Why The Non-Refundable Photography Deposit Is A Myth

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Advice below was inspired by the excellent post The Myth of the Non-Refundable Deposit by legalphotopro.com.

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 galeries, 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, everyday, 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.

  • http://twitter.com/gilesbabbidge Giles Babbidge

    Interesting article RT : Why The Non-Refundable Photography Deposit Is A Myth – http://t.co/v12UMDKsKy > Your thoughts?

  • https://www.facebook.com/tomisnomore Thomas Bicknell

    Redundable… quick catch it before everyone wakes up then happily delete my comment.

    • Miguel

      Stays in the url of the post, though :)

  • john bornwe

    really, a lawyer in another life and he made this basic mistake. it’s probably a good thing he not practicing law any more.

    • Dave E.

      Was that really necessary?

    • http://www.sin3rgy-creative.com/ David Liang

      Oh look it’s mr.perfect casting judgement on the internet. You’re expert criticism would read better had you used proper grammar. Since you’re insulting someone else for making a mistake in not paying attention, you should take your own advice and edit your words as well.

  • Janis Ebstein

    Good learning lesson, I think I’ll re-write my contracts so that deposit money has already been spent in preparation for the shoot… i.e. Services already rendered.

    • Jeffrey Guyer

      I see where you’re coming from, but I wouldn’t stray too far from the language I quoted (PPA-approved, actually). What types of pre-shoot expenses would you actually have?

  • Kent LaPorte

    Good lesson about legal agreements, but what is missing here is the moral and ethical obligation that the customer had. The family knew completely that the initial payment was to reserve the photographer and the date and that the photographer would likely lose out on accepting any other paying gigs as a result. Regardless of what the contract said Gwen’s lack of fairness is deplorable. If you didn’t have a business to run and a reputation to uphold I would say print her name throughout the internet as someone who reneges from her commitments. There should even be a site that professionals can go to just like customers go to the BBB or Angie’s that indicates if a customer is a weasel. People complain about businesses taking advantage of them but look what they do in return. We created this litigious mess. It takes more than laws to create a just society. My momma taught me better.

    • Jeffrey Guyer

      It’s an interesting point, Kent, but the fact remains that they can do us more harm than we can (or should) do to them. It’s a simple fact of life and business that people talk. And just like word of mouth can build a business, it can also kill a business. The overwhelming majority of clients are this bad. I used an extreme case as an example.Thanks for joining the conversation.

  • tb

    Can you take a new client on that now open day and still keep the amount paid to offset lost business or does the contract worded this way mean you need to take that day off?

    • Jeffrey Guyer

      My feeling is that if I can book a new client for that day, then I should…and not keep the deposit. There’s a difference between what’s legal and what’s right. Where that line is drawn is different for everybody. As far as the new contract language I copied for the article, you’d be totally in the clear if you just took the day off. Again, though, it doesn’t necessarily mean you should. But that’s just one opinion.

      • Ralph Hightower

        That’s why doctors and lawyers call their business a practice.

      • http://www.evildaystar.ca Eric Lefebvre

        But you still incurred expenses. Travel costs to go meet the potential client and sign the contract at the very least. You might have already spent 3 hours working on that shoot (diving to meet the client, 1 hour meeting, multiple emails …). That is time you have worked at this and that’s what my retainer covers.

        I don’t ask for 50%, my retainer is much smaller by comparison but it’s there to weed out people who might just be booking me for now while they find someone else and to cover my basic costs for booking the client.

  • Ricardo Mendoza

    Hi there, my name is Ricardo Mendoza and I am a freelance videographer.
    First off, I believe your intent is excellent about contracts and I must add that I would’ve handled it a little differently.
    First off, I tell my clients verbally and contractually that a deposit is non-refundable (to make it crystal clear). However, for the sake of argument, let’s say that it was only in the contract… I would’ve told her that the 50% is non-refundable BUT, I am going to make an exception for you. I am going to give you 40% and keep 10% as a reserve fee so that there’s good faith on both sides. It is stated under contract that I keep 50% rain or shine, but I don’t deal with contracts, I deal with nice people that will give me work and recommend me in the future… (or something nice to that effect)

    Here’s the reason why: My jobs depends entirely on word of mouth and we have a choice: Losing 50% OR keeping a potential client. To me, this is easy. The ROI on the potential client is much greater by keeping her happy. If she posts on facebook (which she will), “I’m dealing with a photographer from hell, never do business with Smith’s photography!!”

