Over on Threads, a user going by brandothecommando_ said this:
If you are a photographer don’t put non refundable deposit for booking. If you get sued you may end up having to pay back the client’s deposit. Use non refundable retainer or booking fee. Please keep in mind the verbage you use for the contracts so that way it’s strong. And for the love of god as a photographer make sure you don’t break your own contract and loose out on money because you got sued.
And since I’m writing this article, it should be plainly obvious that this is NOT correct. Before we dive deeper, here was my reply:
Nothing wrong with calling it a deposit. Since “deposit” implies that it will be credited toward the final balance without needing to spell it out.
“Retainer” or “booking fee” have different meanings under common law and it won’t be clear, unless you spell it out in your contract, that said “retainer” or “booking fee” will be credited toward the final balance and isn’t a separate charge.
But you do need to make it clear that the deposit is non-refundable except where required by law.
And calling it a “booking fee” or “retainer” doesn’t save you from having to refund that if you’re sued and the client is seeking a refund of everything paid because you failed to uphold your end of the contract.
“Deposit” vs “retainer” or “fee”
If I say that I charge $1,000 for a photo shoot and there is a $500 deposit due up front, what is your assumption? Likely that the $500 is going to be credited toward the $1,000 (plus any other fees per the contract). But if I call it a “retainer” or “booking fee”, you’ll likely think that fee is a separate charge from the $1,000.
And so will the law.
The easy demonstration on this is the “application fee” for an apartment vs the “security deposit”. The security deposit is credited toward anything you owe your landlord after you move out. This could include costs to clean the apartment to get it ready for the next tenant or repairs to any damage you cause. And if the deposit you paid is more than the costs incurred, the landlord is supposed to refund the remainder – unless the contract says it won’t refund anything less than a certain amount, like anything under $10.
Fees are also typically not refundable, but deposits generally are. Unless you say the deposit isn’t refundable. But to elaborate on that idea, I’ll just pull in the section “Non-refundable deposits” from this article:
If you’ve bought a house, you should be familiar with “earnest money”. For those not in the know, it’s a cash deposit (mine was $500) that shows that you are serious about buying the house. It is credited toward your closing costs, but is non-refundable if you back out of the purchase with some exceptions (e.g. you discover something substantial about the home not on the seller’s disclosure form).
So for services booked months or longer in advance, the non-refundable deposit is similar to “earnest money”. It shows you’re serious about their services, secures them for the date in question, and is non-refundable should you back out.
Making anything similar to this idea incorrect: “Services were never rendered, so the videographer has no right to keep the money.”
And the contract will stipulate the deposit is not refundable under any circumstances (except where law requires), or will give only some circumstances in which the deposit may be refundable in whole or part. This doesn’t mean the money is absolutely gone. But getting it back requires getting the contract nullified in Court (good luck there!) or the other party (photographer, etc.) must have backed out for some reason or failed to show.
That doesn’t mean the service provider cannot refund the deposit under any circumstances. Only that they won’t be obligated to do so under the contract for circumstances not expressed in the contract. The refund will, instead, be entirely at their pleasure.
You’re free to request it, but they won’t be under any obligation to give it.
So this begs the question, when is a non-refundable deposit actually refundable?
Refunding a non-refundable deposit
Obviously the party receiving the non-refundable deposit always has the option of refunding it absent an obligation to do so. So when is there an obligation? In short, when the contract or the law says so. The contract can enumerate conditions under which the deposit is refundable in whole or part, thus creating a contractual obligation – e.g., when the opposing party dies.
But when is there a legal obligation where the contract is otherwise silent? Generally the party receiving the deposit must be in breach of contract. (There are plenty of other circumstances wherein that money, and potentially more, may be recoverable by the other party, but I’m not writing a dissertation here.)
Going on photography, since that’s the context for the statements that prompted this article, that would mean the photographer fails to show for the shoot for reasons not outside their control, or fails to otherwise fulfill their obligations under the contract – e.g., not turning over the photos in the amount of time the contract specifies, absent extenuating circumstances. And if the photographer recognizes they’re in breach, they should do the right thing and refund the deposit without any fuss.
But if they don’t and their client sues them, the client can seek refund of the deposit and remedy of any other damages since the photographer failed to uphold their end of the bargain. And calling it “non-refundable” won’t help you. Saying the deposit is “non-refundable in all circumstances” is unenforceable.
And calling it a “booking fee” or “retainer” won’t save you either.
Since if you’re sued and your client is seeking monetary damages where injunctive relief won’t suffice or isn’t possible, and the Court rules against you, the Court will order you to pay a specific amount based on the losses or damages the client incurred. An amount which will likely also include everything the client paid you – i.e., all deposits, fees, and the like.
“If the service didn’t happen”…
The above-mentioned user replied to me:
Calling it a deposit is meaning you are paying for a service in advance in the future. Even if you call it non refundable and let’s say the service didn’t happen and client were to sue you would lose.
I’ll admit I got a little harsh in my feedback, but at the same time I also have a LOT more than a layman’s understanding of contract law. As I’ve said before, there are a lot of misconceptions floating around about how contracts work and don’t. But their reply to me also highlights that people will say contracts aren’t bulletproof, which implies they’re easy to get out of, while also saying that money is easy to shield from a lawsuit by… labeling it something else.
Yeah that’s not how it works.
It isn’t as simple as “if the service didn’t happen”. It really depends on WHY it didn’t happen.
You really need to learn about contract law before speaking like you know what you’re talking about. Because it’s painfully obvious you don’t given you think calling it a “booking fee” or “retainer” instead of a “non-refundable deposit” somehow shields that from recovery should your client sue you and win a monetary award against you – regardless of why they’re suing you.
And while you’re learning about contract and common law, make sure to also brush up on how relief works in the context of a civil suit outcome. Monetary relief and injunctive relief. Since if your client sues you, everything the client paid you and then some is potentially recoverable.
And there isn’t anything you can write into your contract that will shield anything your client pays you. Not even a “liquidated damages” clause can do that depending on why your client is suing you.
Since depending on WHY your client is suing you, the tort that is alleged and the damages the client is seeking to recover, they could end up recovering MORE than what they paid you. Since the lawsuit is entirely about making the party who is injured as whole as possible.
Which is why business insurance is so, so important.
Sure your client could sue you if the service doesn’t happen. They can also sue you for looking at them funny if they decide to call it “harassment”. Whether they prevail is a different story, and a lot of… caustic people in the world know that merely threatening a lawsuit often is enough to get someone to comply with their demands, however unreasonable.
The point of a civil suit is to make an injured party whole as best as possible. Which is why no language in a lawsuit can shield from recovery anything a client pays you.
While I’ve said before that contracts are damned hard to get nullified, there is one reality about contracts that everyone needs to understand: where the law and a contract conflict, the law wins. Put anything into a contract that conflicts with common law (i.e., Court precedent) or statutory law and the Court will rule it unenforceable.
Put any language in the contract that attempts to shield from recovery via a lawsuit anything your client pays you, the Court will rule that unenforceable if you’re sued and just act like that language was never there in the first place.
