Client cancelled: can you keep the deposit? UK freelancer rules

Only if the contract says you may. There is no default UK right to keep a deposit or charge a kill fee when a client cancels. That right has to be agreed. For a business client, an agreed cancellation charge must not be a penalty. For a consumer, a 14-day cancellation right can apply, and the term must be fair.

A deposit is money paid up front. A kill fee is a sum due if they cancel the job. They only exist as rights if both sides agreed them — in a signed contract, a proposal they accepted, or a clear email that names the amount and what happens on cancellation.

Who the client is then splits the page:

• A business client (a company, or a person buying in the course of business). The agreed cancellation charge must not be a penalty under Cavendish Square Holding v Makdessi [2015] UKSC 67.
• A consumer (an individual acting wholly or mainly outside their trade, business, craft or profession). Distance and off-premises contracts carry a 14-day cancellation right under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Cancellation terms are also tested for fairness under the Consumer Rights Act 2015.

This page is England and Wales first. The copyright and consumer statutes cited here are UK-wide. The money-claim route for an unpaid balance is the England and Wales procedure in What do I do when a client won't pay my freelance invoice.

No. A deposit and a kill fee exist only if both sides agreed them. Emails, a proposal or a signed contract can record that agreement. If nobody wrote a cancellation sum, you can still charge for work they asked you to do. You cannot invent, after they cancel, a right to keep money never agreed as a deposit.

What a silent job still supports:

• Payment for work they asked you to do. If they commissioned the work and you did it, that is a contract. You can invoice for the work performed.
• Costs you already committed because they asked you to — a studio, a freelancer you booked, a location fee — where that spend followed from the job they ordered.

What it does not support:

• Keeping a “deposit” that was never described as a deposit, never named as non-refundable, and never tied to cancellation.
• A kill fee pulled out of the air after the cancellation email.
• Treating a first invoice as a cancellation charge because that is what you wish you had written.

Termination for convenience is the off-switch that does not need a breach. If the client can walk away without a reason, the paper has to say what is paid at that point. A convenience clause with no money attached is how a cancel-the-week-before email costs them nothing.

Next time, start from a videography contract or a freelancer agreement and put the deposit, the kill fee and the convenience exit in the same draft.

An agreed cancellation charge that is really a sum payable on breach is unenforceable if it is a penalty. Cavendish Square Holding v Makdessi [2015] UKSC 67 asks whether a secondary obligation imposes a detriment out of all proportion to a legitimate interest in performance. Tie the figure to time held, costs committed and other work turned down.

The Supreme Court in Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67 restated the penalty rule. A clause is a penalty if it is a secondary obligation which 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. The innocent party has no proper interest in simply punishing the defaulter.

Two distinctions matter on a freelance job:

• Primary vs secondary. A genuine cancellation charge that is the agreed price of a contractual right to cancel — termination for conveniencetermination for convenienceTermination for convenience means one side can end the contract without claiming the other side did something wrong, usually after giving notice.More in the glossary in return for a named sum — is a primary obligation. The penalty rule is aimed at secondary obligations, the sums that bite on breach.
• Legitimate interest. Time you held, other work you turned down, crew and kit already committed, and the cost of a gap in the diary are interests in performance. A round-number 100% from the day they sign, with no link to those interests, is the shape that looks like punishment.

Write the interest on the page. A sliding scale that rises as the date gets closer is easier to stand behind than a flat maximum from day one. Credit the deposit to that sum so you are not charging the same loss twice.

If they cancel and then do not pay the agreed cancellation sum, that unpaid sum is a debt. Chase it as a debt: written demand, letter before action, money claim. Client won't pay a UK freelance invoice is that sequence, including statutory interest on a qualifying business-to-business debt under the Late Payment of Commercial Debts (Interest) Act 1998.

A consumer who agreed at a distance or off-premises has 14 days to cancel under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. If they asked you to start early, they pay a proportionate amount for what you supplied. A term that keeps a large deposit regardless is tested for fairness under the Consumer Rights Act 2015.

A consumer, for these Regulations, is an individual acting for purposes wholly or mainly outside that individual's trade, business, craft or profession (regulation 4). A couple booking a wedding film is a consumer. A brand booking a campaign is not.

