Its not clear in your message - has the Client
actually canceled the project? Or do you suspect he might?
If the latter (and assuming the absence of any
mention of the recourse in the contract), I recommend advising him in writing
that the payment of the retainer clearly indicates acceptance of the
agreement and that you will charge them for all costs, including your labor,
plus a cancellation fee of ___ if the contract is canceled by the client for any
reason. Use whatever amount you think is appropriate to represent any
actual loss you have suffered and that you could reasonable justify, i.e., lost
profit (not total fee) on other work you turned down.
I guess most, if not all, of us will need to say
this in our input on this thread: I am not a lawyer and my thoughts/advice
are not to be taken as legal advice.
M. David Finley, P.E.
2086 SW Main Boulevard - Suite 111
----- Original Message -----
Sent: Saturday, July 05, 2003 8:07
Subject: Refundable or Non-Refundable
I have a client
that has paid a 40% retainer for the design of a custom home / with remodel. I
received his retainer a week ago with a letter from his partner agreeing to
the terms of my work agreement although I have not as yet received the signed
agreement. However, the letter was confirmation of the terms of the agreement
I sent. I confirmed receipt of the retainer and started some preparatory work
(ordering a Near Source and Soil Type report from the local Geotechnical for
example). I also spent at least ten to twelve hours of time prior to the
receipt of the retainer to discuss his design so as to identify the load paths
and the method in which I would approach the design.
After the first
visit with the client, he concluded that he wanted me to provide engineering
services. He impressed upon me that his partners who were not in the industry
were concerned with my lead times and the time it would take before they could
break ground. I told the client that I had two projects on my desk at the
moment and based on the current work load would be able to start his project
in approximately two weeks. However, I told him that I take work based on
first-come-first-serve. Once I receive his retainer and signed agreement, I
would place his project in the schedule.
It was implied
that by accepting his retainer I was placing him within a queue and would
refuse any other work that would interfere with starting and completing his
project in the order in which I received work. The only exceptions to this
are; plan check corrections and in-field construction problems that need
immediate attention. After I received the retainer, I had an offer to design a
12,000 square foot one story light-framed RV storage facility. The developer
wanted it done within the same time period as the job I received the retainer
for and I turned the RV storage project down. I have created a network for our
local engineers and to accommodate the client with the RV facility, I went
online and offered the project to anyone who would want it. It was taken by
one of our networked professionals.
My work agreement
does not indicate the return of the retainer if he should cancel the project.
He paid the retainer to insure a place in my schedule and I turned down other
work in the process. While I have time and expense involved I am not sure what
I should do regarding the reimbursement of retainer fee's. The retainer was
$3,000.00 and existing time and expense might add up to about $1,800.00.
However, I believe a penalty should be charged as I turned down other work to
protect his schedule. How much of a penalty is appropriate? Do you believe a
retainer is inherently non-refundable?
What are your
Dennis S. Wish,