I'm recently starting up a freelance web design sole proprietorship on the side, and a recent client of mine backed out of a contract stating that it was illegal to demand a security deposit. From my research no actual signs point to this statement as being factual, yet I would like to confirm my suspicion.
Law & Ethics - 4 Answers
Random Answers, Critics, Comments, Opinions :
1 :
When entering into a work contract, it is perfectly legal for you to set up the payment terms any way you wish. You may grant net terms, require a security deposit, or even require payment in full upfront. For work of this nature, it is customary to require a down payment prior to starting work, and then offer net 30 terms on subsequent payments. If someone doesn't wish to make any payments upfront, you should be very Leary about accepting them as a client, and may wish to check out their credit or their references first.
2 :
Of course it isn't. You could even require clients to pay in full up front if you chose.... though I suspect you'd get very little work that way. You say he "backed out of a contract". Had he already signed the contract when he changed his mind? If he had then you, of course, can sue him for your lost profit. Richard
3 :
In God We Trust. All others, pay upfront. Unless you've run their credit, or a D&B on their business, you're assuming all the risk for getting paid AFTER you've completed the work. Of course, if you're dumb enough, I mean if you choose, to run your business that way, you're entitled to do so. But nothing in the law prevents you from requiring full payment, partial payment, down payment, deposit, or retainer. The customer may be always right, but some customers you're better off without. Sounds like your client was one of them. In fact, I do occasional work for political parties. I take cash or credit card for the full amount, up front, or no work. Republican or Democrat, both have screwed me in the past. As soon as the elections are over, the checks bounce and the temporary corporations they created have been dissolved.
4 :
I set up my freelance/contract work to be paid on a 40-30-30 schedule. 40% deposit up front to begin the contract. 30% payment is due when the initial design & content are fully approved. The final 30% due when the final files are delivered to the clients server and the site is live and functioning. 40-30-30 is pretty common in the industry
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