Retainers
making them truly non-refundable is more than saying a magic word.
Just about every contract for wedding services I’ve seen has some provision requiring payment of a certain sum that is non-refundable. As service providers, many of us small or solo businesses, we can only so one event in a day. So if a client flakes, we loss money and often, the opportunity to be hired for a replacement client. Enter the non-nonrefundable retainer.
Retainers are most commonly seen with attorneys. In a “true” retainer fee arrangement, in exchange for the client’s payment of an agreed-upon amount, the attorneys commit themselves to take on future legal work for the hiring client, regardless of inconvenience, other client relations, or workload constraints. See Banning Ranch Conservancy v. Sup. Ct. (2011) 193 Cal. App. 4th 903, 916-917.
Basically, this says that a true retainer is a payment for saving the date only. So far, I think most of us are good. Where things get tricky is where we “apply it to the balance”, which what I think most people do, and until recently, I did as well. Some courts have ruled that billing against a retainer, or applying it to a balance is more of an advance payment and should be looked at as part of the payment for services. So if no services are performed, the advanced payment is not earned and should be returned.
The better move is to think of this as a separate, itemized fee, you can call it a booking fee or retainer fee, just not deposit. (Caveat: there are no magic words, if it looks like a duck, and quacks like a duck…) A good practice in contract drafting is spelling out the purpose of the clause because this shows that the parties have a common understanding. So the retainer section should clearly state that the retainer fee is only to save the data against all other inquiries, and it is not applied to the services. A good phrase to add is that the fee is “earned upon payment”.
You’re probably wondering “What? my clients aren’t going to pay me 50% more than my package!” Yeah, you’re right, sorry, you’re not getting a raise with this. Instead, you can let your client know in the retainer section that the fee has been bundled into the package for your convenience and marketing purposes only, but it is its own separate fee.
Something else to consider is if your business is a sole proprietorship, you are your business. So if you take a retainer and you send someone else, who is not an authorized agent of your company (e.g. employed manager, or partner in a general partnership situation) to stand in on your behalf you have violated the retainer agreement and it would be refundable. Again, the drafting language needs to be very precise here, and it’s truly best left up to an attorney.
Finally, the next safety net for being compensated in the event of a flake out is your liquidated damages clause. If a court finds for some reason that the retainer fee clause is invalid and must be returned, having a clear liquidated damages clause section is key to recouping these loses.
Liquidated damages are damages that the parties agree to at the outset of the contract for a specific dollar amount that is meant to compensate the injured party in the event of cancellation or specific breach. By definition, these damages are difficult to calculate, so that parties agree to a reasonable estimate. Your LDC should specify the dollar amount and the actions/inactions that trigger the damages.
Desiree Nguyen Orth is a California licensed attorney and photographer who owns Desiree Nguyen Legal. Desiree Nguyen Legal is a modern law firm for creative small business owners using a holistic approach to legal protections and damage prevention. The information provided is for educational use only and does not constitute legal advice or solicitation. No attorney-client relationship is formed by commenting or submitting anything on this site. Please contact Desiree Nguyen Orth or an attorney barred in your state for individual legal attention.