Client doesn't want to pay the final instalment and tries to negotiate for new conditions

Question

I'm an Australian independent contractor. I have a hard-to-work-with European client who I'm happy to let go (and fire). We agreed to work on an app which had been delivered early last year. The client was satisfied with the works, and he's already selling it in the App Store.

There was absolutely no mention of source code, change in code ownership, etc. when the deal was made back in 2015. The project was a modified form of my existing app, which existed before the deal, and the client obviously has no ownership in it. There was no contract. The deal was something like this:

Client: Can you make a new app for me? I want the following features ...
Myself: OK. This is the price ....

Unfortunately, the client has been refusing to pay off the final installment which is about $42 AUD. I sent him my bank details on how much he had already paid, and how much he still owed. He agreed the transaction was not complete, but still refused to pay. The project is partially paid.

He is trying to negotiate and bargain with me for the final installment. He insisted I had to send him the source code, something never agreed. He also wants total ownership of everything, but without explicit written agreement (https://www.ipaustralia.gov.au/understanding-ip/getting-started-with-ip/ip-ownership), he'd only be given the non-exclusive rights to distribute the app.

Basically, he's bargaining for:

• "Update" and "upgrade" the app whenever he wishes
• Access the source code because he thinks he "paid" for it

Question

What's the best way to address this situation? I'm currently sending him overdue notices, and avoiding to negotiate for something that I should receive unconditionally. Every time he tries to negotiate, I simply reply with a payment notice (and nothing else).

It goes like this:

Client: I agree the transaction is incomplete, but you must hand over the source code ...
Myself: Dear xxx, this is the overdue payment notice. The overdue amount is $42.23 AUD ...

Should I negotiate and explain? Should I just keep sending him overdue notices? Should I ignore? What should I do?

Answer 1

As stated on the IP Australia website:

In Australia, the IP created by a contractor is by law considered the property of the contractor unless otherwise stated in the contract.

So you should be under no obligation to hand over the source code if that was never agreed upon in a contract. But on the other hand, it would be hard to enforce payment without that same contract.

You may need to cut your losses because the cost of retrieving final payment through legal means would outweigh the $42 outstanding. Never a fun thing to do a freelancer but the more time and energy spend chasing this is less time spent on new projects.

Answer 2

Well, the first thing to remember is that your client is trying to negotiate from a position of weakness. You are the owner of the intellectual property and without access to the source code, your client cannot update the app or add new features.

If the app starts failing and requires a new version, he won't have a choice but to pay you to fix it because it's your IP and you have the source code. If a company wants to purchase it, it's yours to sell :) and be sure to remind him of all that when he needs your help.

There is also no guarantee whatsoever that you will receive any money after you hand over the source code since his credibility is quite underwhelming.

Personally, I think most project source code is probably worth more than $42. You can ignore him because he can't afford to ignore you.

In the meantime, move onto new projects.

Answer 3

If these other posts are correct about Australian IP law, then why don't you change the app name in the source, compile, and put it on the App Store yourself? You'll get your money, and then some. Don't waste your time over $42. You're in a great position.

Answer 4

As a contractor, your source code is yours, and yours alone, failing a contract biding you to hand it over. In Europe, I do confirm the laws are pretty much the same, so you have got your bases covered by law, either in Australia or in Europe.

If the client asks for the source, put a generous price tag on it, as it was not requested from the beginning. It really does not matter what the customer thinks, that is his problem, not yours. Furthermore, the law is in your side.

I would advise you being consistent on your communications. You fulfilled your side of obligations, the customer has to keep their side, sticking to the values arranged. Furthermore, you have also a vested interest on being consistent, that is having a proper trail certain things like handing over source code were never requested, failing having a proper contract.

For now, given their track record, I would not have much conversations with them besides having your money back, so I think you are on the right track dealing with a problematic customer. If they fail to pay the exact amount, they are not worth your time.

As for maintenance, I have no idea of the values involved. For projects where a fixed substancial amount of money were involved (several thousand), it would be courteous to provide a 6-month window of a "guarantee" only after all due payments are settled.

For lower values, and for time paid by month, or by hour it does not make sense at all, and it would be extra work, hopefully in a pre-fixed price.

As for getting your money back, bid your time and do not lose much sleep over it. The client will come to you when there is a major problem to be corrected if you keep the ownership of the source code.

Answer 5

This is a topic I have contemplated and have a bit of experience in and upcoming with a Java project. Setting aside legal this and that I'll give you what I believe to be an honorable expectation.

1. As a client, if I hire you to build an app for me, whether you have one similar already started or not, I would expect to have the source code given to me after the last payment unless you have stated otherwise. I think this is a reasonable expectation for the client to have, written or not. Otherwise you hold me hostage to any price you want to charge for updates and mods. If you discounted the project because you already have most of it built and want to keep the source code, you need to state that in the beginning.

2. As a client I would expect any bugs, if discovered, to be worked out at no extra charge after final payment over a certain period of time.

3. As a client I would expect to pay for updates and new features from your or another developer if I choose.

4. As a client I would not expect to have exclusive use of the code but I would expect you not to make an app called Client2 and sell it next to mine. If you modified the code to do something else I get it.

5. As a developer you should expect to get paid. And if you are not paid and have more demands (not requests) put upon the project, you would have no obligation to do any fixes or updates or provide the source code. I do think you should provide the source code if he pays the final. I think that would be honorable and be lesson learned for future jobs if you didn't think about it.

I don't know why anyone would expect not to have the source code after hiring someone to build a project. That's like a home builder not giving you the keys to your house. He built it for you, but you can't use/mod it unless you hire him again. It's a hostage situation.