When Your Client Goes Bust Without Paying


A few months back I was contacted by a local design agency that I hadn’t worked for before. They needed help with some new visuals for a large project for one of their clients. We agreed a fee, I went to meet them and made a start on the project. The project went well (I always tend to go above and beyond the call of duty for new clients) and everyone was happy with the work I produced. Great. I sent my invoice over and got back to working on various other projects I had with other clients.

Show Me The Money!

30 days went by and no money was showing in my bank account. I contacted the client and told them the invoice was now due for payment, they informed me it was due to be paid shortly. No surprises when a couple more weeks went by and still no money. This dragged on for weeks and weeks. I sent solicitors letters, even contacted a debt collector to help out. Unfortunately it was all in vain and I found out on the grape vine that the agency had ceased trading without paying my invoice. Damn.

There are probably a few things I could have done that would have helped avoid this situation but we live and learn. I’ve always found it particularly difficult to enforce deposit payments for work with design agencies. It’s often very last minute and isn’t really the done thing.

The Plot Thickens

The situation I now find myself in is that the initial project that I produced the design work for is due to launch shortly. The design agency’s client continued on with the project and found another agency to take over the development work. The fact that my design work is about to be used without me ever having received a penny for it doesn’t sit well with me and has left a bad taste in my mouth and I’m now left considering my options. Assuming the end client paid the design agency that has since ceased trading they’re not exactly going to want to pay for the design work twice but something about the whole situation seems so wrong.

Your Thoughts

What would you do in my situation? Have you ever had a similar situation? I’d really like to know your opinions.

Comments


Gary Hartley:

12 May 2011 22:59:49

Hi Dave,

Being fresh into the freelance world myself I can’t really share my experienced thoughts on the matter though I wholeheartedly agree that something seems so wrong with this situation though without the experience or knowledge on the matter I could advise on the best cause of action.

Were any contracts signed? Do you have an audit trail of your communications with the liquidized agency? Who owns copyright of your designs? This maybe useful reading http://www.kelek.com/freelance/ownership.html

Have you contacted the end client to discuss the situation? I would certainly touch base with them as they maybe accommodating to your situation.

I’ll keep an eye on progress if/when you hit a resolution.

-G

James:

14 May 2011 13:08:10

Dave,

Sounds like a real shit of a situation but one that I doubt you’d be alone with.

As far as I know, until you’re paid (and even after you’re paid unless otherwise specified in contract) you retain all copyright and intellectual property rights to any work you’ve done and as such, the new agency/client would potentially be in breach of your copyright if using work that’s not been paid for.

It may also be worth contacting the liquidators of the bust agency to see if there’s any luck there but I doubt you’ll get much money wise.

May be worth getting in touch with https://twitter.com/#/SteveKuncewicz who’s been helpful with general advice for several designers on my timeline on twitter. Maybe something he could suggest that you’ve not considered.

Good luck!

James.

Robert:

20 May 2011 18:43:58

Dave,

Hey. I’ve run into this myself. Oddly enough, it was the first client I spoke to about getting a deposit from, up-front. He paid half, I created what he wanted, he liked it, and then he never contacted me again. I assume he realized he couldn’t pay up and that, perhaps, I was faster than he expected.

I never gave him the work. The thing to remember is that you can host your own work in a directory, until the client is happy with it. Once the payment goes through, you can give them the work. If you’re an honest bloke, as I’m sure you are, you’ll be fine…and you’ll get paid. Meanwhile, if you had to give up a design for print work, that’s different.

What I suggest is to always create a statement of work that you both sign. If you can’t get a signature, or don’t want to go through all of that, at least get them to send you emails and/or complete a form with the details you require. If you can get signatures or emails straight from them, you may have some legal pull. At least that works in America, generally. I wish you luck.

Robert

Dawn:

09 Oct 2011 00:57:42

Hi Dave, sounds all so familiar. It has happened once with me, it was my first freelance design gig and I was ever so eager to get a move on with things. I was recommended by a small agency who were to develop the site and I was asked to design the interface. Cool, I thought.

Sadly I didn’t draw up a contract because A) I was new and naive to the freelance world back then and B) I figured the client was trustworthy as they had previously worked with the agency. So, I got to work on the site and the client was happy with it. I sent it to the agency (the client was to pay me directly) and all was well.

Sent the invoice via email and didn’t hear back from the client for a few weeks. Sent reminders and even tried to get in touch via phone. I finally got the picture after the client hung up on me when I did get him on the phone. Without a contract I was unable to make a strong case. Now I cover myself completely with a contract.

I think the above commenters are right in that you own the copyright for the work until payment has been received but I’m not 100% on that. It’s so easy to assume agencies go by the books but sadly it’s not always the case. From what I’ve read in your post I wouldn’t be surprised if other designers have been affected by the recent financial swamp they’ve gotten themselves into.

Evan:

14 Mar 2012 13:48:32

I am in a similar situation and I wanted to know where I legally stand as to receiving payment for design work from a company that is in liquidation? Am I still entitled to be payed for the work I have done regardless of their business status?

RONALDM258:

20 Mar 2012 17:14:52

Its sounds harsh had quite the same thing happen to me. But it was more a scam and I was desperate and was new to freelancing and all its in’s and out’s.

Dave:

24 Mar 2012 09:08:59

Evan – to be honest I still don’t know the legal stance. I hope you get your money though, it’s not nice when it happens at all.

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