Freelancers’ Questions: How to handle clients who cancel projects?

Freelancer’s Question: I joined a website design project for a client. I asked him to deposit 50% of the project's money. I sent draft designs; they were almost complete. Suddenly, the client said he met a financial problem and cancelled the project.

We didn't sign any contracts. I couldn't get the remaining amount but I think I deserve more than the 50% deposit. What should I, or can I do? And how should I handle cancellations in future? I’m interested in written terms to protect me suffering the same fate again,

Expert’s Answer: Freelancers are unfortunately quite exposed to risks like this and it can be tricky to strike a balance between protecting yourself and being fair to the client. After all, you don’t want to scare them off by asking for too much money upfront!

In this case, you asked for 50%, which is an excellent mid-way point as in the majority of cases, this should cover your absolute minimum costs if the worst happens.

However, you understandably want to be paid for more than just the bare minimum if a client cancels a project.

The key, as you rightly identify, is getting something in writing.

A formal written contract with this client would have given you the right to invoice them for time spent, or retain ownership of the work you’ve done in the event that the project gets cancelled. A contract may also potentially allow you to repurpose some of the work for someone else, or retain it as leverage in case your client comes back to you in the future.

As you don’t have a contract with this particular client, you have fewer options.

In our experience, it’s usually very difficult to claim any money back without having something in writing and without this, you really are reliant on the good will of your client to pay more if you ask.

Remember: contracts are not just about getting paid. Yes, they should define your payment terms, like the length of time clients have to pay, but they should also give you the rights to protect your works and your financial position in situations like this.

Getting your terms and conditions drawn up by a legal professional is indeed the only way to ensure they are enforceable in court. But don’t skimp by pinching someone else’s terms, don’t write them yourself from scratch, and don’t use an online template.

This is because the amount you spend on getting a legally watertight contract drawn up is a sound investment. It’s actually one no business can do without. With a sound and legally enforceable contract, the next time you come across a client that doesn’t pay what they owe, you’ll be able to proceed to collections and potentially court without delay.

Whereas if you skimp on this, and don’t get proper legal terms drawn up, you’ll inevitably find that a keen solicitor – acting on behalf of the client -- can trample over your supposed contract in court, and potentially cost you considerably more in the long run with wasted legal costs and a debt you are unable to collect.

The expert was Adam Home of Safe Collections Ltd, a specialist in debt recovery for unpaid freelancers and self-employed sole traders suffering from late payment.