Client paid for project in full, canceled the project 4 months into it (nothing to do with me) wants refund for unfinished work

Question

For this project we had no formal contract, just emails outline scope of work and partial usage rights for the images I was delivering. They decided to cancel the project about 4 months into it (once again, nothing to do with me) after I had completed 4 of the 13 images in the original scope.

Their "solution" was for me to keep the full amount of money, which they had already paid, in exchange for full usage rights (the amount they would be well below industry standard, which I explained to them) Otherwise they would need a refund.

I offered other solutions--higher price for full buyout, or unfinished work balance as a credit for future work. To which they denied both options

Normally changing scope or canceling a project would just be chalked up as "shit happens" but this was abnormally late into the project and well after I was already paid ("hope you didn't spend that money because we want it back!") and I'm really hesitant about refunding the money.

To me, in the beginning we mutually agreed "X amount of work for X amount of money"--very black and white. Then 4 months down the road they're like "never mind, we changed our mind on our agreement".

On one hand, yes I didn't complete the project. On the other hand they chose to break their half of our agreement and now I am the one getting screwed out of expected money I was counting on.

Thoughts of where I stand in this?

Answer 1

I know it's too late, but one thing to do is to learn to ALWAYS have a contract! I do work for a couple of friends and even among friends we have a contract. Unexpected stuff happens and a contract provides a framework for how to deal with it.

Also - and I know it sounds like I am blaming you for this situation, but I am honestly not - I would recommend strongly against full payment in advance. A retainer with regular invoices as the project progresses? Yes! A big fat invoice at the end? Yes! Full payment at the start? For me it's too risky - what if there's a family issue or you get the offer of the job of your dreams... or what if the client pulls the project and wants a refund...

Anyway onto the question in hand...

Without seeing the emails you exchanged where you

mutually agreed "X amount of work for X amount of money"

it's hard to know if they'd constitute a contract; depending on your jurisdiction they might. If the amounts are big enough to warrant it, consult a lawyer and find out.

If not, choose the option which is least injurious to your pride - sell the rights cheap, or refund the money - and treat yourself to a lesson in business... that lesson being: contracts and invoices exist for a reason and are beneficial to both vendor and purchaser!

Answer 2

Without a contract, retaining 33% of the fee and refunding the other 66% would seem fair to me. You completed about 1/3 of the images.

Image rights for the 4 images would remain as agreed upon.

Any further rights to the 4 completed images would be a matter of further negotiation.

It's difficult to prove you are harmed due the anticipation of income. I expect to earn $X from Client Y in 2020, that doesn't mean I can invoice Client Y in 2020 for $X even if they didn't give me the work to warrant it. Without a direct "kill fee/cancellation" charge in a contract, you can't often get away with charging a kill fee.

That being posted -- I've been there, done that -- spent payment prior to work being completed and then had to refund something for one reason or another. I've learned to not spend money until the project related to it has been completed.

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Basically, I'd look at it as quantum meruit - you deserve to be paid based upon the work you performed, not the work you thought you would be doing.

: (kwahn-tuhm mare-ooh-it) n. Latin for "as much as he deserved," the actual value of services performed. Quantum meruit determines the amount to be paid for services when no contract exists or when there is doubt as to the amount due for the work performed but done under circumstances when payment could be expected. This may include a physician's emergency aid, legal work when there was no contract, or evaluating the amount due when outside forces cause a job to be terminated unexpectedly. If a person sues for payment for services in such circumstances the judge or jury will calculate the amount due based on time and usual rate of pay or the customary charge, based on quantum meruit by implying a contract existed.

Answer 3

If it doesn't harm your business, I would accept their solution. You then get paid the amount you expected while having spent 1/3 of the effort you would have, and they are happy to have paid you. It doesn't sound like the agreement would prevent you from also having the use of your creations, because you didn't mention exclusive rights.

Never mind that you got lower than industry standard. There is no harm to you. To prevent the next guy from arguing to meet the deal they got, bind them to a nondisclosure agreement about the price. Next time create a contract. Now you prevent a dispute that will drain your energy and distract you from further productive use of your time. Move on.