The law on returning deposits

[WebDesignBob]

I have a client who, two years ago, paid an invoice which clearly stated the deposit was non-refundable. Two years on and a great deal of 'my time' later, he is asking for a refund in full.

What is the legal standing on returning deposits in general, when the invoice states the deposit is non refundable?

I dislike invoicing unless the work is guaranteed and dislike delays even more, especially when they result in the client wanting a deposit back. It isnt always convenient (for me) which is why I introduced the "non refundable deposit" terms several years ago, and its also why I try not to accept a deposit unless Im confident work is about to begin.

Any advice gratefully received!

 

[sjbeale]

It is legally binding.

 

[MikeJ]

Surely it depends on the context.

If you took a deposit for a website, then did absolutely no work on it, then he'd surely be entitled to a refund despite the "non refundable" statement.

If he changed his mind after placing an order and paying a deposit, then you could argue that you had cleared time in your schedule to work on his project, and you're pretty safe.

 

[WebDesignBob]

Surely it depends on the context.

If you took a deposit for a website, then did absolutely no work on it, then he'd surely be entitled to a refund despite the "non refundable" statement.

If he changed his mind after placing an order and paying a deposit, then you could argue that you had cleared time in your schedule to work on his project, and you're pretty safe.

It sounds feasible. Legally, wouldnt the "non-refundable" element in the contract eliminate the need for consideration of whether we had or not scheduled time for the job?

In truth though, the job had a scheduled start date and had indeed been booked in once we had everything we needed (last month) - at the eleventh hour he asked to put the project on hold without giving a reason. So, we didnt start.

Im curious about the "non-refundable" element, though. Its very rare for this scenario to occur, it would be interesting to know the legal standing either way, or what other factors might be involved.

Thanks for the replies thus far.

 

[MikeJ]

He's in breach of contract, from what you've said there. The deposit being non-refundable was a term of the contract. You're fine to keep the deposit.

(in my opinion. I'm not a lawyer.)

 

[Cylon]

When the contract was formed and the deposit paid was there an agreed timeframe this work would commence as to pay a deposit for somthing two years in advance seems insane (well unless your ordering an Ferrari).

Have you done anything to breach the contract your end, where the delays acceptable.

I agree with Mike though a 'non refundable deposit' is just that but theres always a but ..

 

[Simon-M]

Rather than looking at this as a legal or not issue, look at it from a customer service angle. 2 years is a long time down the road. However, you haven't actually done any work. Why not give the the guy jalf back and tell him the other half was for your admin and scheduling. The fact he is getting half back is as a gesture of your good will.

It's your call though

 

[WebDesignBob]

When the contract was formed and the deposit paid was there an agreed timeframe this work would commence as to pay a deposit for somthing two years in advance seems insane (well unless your ordering an Ferrari).

Have you done anything to breach the contract your end, where the delays acceptable.

I agree with Mike though a 'non refundable deposit' is just that but theres always a but ..

It was understood that we would be starting work then - there was nothing which led me to believe we would wait two years.

Freebies were thrown into the original contract, such as first years hosting free, for which there was no charge made to host nor create his splash page. We had effectively created a very simple page for him, registered a domain name, hosted this for a year whilst we were put on hold... you might in that respect say we were well under way. I certainly felt so, but that is by the by.

The original specification was built around hours of discussion on the phone. 50 emails and more phone calls later (over two years later) more work was done finalising the a new specification.

Both the first and second (updated) specification contained terms which stated deposits were non refundable, as did the invoice (deposit paid and received) plus the domain was registered, hosting account created (with deposit money), a temporary holding/splash page was even created with content supplied the client... Its fair to say we didnt let the client down in any way.

So, back to the terms. Is it legal to refuse to refund a deposit, when terms were made clear?

On moral grounds, clients who have paid in full and are existing clients are welcome to my generosity which I give freely. Im less keen to be mucked around by clients Ive not worked with before, 2 years and 50 emails down the road, having already incurred expenses - having clearly stated my terms in contracts and on invoices, simply because their business has changed track. It happens, not often, but often enough as the decades roll by that Ive grown tired of it, hence the terms.

 

[WebDesignBob]

Rather than looking at this as a legal or not issue, look at it from a customer service angle. 2 years is a long time down the road. However, you haven't actually done any work. Why not give the the guy jalf back and tell him the other half was for your admin and scheduling. The fact he is getting half back is as a gesture of your good will.

It's your call though

I think I addressed this in my previous post. I bend over backwards for my clients, but am less keen to bend over for complete strangers having made my terms clear and having already bent over for them once, if you see what I mean. Another reason Im never keen to generate an invoice or take a deposit until Im sure we are a couple of days away from starting.

