Designers/Developers - Desposits on projects that get canceled before they start

[Wozcreative]

I was wondering what you designers and developers do when a client decides to change their mind and cancel the project after all they've done is give you a deposit (you've previously had successful projects with them so it's not a new client.. to put it into perspective). Do you guys return the deposit? Or keep it?

I know what my boyfriend always pushes for is to never give it back. A deposit is an agreement that you have the time to do their project, and if they don't go forward with it, they lose that deposit.. that's the purpose of the deposit. Now, he's talking from the construction/development point of view. If a construction worker gets a deposit, he's committed to THAT project.. but for designers it doesn't "really" matter.. does it? I don't generally work with contracts, everything is all email and I don't state anything about keeping a deposit if the project doesn't commence. They just know that I need a deposit to start work and the balance to deliver the final work.

Am I being a jerk if I don't give back a deposit? Do I have the right to keep it? Usually it doesn't really matter if the client comes back to me or not.. I just want to do what I'm entitled to, even if I haven't actually spelled it out in a contract per se.

What do you guys do? Am I being a softy for giving it back? Is there a right way of telling a client they can't get it back?

[Freelancier]

Obvious question: what's your contract say about it?

Since I don't collect deposits for my development work, I am going to have my own bias here, but if you didn't do any actual work for the money, then return it. On the other hand, if the guy had you to do some things during the sales process that cost you time away from other work, feel free to charge for that.

For our townhome, we collect "reservation deposits" that are non-refundable. Our thought process is that we're taking those days off the market for a period of time, so there's a cost to us for that. Something to consider if you blocked out your schedule from other work once you received the deposit.

[Business Attorney]

I'm not a designer nor a developer but I agree with Freelancier. You really have to look at why you are getting a deposit. In the case of designers, my understanding when I have worked with them is that it is to protect them against spending time and not getting paid. It is not to reserve a block of time that cannot be readily utilized on another project because of lead times, like a construction project.

I would say that if you have done no work at all, I would return the entire deposit. If you have a little time on getting prepared for the project, I think it is fair to deduct that from the deposit.

The other question is what is your client's expectation? You say you have done previous projects with this client. If their expectation is that they will get their deposit back because this project was aborted before it started, keeping the deposit will likely mean that your string of successful projects from them will come to an end.

[Wozcreative]

Fair enough guys! Thanks for the input :)

[BNB]

Contracts don't really matter in this sense. So you get to keep the deposit, but lose a recurring customer - are you really victorious?

[Dan Furman]

but for designers it doesn't "really" matter.. does it?

Well, to the outside world it seemingly doesn't matter, but to people like you and I, it does matter. Once we let our time get exploited, you can find yourself with a fairly empty week. Which is AWESOME for my golf game, home projects, and Xbox skills, but not so good for the bank account.

Here's what I do, Woz. I *do* have language (it's a simple paragraph that's inserted into my paypal invoice) that says deposits are not refundable.

If it's a new client / one that was questionable, I keep it. Sorry bud, but my time must be respected.

If it's an existing client, I say the deposit is good forever. Just give me some notice (2 weeks is nice) on when you *do* want to do the project (or another one), and I'll apply the deposit to that. This way, with some notice, I can schedule around other stuff, and I'm not handing back money. Nobody has ever had a problem with this.

[Harold Mansfield]

It depends on how much time you've already invested in the project. I've never returned a deposit. Ever. And it's only been an issue once.

In that case I explained that I had already invested money and time on it, so there is no possibility of a refund. However, I credited them a fair amount of consulting or tech support hours to use in the future. Basically store credit.

I haven't looked at it in a while, but I'm pretty sure my TOS says that cancellations/refunds are evaluated on a case by case basis and the client will be responsible for cost incurred.
If I'm already past the 50% point, there are no cancellations and you owe me the full balance. But like I said, it's rare that anything like that ever happens.

[huggytree]

As time goes on you will most likely need to add new policies as issues like this come up.....I think you need to amend your contracts to define what happens if the customer cancels

I paid 1/3rd down on the website being designed for me...I assume that's the kinda $'s were talking about

most likely a thousand or 2 right?

I would always keep some of it...maybe $500 which is non refundable
then id charge for whatever time I have into the project...if you didn't start it yet then id return whats left...id also charge for any phone time and research...id itemize it and send the ex customer the check....

id do what feels right morally....and not worry about the customer being angry or happy.....odds are they will always be irritated to some degree

my goal with a customer is to make no grey area's....everything black and white....those shades of grey are what always causes disagreements...since customers never see the other side of the issue and never blame themselves.......by adding it into your contract you end most potential lawsuits

[Jeff_B]

Your best bet would be to just credit the customer, offer up future services for what ever the remaining balance is ( if you spent 3 hours, deduct what ever your rate for those 3 hours would be). I would never return a deposit as it will (A) devalue your time, and be (B) be cost prohibitive as you may have already pushed back or declined other work to ensure you have placed proper attention to that customers project.