The 14-day right. For a distance or off-premises contract, the consumer may cancel during the cancellation period without giving a reason (regulation 29). For a service contract, that period ends at the end of 14 days after the day the contract is entered into (regulation 30(2)). A distance contract is one concluded without both of you in the same place, using distance communication such as email, phone or a website (regulation 5). An off-premises contract is one concluded away from your business premises. An on-premises contract — signed together at the studio — is neither, and this 14-day right does not apply to it.

Early start. You must not begin the service during the cancellation period unless the consumer has made an express request, and for an off-premises contract that request must be on a durable medium (regulation 36(1)). If they then cancel, they pay an amount in proportion to what has been supplied, compared with the full coverage of the contract, calculated on the agreed price (or market value if that price is excessive) (regulation 36(4)–(5)). They bear no cost for that supply if you failed to give the required cancellation information, or if the service was not supplied in response to that request (regulation 36(6)). If the service has been fully performed after such a request, and they acknowledged they would lose the right to cancel once it was fully performed, the right to cancel ends (regulation 36(2)).

Fairness. An unfair term of a consumer contract is not binding on the consumer. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer (Consumer Rights Act 2015 s.62). GOV.UK’s guide to writing a fair contract says cancellation charges should reflect a genuine estimate of what you will lose directly because the customer cancels, and that non-refundable deposits are more likely to be fair if they are a small percentage of the price and you say when they are kept. GOV.UK’s consumer guide to cancelling says a business is generally only entitled to keep or receive an amount sufficient to cover actual losses that directly result from the cancellation, and must take reasonable steps to reduce those losses.

A “non-refundable deposit, no cooling-off” line does not remove a 14-day right the Regulations give. It is also the shape GOV.UK treats as likely to be unfair.

The same cancellation email is a different legal problem depending on who the client is. A company buying in the course of business is not a consumer. A couple booking a wedding film usually is. The table below sets the two tracks side by side: default rights, cooling-off, penalties and fairness. Read the row that matches your client.

If you are not sure, ask how they are buying. A sole trader booking a brand film for the business is not the same as that person booking their own wedding. The contract should record which it is.

Say when the deposit is due, that work does not start until it lands, and what is kept if they cancel for convenience. A sliding scale that rises as the date gets closer is easier to justify than a flat 100% from day one. The wording below is an example, not a required rate.

A working clause answers five things:

• when the deposit is due, and that work does not start until it is received
• that the deposit is credited to the fee if the job goes ahead
• what is kept, or what extra is due, if they cancel for convenience — the kill fee
• that committed costs sit on top if they are higher
• who owns unpaid work if the job stops

Example

The Client will pay a Deposit of 30% of the Fee on signature. The Freelancer will not start the Services until the Deposit is received. If the Client cancels for convenience, the Client will pay a kill fee of 25% of the Fee if cancellation is more than 14 days before the start date, or 50% if cancellation is 14 days or fewer before the start date or after work has started, plus committed costs already incurred. The Deposit is credited to that kill fee and is the minimum kept. Fees for work already performed are paid if higher. Intellectual property in work not fully paid for stays with the Freelancer.

In Plain English: 30% lands before you start. If they call it off, they pay 25% when there is still a fortnight in hand, or 50% once you are inside two weeks or already working, and they cover costs you have already committed. The deposit counts towards that. They do not own unpaid work.

That sliding scale is an example. It is not a statutory rate, and it is not a rate we charge. For a consumer client, the same shape still has to be fair, cannot remove a 14-day right the 2013 Regulations give, and should track actual loss rather than a round number you cannot explain.

A videography contract is the usual home for a booking fee, a shoot date and a cancellation scale. A freelancer agreement carries the same deposit and kill-fee lines for other jobs. The termination clause is where the convenience exit sits.

On Contracts.io both sides draft, negotiate and e-signe-signatureAn e-signature is any electronic way of showing agreement to a document, such as a typed name, a drawn signature or a click.More in the glossary one shared contract, so the deposit and kill fee are the version you both signed. Start from a videography contract or a freelancer agreement. The client opens one link. Nobody emails v4_final.docx back and forth. Cancellation money is then a signed line, not an argument after the fact.

You describe the job in a sentence. Lex drafts the agreement. You share one link. The client can Accept, Counter or Decline on that same version, then both of you e-sign it. The other side never pays and does not need an account.

That does not keep a deposit that was never agreed. It does mean the deposit, the kill fee and the termination for convenience line are the words you both signed, not a hope in a later email.