If a client cancels a contract, am I legally obligated to refund a non-refundable retainer fee?
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If a client cancels a contract, am I legally obligated to refund a non-refundable retainer fee?
I have a client who seeks 8 staff members to provide quality care to their elderly aunt with late stage dementia and is non-ambulatory. It is a trustee account that funds are coming out of. I entered a verbal contract with them on 07/10 and a written contract on 07/11. The contract states that I will receive $1000 per position so an $8000 NON REFUNDABLE retainer fee to initiate the search. The retainer fee results in a 3 discount in the total fee which is now 12 of the annual projected salary of each staff member. The client, for various reason, has cancelled the contract with me and requesting a refund of the non-refundable $8000. I am legally obligated to refund that $8000 if I have a signed contract stating it is a non-refundable retainer fee to initiate search. In the 6 days since a verbal contract and 5 days since a written and signed contract, I have sourced candidates, set appointments to screen candidates, wrote a job description, posted that JD on multiple job board which cost me money, screened candidates and even submitted a candidate for consideration.
Asked on July 16, 2019 under Business Law, North Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
Contracts are binding as per their plain or explicit terms. If the contract stated in so many words that the retainer was nonfundable, you do not need to return it: in signing the contract, the client agreed that her fee was nonrefundable. The only time she could seek its return would in the case of provable wrongdoing (e.g. breach of contract; fraud) by you.
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