 

[Andrew46]

I have encountered similar problems. However I do not think it is correct to characterise the payment up front you require as a "deposit". I would describe it as an initial payment in consideration of your agreeing to accept the work order. There is case law regarding "deposits" which might muddy the water in case of an argument over the effect.

 

[WebDesignBob]

I have encountered similar problems. However I do not think it is correct to characterise the payment up front you require as a "deposit". I would describe it as an initial payment in consideration of your agreeing to accept the work order. There is case law regarding "deposits" which might muddy the water in case of an argument over the effect.

Out of interest, which would be the more "non-refundable"

I employ my designers and spend huge amounts of time really putting polish into website specifications and building good client relationships. By the time my designers are ready to start work, Ive already invested sufficient time in a small project that, if a deposit was non-refundable, it wouldnt be worth having even before my guys have started work if it were not non-refundable.

 

[goodguy]

He paid you a deposit, so he was keen for the project to go. What was the reason why he pulled out, you not transferring the domain name to him, not putting the hosting into his name, raising your rates or all of the above?
There should be know need for a deposit, because design, web site building is so subjective that once money is paid, the design, builder can delivery what every they want.
Transfer the domain and hosting to him, and offer them the money back, minus reasonable amount(ie. not £200ph) for your time....

 

[Optegris]

He paid you a deposit, so he was keen for the project to go. What was the reason why he pulled out, you not transferring the domain name to him, not putting the hosting into his name, raising your rates or all of the above?
There should be know need for a deposit, because design, web site building is so subjective that once money is paid, the design, builder can delivery what every they want.
Transfer the domain and hosting to him, and offer them the money back, minus reasonable amount(ie. not £200ph) for your time....

Where did the OP state they have registered the domain in their own name?

There is every need for a deposit to be paid as it shows intent on the side of the customer and the designer. The one thing that has not been mentioned is the size of the deposit and what percentage that was of the final bill.

 

[WebDesignBob]

Where did the OP state they have registered the domain in their own name?

There is every need for a deposit to be paid as it shows intent on the side of the customer and the designer. The one thing that has not been mentioned is the size of the deposit and what percentage that was of the final bill.

Im not really interested in discussing further specifics. I am interested in the legality of clearly stated non refundable deposits.

I once put several thousand pounds down to buy a retail item. 24 hours later, I found the item £2000 cheaper elsewhere and asked if the deposit was refundable. I was told to check my paperwork which indicated it was not - I made no fuss and agreed with the retailer that his terms had stated deposits were non refundable.

There was absolutely no falling out with the client whatsoever. He simply does not want a website - from anyone, a decision his agent made for him.

Apologies if I dont respond to further queries which arent topic specific, re: the legalities etc.

Thanks for the replies so far.

 

[Optegris]

With respect the size of the deposit is relevant as it would allow you to make a better informed decision whether to stick to your guns or to refund the deposit through good customer service.

Of course it's up to you what you do but if you are that concerned about the legalities of refunding a deposit or not then take your contract to a solicitor and seek professional advice and not forum opinions.

 

[WebDesignBob]

if you are that concerned about the legalities of refunding a deposit or not then take your contract to a solicitor and seek professional advice and not forum opinions.

Im interested in free forum opinions. Its not a big deposit, nor a big deal. Along with the 'not-so-good' there has always been plenty of good and interesting advice and points for consideration given on these pages

 

[internetspaceships]

If the guy agreed to a non refundable deposit then that's it.

Simples. No need to beat around the bush.

 

[arcon5]

Im not really interested in discussing further specifics. I am interested in the legality of clearly stated non refundable deposits.

I once put several thousand pounds down to buy a retail item. 24 hours later, I found the item £2000 cheaper elsewhere and asked if the deposit was refundable. I was told to check my paperwork which indicated it was not - I made no fuss and agreed with the retailer that his terms had stated deposits were non refundable.

There was absolutely no falling out with the client whatsoever. He simply does not want a website - from anyone, a decision his agent made for him.

Apologies if I dont respond to further queries which arent topic specific, re: the legalities etc.

Thanks for the replies so far.

So you scarified a deposit of 'several' thousand pounds to save two thousand? :|

Op - this is obviously a B2B contract yes? As B2C contracts have different regulations regarding 'non-refundable' deposits - in that you can only detain provable losses

 

[jules12345]

It truly depends -

If there is fallibility in regards to you yourself and the agreement entered into then you would ahve to refund it. This would not necessarily be in regards to the actual work finished product quality etc. It could be not supplying a good quote or your spec was short of an original demand - the question you have to ask is WHY is he pulling out..!

