The Non Refundable Deposit MYTH

8:50 AM mssoellegant 0 Comments

About a year ago I received an email with some bad news from a client. “Dear Jeff– I just wanted to let you know that Gwen and Peter have called off their engagement and will not be getting married in September. The news comes as quite a shock to us, but Gwen claims it’s for the best and we’ve always trusted her judgment. I apologize for the short notice, but we just found out less than 48 hours ago. I would like to stop by later this week and pick up a refund of our deposit…” There was a bit more after that, but it was just a blur. My attention was focused squarely on four words– “refund of our deposit.” I knew my contract clearly protected my interests with a “non-refundable deposit” clause. I couldn’t relax, though, until I pulled out the contract to make sure everything was in order. Everything was, in fact, exactly as I remembered. Under “Booking Fee, Payment Policy & Expenses,” the contract stated that “the wedding date shall be reserved through payment of one half (50%) of the wedding coverage costs.” More importantly, the “Cancellation” section was quite clear that “If Client cancels the wedding photography for any reason, Guyer Photography shall be entitled to retain the entire amount already paid and no portion shall be refunded.” I typed up a quick reply– first expressing my regrets, then referring Gwen’s mom to the relevant language of the contract. I clicked “send” and went about my day. Things got ugly quickly, and it took about a week to sort things out with the family. It was a real mess. It all boiled down to this– I was right. I knew it. Part of me even suspects that they knew it, too. Unfortunately, though, being right isn’t always enough. We eventually came to an agreement, and I learned a very valuable lesson. There is no such thing as a Non-Refundable Deposit. Let that sink in for a minute.

DEPOSITS AND RETAINERS

Did you notice that the word “deposit” does not actually appear anywhere in the contract language I quoted? There’s a very specific reason for that. In my previous life as an attorney, I dealt with contracts on a daily basis. The thing that a lot of well-intentioned people don’t realize is that it’s not just what you say in a contract, but also how you say it that can be the difference between success and dealing with Gwen’s mom. Why is “deposit” such a dirty word? It’s not, but it doesn’t always mean what you think it means. Time for a quick lesson in contract law. Payment for a service is not earned until the service is performed. Seems pretty straightforward, right? Except for when it’s not. Courts have consistently ruled that money paid to cover advance fees for the performance of a service are not actually earned until the service is performed. Simply put, the money isn’t yours’ until you actually do what you’re being paid to do. So, assuming that my contract with Gwen’s mom clearly stated that I was to provide 14 hours of wedding day coverage, as well as prints, albums, online galleries, etc., any deposit paid in anticipation of those services would not be considered earned until those services were performed. What does that mean? It means that it doesn’t matter how many times my contract says that the deposit is non-refundable, forfeit, gone, or just plain mine. My contractual intent– protecting myself– is meaningless in that situation. If we go to court, the judge is going to rule that the work detailed in the contract has not been done and that I therefore have to return the money. All of it. If the deposit or retainer, however, was paid in order to compensate me for the potential loss caused by Gwen or Peter getting cold feet and cancelling the wedding, then we find ourselves working under a whole new set of rules and assumptions. Under this new scenario, Gwen’s mom has entered into a contract which specifically takes into account my significant loss upon her cancellation. And yes– it is a game of semantics and we are splitting hairs here, but courts like contracts. Better to have a contract that makes you, rather than one that breaks you.

SO, WHAT SHOULD THE CONTRACT ACTUALLY SAY?

As I’ve already pointed out, you have to be very specific about what that advanced payment actually covers. If it is simply the first of multiple payments toward wedding photography, Gwen’s mom wins. If, on the other hand, we list all or part of it as payment against losses caused by cancellation, the money stays right where it is– in my bank account where it belongs. I realized after this fiasco that my contract was better than many I’ve seen, but that it needed some work. It fell just a little bit short of fully doing its job. My new cancellation clause reads like this: “This contract between Guyer Photography and Gwen’s Mom shall not become effective until it is signed and the initial amount due has been paid. At the time the contract takes effect, Guyer Photography shall reserve the date and time agreed upon, and not make any other reservations or accept any other clients for said date and time. For this reason, in the event that Gwen’s Mom cancels the contract for any reason, all monies paid shall be retained by Guyer Photography in order to offset its loss of business.”

CONTRACTS ARE WRITTEN BY LAWYERS FOR A REASON

I don’t recommend lawyers because of our grandiose vocabularies. Even when I was still practicing, I always tried my best to draft contracts in plain, every day, easy-to-understand English. But here, even with all of my training and experience, a crucial bit of contract language slipped right past me. The contract was iron-clad, right up until the moment it wasn’t. It’s also important to note that contract law varies somewhat from state to state, as well as country to country, so checking with someone who knows what they’re talking about in your area is a huge and important step towards getting this right.

OTHER THINGS TO KEEP IN MIND

This is not just about wedding photography. It’s about every client and every shoot. Everyone thinks they have a perfectly acceptable reason for cancelling on you at the last minute (especially models). And maybe on occasion they do. I’m not saying you take a hard line with each and every cancellation. You’re running a business and only you can decide what’s right for your business. If returning what’s already been paid is a good business decision, then by all means return it. In my situation, Gwen’s parents have a pretty high profile and know a lot of people. When I stopped to think about the damage that could be done just from them telling their friends about the cold, heartless photographer who wouldn’t return their deposit, I realized that drawing a line in the sand might protect my interests in the short term, but I want to be in business for the long term. I’m a big fan of compassion. I’ve been extremely fortunate to be on the receiving end of it more times than I probably deserve. As a human being, I want to be as understanding and accommodating as I possibly can. If I’ve sounded a bit less than compassionate here it’s for only one reason. Photography feeds my family. It keeps a roof over our heads. Thankfully, I don’t have a very high cancellation rate. Had Gwen’s mom cancelled in enough time for me to book a new client for that date, or if it had been during a month with better cash flow, I would have refunded the full amount on the spot. But with less than three weeks before the wedding, it just wasn’t feasible. In a perfect scenario, doing what’s right for the client and what’s right for our families would always be the same thing. Contracts are there for when they aren’t.

WRAP-UP

Make sure that your interests are fully and adequately protected. All it takes is one bad experience to learn that the non-refundable deposit is nothing but a mythical creature, much like unicorns, leviathans, werewolves, and Bigfoot. But not dragons. Dragons are definitely real. Trust me. I’m a lawyer.



Until next time. - D💋

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