The Myth of the Non-Refundable Deposit – Law for Photographers

As I pace around my studio, I raise my Alien Bee an inch. I smooth the grey backdrop for the hundredth time. I pluck a stray fiber from my antique settee and I look at my watch: 2:20 pm.

My boudoir client is 20 minutes late. I have called her. I’ve texted. I’ve emailed and finally even resorted to sending a Facebook message. No response.

It is Saturday. My husband skipped his soccer game to stay with the kids. My schedule is clear for the next three hours. I got here early to set up. I cleaned, spruced, stressed and got excited.

My hair and makeup artist is standing in the corner tapping her foot and texting her boyfriend about how bored she is. I look at her and shrug an apology.

At 2:45, I give up and let my makeup artist go (with full payment for her time of course).

 I can keep her non-refundable deposit, right?

My client paid me $400 as a deposit, which I plan to keep as forfeited money. I look at my client contract to be sure I covered this. Here is what it says:

“Deposit. Client shall pay Photographer an amount equal to $400 as a non-refundable deposit. Such amount shall be applied toward the purchase of a boudoir package.”

Okay, so I clearly said “non-refundable.” I should be good to go, right? I’m feeling a little insecure about the contract’s lack of specificity, so I do some legal research. What I find makes me nervous.

 Payment for a service is not earned until the service is performed

It seems that courts deciding whether deposits are refundable have found that payments intended to cover advance fees paid for the performance of a service are not actually “earned” until the service is performed.

In other words, even if you take a retainer, the money is not yours until you do the work.

Uh oh. My contract says that the $400 is to be applied toward a package, which includes processing the images and preparing an album—none of which I have done and won’t be doing. But it also says the deposit is non-refundable. So now what?

 “Deposit”, “Retainer”, “Hush Money”,  … does language make a difference?

If my contract language is not crystal clear on how the deposit or retainer will be used (whatever it may be called), that payment can be categorized as a payment for future services, according to most courts.

And in some jurisdictions, the word “deposit” alone may mandate a refund without clear language to the contrary.  That means the payment would be refundable by law, regardless of how many times the contract says “non-refundable” or “forfeited” or any other too-bad-so-sad adjective I put in front of “deposit.”

But courts have also clarified what a “true retainer” is in the case of a photographer-client contract.  If the payment is made to compensate the photographer (you) for loss of income suffered by reserving the session date for a particular client, that’s a true retainer. You can keep the money if the client doesn’t show.

A true retainer compensates you for the money you lose by not booking someone else on a particular session date. A deposit, unless clarified in your contract, is advance payment for your services, which you’ll probably need to refund if she no-shows.

Bottom line: My contract must clearly state whether it’s an advance payment or payment to compensate for lost income, or it is open for interpretation.

3 ways to make your intentions clear

So, how do we make it clear? What can we do to be sure that we are compensated for the time spent waiting for a client who never shows?

  1. Be sure you have a written contract with the client.
  2. Clearly state how much money, paid in advance, is to be treated as non-refundable, and then state what the money compensates you for.
  3. Include a “liquidated damage” clause.

 “A what clause? Liquid huh?”

You can include in your contract a reasonable amount of money you are to be compensated—an amount that may be difficult to figure out–if your client breaks the contract. These are called “liquidated damages.”

Now, you can’t use this to punish your client (courts have found such penalty clauses to be unenforceable), and you can’t be unreasonable when determining the amount of liquidated damages. For example:

In the scenario above, I may have been counting on a $2500 portrait sale of his-and-hers album with large wall art for his man cave, but if I try to claim $2500 as liquidated damages I’m probably being unreasonable.

On the other hand, if you are a wedding photographer and the canceled event is a June wedding, you can’t exactly just book another one. Higher liquidated damages may be reasonable in this case.

Want an example for your contract? Here you go. (*required cautionary language: please consult your own attorney in your own state to be sure this language works in your jurisdiction)

“Ugh,” I think to myself as I look at the contract before me. “I should have consulted myself before using this form.”

I give myself a little dope-slap and then, instead of spending the next hour photographing a gorgeous woman bathed in beautiful light on carefully designed sets, I sit at my computer and redraft my contract. And my new clause goes something like this:

“To reserve the Session Date and to reserve the stylist, Client shall pay to Photographer, upon execution of this Agreement, a non-refundable reservation fee in the amount of $400.00. Client understands and agrees that Photographer will not book other sessions during this time. In the event that Client cancels the portrait session or fails to attend the session on the Session Date, for any reason, Photographer shall suffer losses that are difficult to ascertain. As such, Client agrees that, in the event of cancelation by Client, such $400 shall be forfeited by Client and paid to Photographer as liquidated damages and not as a penalty. Client and Photographer agree that such amount is reasonable.”

 And with that, I went home to enjoy the rest of my weekend.

(So, you all understand that this is hypothetical, right? If this really happened I would be frantic about whether my client was all right. And I most certainly would never slap myself.) :) 

NOTE: Whether you want to make exceptions for illness, inclement weather, unforeseen circumstances or even allow one rescheduling without loss of the reservation fee is up to you. Just be sure to draft your language clearly.

 

Legal Photo Pro is available to help customize your contracts to fit your specific needs. Just give me a call or send me an email to get more information on my reasonable rates and to get started!


 

10 thoughts on “The Myth of the Non-Refundable Deposit – Law for Photographers

  1. Chances are – just getting the money up front and having them sign the document will cut down on your no-shows by 90% – if not more. I know whenever I get lazy and don’t get the session fee up front, those are the times that people show up late or no-show. Just human nature I guess.

  2. THANK YOU for this posting! While I have a clause that mentions the retainer, this is a lot clearer and to the point and I’ll be doing some revisions myself!

  3. Thanks, Kirsten, for your thorough examination of “non-refundable deposit”. Well, I’m no attorney, so it seems thorough to me.

    After the first few paragraphs, I sensed where you were headed. That you’d need to specify that your client’s deposit was for the service of reserving your precious time and resources for her session. So you called the deposit a “reservation fee”. NICE!

    Seems to me you might consider making the reservation fee refundable until XXX days ahead, after which time it becomes non-refundable. Just a thought, but your clients might be happier to agree to that.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>