have a fit over this because they may feel that since they’re not getting anything, nothing should be paid. A designer’s time is valuable and work is not done for free, even if the client rejects it. It’s a good idea to offer alternatives on what else can be done to save the project, such as additional concepts, but remember, a designer’s work is to be compensated.

Other Standard Clauses

Other clauses that should be included in contracts include confidentiality agreements, time-line and deliverables clauses, and project scope clauses. Time-line clauses refer to sticking to the time-line so the client and designer keeps up with the agreed upon time-line. A project scope clause refers to the notion of project “creep”. At times, a client may want to add little things to the project that aren’t in the original agreement; this causes the project to “creep”, and never seem to end. The designer needs to stick to the original contract and communicate to the client if the project is starting to creep just to keep the project under control. Other items for the project can be done, but will need to be addressed, and paid for, separately. The bottom line on all of this is to communicate to the client.

A Last Word

Some of the clauses and fees mentioned above may seem somewhat harsh, but they’re really not. All contracts for anyone completing a service need to have clauses and other agreements on how the job should be done and should cover those other instances that may come up. A vague contract is a recipe for trouble. It’s better to include more in a contract than less.

Next Time

The last of this series on contracts will talk about what to charge and how to come up with an hourly rate for services. This will also cover when to be paid so the client and designer can be in agreement from the start. Money can be a sticky issue, but it doesn’t have to be.

Next: Details to Remember When Making/Signing a Contract →

← Last: What to Include (and Not) in Client Contracts

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