Can I stop a threatening client trying to take back what they paid me?

Freelancer’s Question: I believe I have a case of constructive dismissal. I’m a freelance developer who has recently been executing a 3-month software development project for an owner of a small business. I had no formal contract of employment, just an agreement of the project over email.

We are two-thirds through the project, and I have delivered four fully functional proof-of-concept applications of the five required, receiving half of the £15,000 total.

Unfortunately, my relationship with the owner has broken down and despite trying reconciliation, the owner is now threatening to attempt to reclaim the £7,500 they've already paid me.I’ve also been insulted and threatened with defamation.

The owner and I have some mutual acquaintances, for whom I also do some work, and while those acquaintances are unlikely to take notice of his claims, I could do without someone bringing my name into disrepute, especially as I have delivered some great software during the project! What can I do, as I’m feeling a bit stung? Any advice gratefully received.

Expert’s Answer: There is mention here of constructive dismissal. However, that is an employment concept which does not apply to freelancers.

From the sounds of the way you are being paid (and from the fact you describe yourself as a freelance developer), you are an independent freelancer, so we will consider the situation on that basis.

So firstly, please do check your IR35 status to make sure you are up-to-date with your status as a freelancer. If you do have any more working terms, practices or circumstances which further imply an employee-employer relationship, then you should discuss this with a specialist employment lawyer.

No contract? Then piece together the terms

Next, presuming you are a freelancer, and since you had no contract in place, this leaves you having to piece together the terms of your agreement with the client using your communications with them.

Under English law, a contract can be formed orally, face-to-face, partly in writing, or indeed over email. So, it does sound like you have a contract with your client – and this is evidenced by the work you did and the payment you received. However, since you likely have not agreed the terms that would normally be involved in the contract -- when payment is due, or what to do if payments are late -- it is difficult to argue that the payment is due without finishing the project. Even then, it might be possible for the client to argue that you have not competed the project in a way they expected you to.

How Quantum Meruit might help

If you have completed most of the project as agreed but have received only half the payment, there is a relevant legal concept called quantum meruit. This is a concept which means that you are allowed to receive reasonable remuneration for services provided.

However, please be aware that quantum meruit is sometimes not available where the parties have clearly agreed on a set price.

It does sound like the price might have been agreed upon, but you could still suggest that you have completed the work up to a certain stage, and so deserve the first payment you have received, and are due the second missing payment for the work done so far -- or another amount based on the work you actually managed to do.

Your potential leverage: IP

One additional point to note is that, as a freelancer, you own the Intellectual Property (IP) in any of your creations, such as the copyright in the software you developed. Assuming that during your conversations you have not agreed to assign your IP to the client, the IP vests in you and you have not authorised your client to use it. Their use of the software could therefore be considered an IP (or copyright) infringement of your IP rights. Perhaps politely advising them of this, and the fact that you believe you are due payment based on quantum merit, would encourage them to accept the situation to avoid any exposure to legal action.

You could offer to assign the IP in the software to them once they have paid you what you are owed. However, proceed with caution for your next steps, as you really do not want to come across as aggressive, and it will be important to ensure that any IP assignment is done properly.

Serious, swift, sorted

Finally, you mention defamation. This is quite a serious claim, but can also be very difficult to advise upon and so we would need more information from you to see whether what the client has done meets the threshold for defamation claims under English law.

So, we would suggest enlisting the help of a lawyer to map out best and most amicable next steps to bring this matter to a swift resolution.

Very finally, in future, please make sure you always prepare a formal contract addressing these issues, as it really helps to avoid a headache if things go wrong! Good luck, we hope the issue is sorted soon.

The expert was Lily Morrison, legal consultant at Gerrish Legal, a law firm specialising in commercial law for freelancers, sole traders and the self-employed.