    That message will be broadcast to 200-500 people. 200 to 500 people. That’s a lot of potential clients and a LOT of money at stake.

    Now, if I return the 40% (or the whole 50%) and send her a thank you note and send her happy, her facebook post would be “My daughter’s wedding was cancelled, an absolute nightmare, however the photographer was nice enough to give me a full refund.”

    That kind of advertising is gold. Even if she doesn’t post anything, people talk and they’re not talking at coffee shops. They’re talking online in a very public forum and you want to be king (or queen).

    Also, I know it’s hard to part with a 50% retainer. Really hard, but it’s better to think of what you are actually getting for that money. A decision made out of scarcity or fear is never a good one, you want to be able to make those choices from a place of abundance. A place where you’re booked solid every weekend. And the only way that’s going to happen is with great marketing and advertising, and we all know what the best advertising is: word of mouth.

    The world gets smaller and smaller everyday and people talk a lot. We need to be on the good side of that talk.

    • Jeffrey Guyer

      It’s a good theory, Ricardo, but if you are working professionally without a contract, you might as well be doing a high wire act without a safety net.

      • Ricardo Mendoza

        Oh no, I do have ppl sign contracts (of course!) but I reiterare it verbally and make it clear so there is absolutely no confusion. And I believe your post still has a lot of value, because we all need to make a better contract with those terms better stated so you won’t get screwed

        • http://islandinthenet.com/ Khürt L. Williams

          I don’t think there was any confusion in this case. The family simply wanted to re-cover from their loss (the cost of a wedding) by having this photographer absorb that loss.

    • http://www.evildaystar.ca Eric Lefebvre

      “First off, I tell my clients verbally and contractually that a deposit is non-refundable (to make it crystal clear).”

      It doesn’t matter how clear you are or if they accept it at signing, if your state doesn’t recognize non-refundable deposits then you won’t be able to enforce that clause if the client goes to court.

      And you offer 40% back but they could still go to court for the remaining 10% and they would win in most states.

      I think that’s the point the author was making here.

      • Ricardo Mendoza

        Hi Eric, that is so true. It doesn’t matter how clear you are. The contract HAS to be as solid as you can make it, and that’s why I appreciate the author’s advice so much.
        Also, that is why I would rather just give the whole 50% back and move on… Having a bad rep online (and in person) will cost me future business and of course, just the threat of a lawsuit alone is motivation for anyone to give the 50% back… not worth it anyway you slice it… IMHO.

      • Jeffrey Guyer

        Great point, Eric…and absolutely correct.

  • Jason Wood

    This is good stuff to think about. The only thing I would add is that as a customer I would like to see something akin to a vacation rental agreement. Those places usually have a clause that says you get your full deposit back if the property is able to be rented out again. So that way you only use the deposit to cover actual losses. In this case, if the photographer can now pick up a gig to fill the gap, he should return the full deposit.

    • Jeffrey Guyer

      I agree, but it also becomes a question of timing. How much time have they given you– two months? One? A couple of weeks? Let’s face it– if a wedding cancels on you within 4-6 months of the wedding date, there’s little likelihood of replacing it with another wedding. If you’re looking at this question in a family portrait sitting, for example, you’re much more likely to get another client scheduled, and therefore be able to refund the full amount.

  • Matthew Fleisher

    Another great example of why photographers should charge “reservation fees” instead of deposits.

    • Jeffrey Guyer

      Unfortunately, Matthew, calling it a “reservation fee” doesn’t improve your footing all that much. The best way to protect yourself is in using the language that accounts for loss of income in the event of cancellation. By calling it a reservation fee, courts are still going to look at you and say, “Mr. Fleisher– Can you please explain to the court exactly what service you performed?” The unfortunate bottom line is that you won’t have a very solid answer.

  • Eric

    I’m not sure this is an ethical question, you can tell me in a nice way if is not.. Is there a template of a contract that is similar to yours that I can download? I’m just starting out, and am not sure where to come up a contract.

