Retainers, Deposits, and Liquidated Damages
Photographers often ask for a nonrefundable payment to hold a date for a client’s future job. If the client’s plans change, the photographer has some compensation for the loss of business. But what should you call that payment when dealing with a client – a retainer or deposit?
The California Supreme Court examined the differences in how the word retainer is used in Baranowski v. State Bar, 24 Cal.3d 153 (1979). The Court explained that a “true retainer” is paid only to ensure the person’s availability and not for the performance of any services. True retainers are nonrefundable and earned when paid. But a retainer that merely represents an advance payment or security deposit for actual services to be performed in the future is not a true retainer. That payment is refundable unless fully earned.
A bride may be willing to pay for a photographer’s promise to hold a certain date for her wedding, but that is probably rare. The more likely use of an advance payment to photographers is to secure future services or products. According to the court, that makes the payment refundable unless earned.
But if the client backs out of an agreement, you may be damaged because you’ve made travel plans or have turned down other jobs. Money can compensate you for that damage. Agreeing ahead of time on an appropriate amount of compensation is known as liquidated damages. In essence, you are fixing the amount to be paid in lieu of performance of the contract. As long as the liquidated damages are reasonable, they are enforceable.
To make sure that you are paid the liquidated damages, you can make the security deposit equal to or more than the amount of those damages. You then have your liquidated damages in hand if the deal falls through and can return the excess to the client, if any.
In sum, don’t use the word retainer for the deposit unless it is refundable, and include a provision in your contract such as:
If Client fails to perform, liquidated damages shall be charged in the reasonable amount of $____.
Whatever you do, be clear and up front with your charges and services. Your clients will be satisfied and you will keep your business.
Take my advice; get professional help.