# To Return Deposit in Part or Not



## ContractorChick (Apr 4, 2013)

I run a design/build firm, and I recently had a client engage me for a kitchen and bath reno. The initial budget was good if not roomy, but the clients requests increased significantly as the planning for the job progressed, ballooning far beyond the initial budget. We gave verbal confirmation of the budget changes (our big mistake, should have gotten written changes), to which the client gave the go ahead each time. (To be fair I was uncomfortable with the client from the start as they seemed far too loose with big financial leaps, but they work in a high income earning sector and I assumed that they were ok with their decisions). Generally the design to conctract process takes little over a week and a half wherin we have sign contracts and deposits. In this case we never got to a contract stage as everything kept changing, budget increasing, etc. We did come to a verbal decision to go ahead with part of the job and got a deposit, on which we ordered all the materials for this part. (This process has now been nearly two months and we have not been paid yet). Once we presented the final numbers for the whole job the client freaked out. (Again we take the blame for not getting written confirmation). We went back to the drawing board, reworked the numbers, the materials, etc, even went so far as to call a few fellow contractors to put in bids for the job in hopes of giving the job to someone who could come in cheaper. Needless to say they were higher than we were, so we whittled what we could and sent the bids, total budget, and total cost to the client to have as much transparency as possible. The client essentially said they wanted us to do the job with no profit and no design fees, and went so far as to say we needed to basically pay for a large portion of the job. (there were many sleepless nights). Now almost 3 months since the start of this odyssey, the client has pulled the plug (much to our relief), but now want the deposit back for a job that is supposed to start in less than a week. We responded that a refund is possible less the restocking fees that we will be charged. (again we are making no money on this or any transaction we have had with this client). The client has said that we must suck up the cost of the deposit fees. Honestly we did our best(and beyond) to meet the extremely unrealistic expectations of this client, and accepting our mismanagement of the clients expectations (and this is not something that has happened before, we have built a number of fine homes and run many renovations). Are we entitled to keep the restocking fees (sucking up the costs of the 80+ staff hours that have been spent on this client)? We are really sad that this relationship went so badly, but feel in some ways that we have been manipulated. Advice is well appreciated.


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## Seven-Delta-FortyOne (Mar 5, 2011)

Why would you not refund them the deposit, less restocking fees and design services fee?

It's not the fault of your company that the client has Filet Mignon taste with a BigMac buget, is it?


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## hdavis (Feb 14, 2012)

Minus restocking and design fees. Any third party would think you should be paid for services rendered. Designers get paid whether there is a build or not. Return whatever is left over. 

Could be they just saw what they'll have to pay in taxes this year and put a lock on their wallet, and are looking for any money they can grab, at this point. Tough to say, but that's a pattern I've seen before.


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## essrmo (May 2, 2007)

rambling first post for a GC. Is this your first rodeo?


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## MelFallen (Nov 28, 2012)

I don't think you owe them anything. Sure, you don't have a written agreement (lesson learned) but in some states (not sure where you're from) verbal contracts are binding. It's difficult, I'm sure, but you're not making any money on this and it seems like you've also lost money in the process so, in my opinion, you shouldn't return their deposit.


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## EthanB (Sep 28, 2011)

Two things:

-Use paragraphs.

-What does your contract say about the deposit and refunds?


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## ContractorChick (Apr 4, 2013)

To respond: This is not my first rodeo, but it is my first time having a client go this sideways, hence the forum entry. 
Lack of paragraphs= late night posting 
My contract states that the client gets a full refund of deposit within 3 business days of signing the contract. After that the deposit is non refundable (although I generally refund anything that I can less the stocking fees). The problem is that we never got to contract stage due to the job continually changing 
I do feel that I should recouperate some of my design fees as the client now has workable plans and product list that they can take elsewhere, but I feel a certain amount of responsibility to this job as I feel that there was clear client expectation mis management on my own end as well-through not getting written confirmation of the changes taking place- (which was exacerbated by the client taking advantage of the willy nilly changes going on to try and get a "deal") 
I thank you all for your input and I think I will proceed by returning the deposit less the stocking fees. 
Cheers


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## kevjob (Aug 14, 2006)

If you ordered any materials I would have them delivered and then figure out how many hours you have in the project and deduct that from the original deposit. 

From here on out use a design contract as to eliminate the verbal back and forth.