If you can say hand on heart that it is no fault of your own which doesnt mean to say that he will say that however, then your most probably safe in keeping the deposit. Thats what courts are for to determine where fallibility lies and if any fallibility. Keep it, you wont have to pay for the court fees anyway (unless you lose) and if your client feels aggrieved he takes you to court, that is the point of the court system.

Regards
Jules

 

[WebDesignBob]

It truly depends -

If there is fallibility in regards to you yourself and the agreement entered into then you would ahve to refund it. This would not necessarily be in regards to the actual work finished product quality etc. It could be not supplying a good quote or your spec was short of an original demand - the question you have to ask is WHY is he pulling out..!

If you can say hand on heart that it is no fault of your own which doesnt mean to say that he will say that however, then your most probably safe in keeping the deposit. Thats what courts are for to determine where fallibility lies and if any fallibility. Keep it, you wont have to pay for the court fees anyway (unless you lose) and if your client feels aggrieved he takes you to court, that is the point of the court system.

Regards
Jules

He needs a holding page (therefore ongoing hosting for his single page, which his credit could be used for) but will never need a website, as he has an agent who will handle his marketing.

Having put copious amounts of time into everything (page creation, consultancy, minor updates, a few years web hosting already given etc) Id like to think Im within my rights to keep a very small amount of money, ie the deposit, which is credit.

Seems we have mixed opinions. I was mainly curious as I once had a client give me a very large deposit then ask for it back. I find people in the process of starting a business change their minds so quickly. Ive had numerous projects stop at the 50% point, simply because the client got a job, became ill, had another idea, decided not to proceed, their partner changed her mind, etc.

I had someone offer me a large deposit 18 months ago. I told him it wasnt necessary, lets finish building the specification etc and a deposit can be made just before we start. 18 months later he still hasnt started and I believe he isnt going to either.

Small deposit returns are not an issue, but finding large amounts of money to refund on demand are a hassle. Hence the query about the law - ive always been curious.

 

[WebDesignBob]

So you scarified a deposit of 'several' thousand pounds to save two thousand? :|

Op - this is obviously a B2B contract yes? As B2C contracts have different regulations regarding 'non-refundable' deposits - in that you can only detain provable losses

No. I paid a deposit. Found the item far cheaper online, and was told my deposit was non refundable, sorry mate, etc.

Came to an agreement with the retailer to reduce the price to one which was more in line with the internet pricing, but I didnt quibble his non refundable policy.

 

[Nuno]

You have provided value: hosting, administration of domain name, emails etc.

The client has paid a deposit on the agreed terms that the deposit is not refundable.

It is unlikely that there will be any future business to be gained from gestures of goodwill or "customer service".

Just keep the money. Leave the ball in his court and if he starts legal blather see a solicitor after informing him, (the client), that you will be passing on any costs of dispute.

 

[WebDesignBob]

Just keep the money. Leave the ball in his court and if he starts legal blather see a solicitor after informing him, (the client), that you will be passing on any costs of dispute.

Can anyone confirm that, if in small claims, no legal costs may be sought from either party.

I thought that a case had to go to crown(?) court and/or be over £5k, in order for parties to be liable for each others legal fees... otherwise everyone in the UK would use solicitors all the time, racking up huge bills for those they have a case against. I thought...

 

[bwglaw]

Can anyone confirm that, if in small claims, no legal costs may be sought from either party.

I thought that a case had to go to crown(?) court and/or be over £5k, in order for parties to be liable for each others legal fees... otherwise everyone in the UK would use solicitors all the time, racking up huge bills for those they have a case against. I thought...

If a claim is allocated to small claims track, generally, legal costs are not recoverable. However, the District Judge has power to award costs where a party's conduct in the proceedings are unreasonable.

Do keep in mind that where a claim has not been allocated to a track, a party is entitled to apply for summary judgment if the claim/defence has no real prospect of success and if this application is successful a party can apply for costs.

The 'small claims court' as people loosely refer is technically incorrect. There is no 'small claims court' as such however the County Court has three tracks; small claims, multi and fast.

Claims that come under the small claims threshold can be allocated any track if the matter is too complex for small claims, therefore we should not assume that just because the claim value is under the small claims threshold it will be allocated to small claims track. It is the decision of the DJ as to which track the claim should be allocated upon hearing any representations.

Represented parties either make an application for summary judgment or try and get any claim allocated to any track other than small claims.