    • Jeffrey Guyer

      Eric– if you contact me through FB or my website (links in the bio), I’ll try to help you out.

  • http://www.sin3rgy-creative.com/ David Liang

    Wow! THanks for this info!

    • Jeffrey Guyer

      You’re welcome, David. Thanks for stopping by!

  • wayneleone

    Great article. BTW, did the cake shop get return the money as the cake wasn’t eaten? Did the hotel return their deposit? Did the travel agent return the monies received as there was no honeymoon? etc
    Aside from the view I have that most people view photographers as a soft touch and ‘sure they’re only taking photos’, the photographer more than anyone else (including the marriage officiant) has a personal and close relationship with the client which is susceptible to damage in this situations and often end up left in a almost blackmail situation where their reputation is at risk because the client bad mouths them.

    For me, in the situation above, make sure it’s clear, very clear at the start of the relationship that retainers/deposits are non-refundable to cover lost income and related expenses in the event of a cancellation within a certain number of days/weeks of the wedding date. I’d then email them at that point in time to RECONFIRM and REMIND them that they are now passing the point of no return regarding deposits (in a nice friendly but clear way). Then, when a cancellation such as the above occurs, only DEAL WITH THE CLIENT, NOT THE CLIENTS MUM as they didn’t sign the contract or have any part of the agreement at the start.

    • Jeffrey Guyer

      Good points, but in my situation the mother was the client. Many times when parents are paying for the wedding they are the ones who sign the contracts. As with all things, you have to walk a fine line. Knowing where to draw it takes practice.

    • Len Montgomery

      I think I would have to agree here. Why would my time consulting, visiting the venue and clearing their requirements to shoot, adding the venue to insurance, dealing with wedding coordinator, etc…all of whom will be paid for their time by the way, be less valuable than anyone else’s?
      The amount of time from the date should directly correlate with the amount of refund, if any. But in no circumstances would I ever give 100% back. If the client or parent went online making statements a defamation suit may follow.

  • https://www.facebook.com/dcrosby Dave Crosby

    Good article, noted.

  • Ralph Hightower

    “A deposit is required to reserve the date for services requested. Should the reservation be cancelled by the client for whatever reason, “cold feet”, different fiance, infidelity, or other reasons that the services are not used, the deposit will be retained.”

    I am not a lawyer. I have watched a few TV shows about the legal practice; I also have an aunt and a few cousins that are lawyers, so your revision looks like it could withstand the crutiny of Ally McBeal or Boston Legal.

    I think that you nailed it with your contract revision.

  • http://www.knoxvillepartymagic.com Christine Maentz

    You think you have it tough with deposits because you’re photographers.. try being a children’s entertainer (magic, balloons, face painting). It’s acceptable the the hotel doesn’t refund the client but when it comes to us (and you), then it’s a whole different ball game! Great article! Will repost among my community of entertainers!

  • Adrian Foster

    Are we talking US law here? Does this apply equally in Europe?

    • Jeffrey Guyer

      Hi, Adrian– I can’t speak specifically about how this issue is interpreted in Europe, but it’s been my experience that many aspects of contract law are handled similarly in Europe. Best to err on the side of caution and consult with a local attorney who can tell you for certain.

  • P.Mcdonald

    The first paragraph under “Other Things to Keep in Mind” is the true point of this article. It doesn’t matter if you have an iron clad contract, word of mouth and your reputation after denying a refund can spell the end of your business depending on where you operate and how vocal your angry ex-clients are. Being right is cold comfort when your phone stops ringing.

    My advice is to treat a deposit as if they it’s someone else’s money, put it in a separate bank account and forget it until the job is done.

  • Loic

    Contract law is state
    specific. In California, there’s established case law that holds that a deposit
    may be non-refundable if the recipient of the deposit can show damages. You can
    argue the value of the time you spent on meeting with the client and/or
    performing services thus far and the opportunity cost of not booking another
    client as damages.

  • Anna

    Jeffery, what do you think about charging a client a specific amount to ‘hold’ a specific date? To hold a date IS service executed, and then charge a remainder when the photography takes place? Is this similar to “losses caused by cancellation”?