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## RAM3500 (Apr 5, 2013)

I would give the deposit back less the restocking fees. The gave the deposit you did your part and ordered materials as you should with deposit money then they pulled out on you. 
I would give them a copy of all receipts so they don't think you are sneaking them in any way and treat it like any job and send some form of invoice etc. 
Hope this helped you out


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## cabinetsnj (Jun 10, 2012)

hdavis said:


> Minus restocking and design fees. Any third party would think you should be paid for services rendered. Designers get paid whether there is a build or not. Return whatever is left over.
> 
> Could be they just saw what they'll have to pay in taxes this year and put a lock on their wallet, and are looking for any money they can grab, at this point. Tough to say, but that's a pattern I've seen before.


If you can account for the money you keep, then there is no problem keeping it.

Send the company a detailed receipt of the expenses charged. If there is no money left then there is nothing left. They spent their money unwisely which is not your concern.


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## iggy (Mar 3, 2013)

Speak with an attourney before you do anything. Laws vary and what we may think fair is not always what is legal.


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## CITY DECKS INC (Sep 4, 2012)

ContractorChick said:


> I run a design/build firm, and I recently had a client engage me for a kitchen and bath reno. The initial budget was good if not roomy, but the clients requests increased significantly as the planning for the job progressed, ballooning far beyond the initial budget. We gave verbal confirmation of the budget changes (our big mistake, should have gotten written changes), to which the client gave the go ahead each time. (To be fair I was uncomfortable with the client from the start as they seemed far too loose with big financial leaps, but they work in a high income earning sector and I assumed that they were ok with their decisions). Generally the design to conctract process takes little over a week and a half wherin we have sign contracts and deposits. In this case we never got to a contract stage as everything kept changing, budget increasing, etc. We did come to a verbal decision to go ahead with part of the job and got a deposit, on which we ordered all the materials for this part. (This process has now been nearly two months and we have not been paid yet). Once we presented the final numbers for the whole job the client freaked out. (Again we take the blame for not getting written confirmation). We went back to the drawing board, reworked the numbers, the materials, etc, even went so far as to call a few fellow contractors to put in bids for the job in hopes of giving the job to someone who could come in cheaper. Needless to say they were higher than we were, so we whittled what we could and sent the bids, total budget, and total cost to the client to have as much transparency as possible. The client essentially said they wanted us to do the job with no profit and no design fees, and went so far as to say we needed to basically pay for a large portion of the job. (there were many sleepless nights). Now almost 3 months since the start of this odyssey, the client has pulled the plug (much to our relief), but now want the deposit back for a job that is supposed to start in less than a week. We responded that a refund is possible less the restocking fees that we will be charged. (again we are making no money on this or any transaction we have had with this client). The client has said that we must suck up the cost of the deposit fees. Honestly we did our best(and beyond) to meet the extremely unrealistic expectations of this client, and accepting our mismanagement of the clients expectations (and this is not something that has happened before, we have built a number of fine homes and run many renovations). Are we entitled to keep the restocking fees (sucking up the costs of the 80+ staff hours that have been spent on this client)? We are really sad that this relationship went so badly, but feel in some ways that we have been manipulated. Advice is well appreciated.


my contract states x amount of dollars is non refundable period. if you do make sure it's less what you are in to it + aggravation tax..


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## jimmys (May 1, 2009)

+2 on check with atty. I think a judge will agree you had a poor contract but performed work for the owner, for which you should be paid. 
Jim


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## cabinetsnj (Jun 10, 2012)

The best thing is to have a contract that spells everything out.

You need to hire a lawyer and have him or her write you a good contract. The contract should have a clause that says if the project is canceled in the middle, the client will be charged for work done up to that point.


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## jamestrd (Oct 26, 2008)

ContractorChick said:


