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Payment milestones and deposits clause, explained
A milestoneA milestone is a defined point in a project, often tied to a deliverable and a payment.More in the glossary-and-depositA deposit is money paid up front, before the main work or the final invoice.More in the glossary clause splits the fee across a booking sum and named stages, and says when each sum is due.
Last updated 28 October 2026
What does a payment milestones and deposits clause do?
A milestones-and-deposits clause splits the fee across a booking sum and named stages, and says when each sum is due. English law does not imply a deposit; the figure is the one you write. A forfeited deposit is tested as a penalty under Cavendish [2015] UKSC 67. We put the stages next to the work.
How should a deposit be structured?
Name the sum, when it is due, and whether it is credited against the fee. A booking fee that is earned on signature is a different animal from a deposit held against later invoices. On a consumer wedding or portrait job, fairness under the Consumer Rights Act 2015 still matters. On a business job, write the number. See deposit and our cancellation guide.
How do milestones line up with deliverables?
Each milestone should match a thing the client can see: a signed-off concept, a first cut, a launch. A milestone that is only ‘end of month’ is how a dispute about quality becomes a dispute about money. Tie invoice dates to acceptance. Put the remaining balance next to final delivery, not next to a vague ‘completion’.
What happens if a stage is late because the client is late?
Write a client-delay rule. If feedback, assets or access are late, the milestone date moves by the same number of days, and any waiting time may be charged. Without that sentence, a supplier who invoices on a date the client blocked still looks like the late party. Pair it with payment terms and, on a commercial debt, late-payment interest.
Is a forfeited deposit a penalty?
It can be. Cavendish [2015] UKSC 67 asks whether a secondary obligation imposes a detriment out of all proportion to any legitimate interest in the primary obligation. A deposit that matches committed costs and lost diary time is the shape that stands. A 100% forfeiture on a week’s notice, with no costs, is the shape that is attacked. If you mean a kill fee, write a kill feeA kill fee is a payment due to a creator or supplier when a client cancels a project before it is finished.More in the glossary. See cancellation.
Example wording
Example · our own drafting
The Client will pay a deposit of [30]% of the Fees on signature, credited against the last invoice. The remaining Fees are invoiced on the Milestones in the scheduleA schedule is an annex to the contract that holds the detail: fees, dates, deliverables, service levels. It is part of the agreement if the main body says so. An order-of-precedence line should say what happens if the schedule and the clauses collide. Swap a schedule only by the variation method the contract names.More in the glossary: [concept sign-off], [first cut], [delivery]. If the Client delays feedback or assets, the affected Milestone date moves by the same number of days. A deposit is not refundable once work has started, except as a credit against Fees for work done if this agreement ends under the cancellation clause.
In Plain English
The client pays 30% on signature, and that sum comes off the last invoice. The rest is billed when named stages are done: concept signed off, first cut, delivery. If the client is late with comments or files, those dates move by the same number of days. Once work has started the deposit is kept, unless the job is cancelled and it is used to pay for work already done.
What should you watch for?
| Point | Watch for | Push for |
|---|---|---|
| Deposit | Silence, or a 100% upfront demand with no booking logic. | A named percentage due on signature, credited against the last invoice. |
| Stages | Milestones that are only dates, with no deliverable attached. | Each invoice tied to a thing the client can accept. |
| Delay | Supplier dates that do not move when the client is late. | A day-for-day extension, and a right to charge waiting time. |
| Forfeiture | Keep the whole fee on any cancellation, with no costs behind it. | A deposit or kill fee that tracks committed costs, tested against Cavendish. |
| Late pay | Milestone invoices with no interest or pause right. | The same late-payment and suspend-work rules as the rest of the fee. |
Which contracts include it?
Lex includes this clause in, among others:
- Freelancer agreement
- statement of workA statement of work (SOW) is a document that describes the specific work, deliverables, timeline and fees for one project.More in the glossary
- Videography contract
What does the law say?
Statutory interest on late payment of commercial debts is set by order under the Late Payment of Commercial Debts (Interest) Act 1998; gov.uk states the rate as 8% plus the Bank of England base rate.
Source: Late Payment of Commercial Debts (Interest) Act 1998, s.6; gov.uk guidanceChecked 7 October 2026Pending lawyer review
A clause is an unenforceable penalty if it is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
Source: Cavendish Square Holding BV v Talal El Makdessi, [2015] UKSC 67Checked 28 October 2026Pending lawyer review
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Frequently asked questions
What does a payment-milestones-and-deposits clause mean?
It splits the fee across a booking sum and named stages, and says when each sum is due. English law does not imply a deposit; the figure is the one the contract states.
How should a freelance deposit be structured?
Name the sum, when it is due, and whether it is credited against later invoices. A booking fee earned on signature is different from a sum held against the last invoice. Write which you mean.
Should each milestone match a deliverable?
Yes. Tie each invoice to something the client can see and accept — a signed-off concept, a first cut, a launch — not only to a calendar date. See /glossary/milestone.
What if the client delays a stage?
Write that milestone dates move by the same number of days as the client delay, and that waiting time may be charged. Without that, a blocked date still looks like the supplier’s miss.
Can a forfeited deposit be a penalty?
Yes, if it is a secondary obligation out of all proportion to a legitimate interest, under Cavendish [2015] UKSC 67. Match the kept sum to committed costs and lost diary time, or write a kill fee instead.
Sources
- Late Payment of Commercial Debts (Interest) Act 1998, s.6; gov.uk guidanceChecked 7 October 2026Pending lawyer review
- Cavendish Square Holding BV v Talal El Makdessi, [2015] UKSC 67Checked 28 October 2026Pending lawyer review
Related
The legal wording governsLast reviewed 28 October 2026Pending lawyer review