Daniel Nisbet

Episode 60  |  July 31, 2018

What to do if your client cancels your project and wants a refund

Anytime you start working with a client, it's pretty obvious that both parties want the project and the relationship to succeed.

Unfortunately, it doesn't happen that way every once in a while. In (hopefully) rare instances, you might be forced to re-examine working on the project. If things are going south, it could mean cancelling the project and not working with them again.

It can feel easier if you're the one deciding to stop. Things are in your control and you can "drive the bus," so to speak.

But what if the client is the one who puts the stop on? And furthermore: they think they're entitled to a 100% refund for everything?

I've seen this pop up on a variety of forums and social media. It's a very sticky situation.

The first question is always "what does your contract say?" If you've been in this spot before, there's a decent chance you probably have something that covers you here. If you haven't yet, your contract should have something about cancellations and what to expect for refunds (if there are any).

When it comes to refunds, you have a few options. At the least, the down payment should be non-refundable. After that, you can consider if you want to only charge for your time or through a specific milestone.

But let's say you don't have that.

The downside, is you're already on your back foot. This puts you immediately in a position where you have to start negotiating your way out of an already bad relationship.

You'll need to hope that the client at least saw some value in what already took place. And hopefully, they can agree that you should be getting paid (or retaining payment) for the work you've done.

It gets more difficult if you're in the middle or towards the end of the project. At this stage, you may have assets completed, or almost completed. Who owns gets the ownership? Does the client get access to anything?

A lot of pushback can happen here, because some clients expect that they get whatever you completed, and have the rights to it. In my own contracts, they don't own the rights until the entire project is completely paid for. But here, you have to decide what's best for the both of you moving forward.

If the relationship is ending badly, it might be worth considering cutting your losses and running. That's the worst-case scenario. I've done this in the past. It doesn't feel well, but it ended up being the best way to get out quickly. It sucked writing out a check and refunding the money. However, it wasn't worth it to get sucked into a legal battle that would have cost me way more. Lesson learned.

At the end of the day, you have to take charge of the situation and consider what you can do to protect your business. Any time you do need legal advice (and especially if you're working with your contract), talk with an attorney. Take advantage of a free consultation. It's worth it to sit down and figure out the best way to protect you and your business.