> I run a design/build firm, and I recently had a client engage me for a kitchen and bath reno. The initial budget was good if not roomy, but the clients requests increased significantly as the planning for the job progressed, ballooning far beyond the initial budget. We gave verbal confirmation of the budget changes (our big mistake, should have gotten written changes), to which the client gave the go ahead each time. (To be fair I was uncomfortable with the client from the start as they seemed far too loose with big financial leaps, but they work in a high income earning sector and I assumed that they were ok with their decisions). Generally the design to conctract process takes little over a week and a half wherin we have sign contracts and deposits. In this case we never got to a contract stage as everything kept changing, budget increasing, etc. We did come to a verbal decision to go ahead with part of the job and got a deposit, on which we ordered all the materials for this part. (This process has now been nearly two months and we have not been paid yet). Once we presented the final numbers for the whole job the client freaked out. (Again we take the blame for not getting written confirmation). We went back to the drawing board, reworked the numbers, the materials, etc, even went so far as to call a few fellow contractors to put in bids for the job in hopes of giving the job to someone who could come in cheaper. Needless to say they were higher than we were, so we whittled what we could and sent the bids, total budget, and total cost to the client to have as much transparency as possible. The client essentially said they wanted us to do the job with no profit and no design fees, and went so far as to say we needed to basically pay for a large portion of the job. (there were many sleepless nights). Now almost 3 months since the start of this odyssey, the client has pulled the plug (much to our relief), but now want the deposit back for a job that is supposed to start in less than a week. We responded that a refund is possible less the restocking fees that we will be charged. (again we are making no money on this or any transaction we have had with this client). The client has said that we must suck up the cost of the deposit fees. Honestly we did our best(and beyond) to meet the extremely unrealistic expectations of this client, and accepting our mismanagement of the clients expectations (and this is not something that has happened before, we have built a number of fine homes and run many renovations). Are we entitled to keep the restocking fees (sucking up the costs of the 80+ staff hours that have been spent on this client)? We are really sad that this relationship went so badly, but feel in some ways that we have been manipulated. Advice is well appreciated.


No reason to take a deposit if the client can cancel any time they feel like it and just get their money back..

Its to cover any costs that start to accrue for their project including clerical ,materials design estimating fuel whatever.

They now have skin in the game
That they risk losing if they jerk you around..

Your only mistake is no contract..
Consumer protection laws work against you now..

In this case reimburse..

You can probably get away with keeping some as their amount to sue for will be minimal and with no work performed contract amount. they have no real financial claim for the consumer protection act..


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## skyhook (Mar 17, 2007)

ContractorChick said:


> To respond: This is not my first rodeo, but it is my first time having a client go this sideways, hence the forum entry.
> Lack of paragraphs= late night posting
> My contract states that the client gets a full refund of deposit within 3 business days of signing the contract. After that the deposit is non refundable (although I generally refund anything that I can less the stocking fees). The problem is that we never got to contract stage due to the job continually changing
> I do feel that I should recouperate some of my design fees as the client now has workable plans and product list that they can take elsewhere, but I feel a certain amount of responsibility to this job as I feel that there was clear client expectation mis management on my own end as well-through not getting written confirmation of the changes taking place- (which was exacerbated by the client taking advantage of the willy nilly changes going on to try and get a "deal")
> ...


Ca. has the 3 day right to cancel law. After that, you have the right to invoice any amount you have into the job.
I usually waive the deposit until some work has been performed, then get a check or take the deposit and wait 3 days before mobilizing to the job. 
BTW, it's better to call it a down payment or something other than Deposit, since there are so many negative connotations perceived with the word. http://dictionary.reference.com/browse/deposit?s=t


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## CarpenterSFO (Dec 12, 2012)

How much money is on the line? Total job value? Materials ordered? Restocking charges?


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## essrmo (May 2, 2007)

ContractorChick said:


> To respond: This is not my first rodeo, but it is my first time having a client go this sideways, hence the forum entry.
> Lack of paragraphs= late night posting
> My contract states that the client gets a full refund of deposit within 3 business days of signing the contract. After that the deposit is non refundable (although I generally refund anything that I can less the stocking fees). The problem is that we never got to contract stage due to the job continually changing
> I do feel that I should recouperate some of my design fees as the client now has workable plans and product list that they can take elsewhere, but I feel a certain amount of responsibility to this job as I feel that there was clear client expectation mis management on my own end as well-through not getting written confirmation of the changes taking place- (which was exacerbated by the client taking advantage of the willy nilly changes going on to try and get a "deal")
> ...


well, how did it go down? 
hope I didn't scare you away with a little ribbing. :jester:


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## AlbacoreShuffle (Aug 26, 2011)

If you truly have 80 hours in to this deal I would tell them to go pound rocks !


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## Deckem (Jan 27, 2011)

Do you have email or other types of records of conversations. In most states you are entitled to compensation for your time. I would talk with local legal advisers. I would give them the plans they paid for and not the refund, as long as I am within my rights, at this point even if you refund the customer they are going complain about you every chance they get!


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