Contracts: Using 'Retainer Fee' vs. 'Deposit'

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Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby CJ Greiner » Tue Sep 21, 2004 5:12 pm

I guess it's about time to start including some of the educational content...

Here's one that may require a little input from our more legally-adept members:

Contracts: Using "Retainer Fee" vs. "Deposit"

I've heard it time and time again from all sorts of sources, and I've updated my contracts, webpages and marketing material to suit...

USE THE TERM "Retainer Fee" INSTEAD OF "Deposit" :!:

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The reason? Well, they have different meanings... and if you ever get "canceled" by a client, or if you ever have to refund $$$ based on a missed or changed performance date -- you'll want to charge a fee that you can keep.

That's right: If a client ever presses the matter -- they can get a "Deposit" back!
Why? Well, it's because a Deposit is considered to be the first payment towards the total due for a service. Most contracts are written to provide that service between certain hours on a specific date.
If for any reason that service is not provided or canceled by the client... then the client can request that the total amount paid for that service be refunded.
Since the Deposit was simply the first payment towards the service that wasn't performed... that has to be refunded too!
Just because you have the client sign a contract that says "Non-Refundable Deposit"... doesn't mean that it's not refundable in a court of law!

Now, there are ways to try and keep the "Deposit", such as suggesting to the client that they apply it towards a new date, etc. BUT: if they really want it back--they can get it back!

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The alternative: Use the term "Retainer Fee".
The retainer fee may be part of the total price that you quote to your client, but it's different from a Deposit:
A Retainer Fee is charged to book a specific date -- to hold it for that client and no other.
Additionally, the retainer fee can be used by the DJ to pay for expenses incurred while being "retained" by the client -- even prior to the actual event.
Some of those expenses include telephone, email and in-person consultation time, paperwork and mailing costs, equipment and music preparation time, etc.
The key: You can earn your retainer fee long before you ever earn a deposit or performance fee!

WHAT TO DO:
Change all of the wording in your contracts, on your websites and in all of your marketing material to "retainer" or "retainer fee" (i.e. "Non-refundable retainer fee")
Make sure that when you discuss your services with your client that they understand that it's a retainer fee, and what it's for.
It also helps to keep track of the time spent on a particular event/client so if it ever comes up... you can prove that the money was spent on securing the date and event preparations.

Here's an example of the clause from my contract:
6. Total retainer plus performance fee agreed upon is $________. A non-refundable retainer of $________ is required to secure Smithfield Entertainment for the engagement. The remaining balance of the performance fee must be paid in full before the start of the engagement. Any payments received less than 2 weeks before the engagement must be by cash, credit card, money order, certified check, or corporate check. Personal checks are accepted up to 2 weeks before the engagement. All checks shall be made payable to Smithfield Entertainment.

In conjunction with that... here's the part about refunds:
13. This agreement cannot be canceled except by mutual written consent of both the Purchaser and Smithfield Entertainment. If cancellation is initiated by the Purchaser in writing and agreed to by Smithfield Entertainment in writing, Purchaser will be required to pay (in addition to the retainer fee) any unrecoverable costs already incurred by Smithfield Entertainment (but not more than the total fee agreed upon). Otherwise Purchaser shall be obligated to make full payment of the total fee agreed upon.


Make sure that whatever wording you choose to use in your contract is approved by your attorney -- he's the one that has to defend it in court!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby jwg » Tue Sep 21, 2004 7:42 pm

CJ:

I have used the term 'retainer fee' for several years now. And i changed it because of a post on the boards back then.

Mine says:

Purchaser will make payment in cash, check or money order as follows: a $xxx.00 retainer fee is to be paid when signing this agreement, the remaining amount of $xxx.00 is to be paid to John W. Gallagher one (1) week before the date of the event. In addition, any overtime is to be paid the date of the event OR included in the final balance due.

RETAINER FEE IS NON-REFUNDABLE
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby Dan the Music Man » Wed Sep 22, 2004 5:05 am

Great topic! This has been an issue for some time. I call it a "retainer fee" also. I've started using this about two years ago and it works great! I tell my clients that I have to charge a fee to help cover expenses and that they are "booked" on my calendar. (which means I'm telling everyone else that I'm not available whether they call or check the date on my website)

Another thing that I've added was full payment is due at the music consultation (usually thirty days before the dance). I want that check to go through my business account to make sure it clears. I just tell my clients that it's for my protection. "I'm not saying that you would do this but I've had it happen to me before and I truly care about staying in business!" The clients understand and don't have a problem paying me ahead of time. I also state that, "It's one less thing for them to worry about getting the check to me at the end of the night. (the best man gets drunk and takes the check home with him or better yet, they forget to pay me!) I would rather know if the dance is going to happen thirty days before than to call the week of to see that it's cancelled.

One other thing, I used to be 30 days, then I went to 60 days, NOW I'm at 90 days and the client is locked in for the final payment. Can I really book a Wedding dance after a client has cancelled 30 days, 60 days or even 90 days out? I think not. I just changed my contract and wouldn't you know, a mother of the bride signed it and backed out 83 days before the Wedding? Now, how do I replace that when I've been telling everyone that I'm booked?

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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby djlouie » Tue Sep 28, 2004 11:05 pm

I use the word reservation fee, is that ok too? or should I change it?
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby CJ Greiner » Tue Sep 28, 2004 11:47 pm

djlouie wrote:I use the word reservation fee, is that ok too? or should I change it?


Your wording might work if you said "Non-refundable reservation fee". BUT...

... since the only thing that the fee is for is for making the reservation, I think they could argue that it should be returned. Why? Because all you did was write their name in a calendar.

I'm not quite sure... but one argument could be that if your client "cancels" the reservation that they get the reservation fee back because there's no longer a reservation.

The other side of the argument is that you should keep the money because you turned down other gigs on that date because that client had "reserved" it.

I guess the point is, if there's two obvious sides to the argument, the judge could just as easily decide against you as for you.

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However: If it's a retainer fee, it's for more than just reserving the date -- it's also for performing all of the other activities you do before the event including telephone calls, email and in-person consultation time, paperwork and mailing costs, equipment and music preparation time, etc. These are all things you can prove you did and can prove to the court you should be paid for with the retainer fee.
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My Disclaimer: 8)
Make sure that whatever wording you choose to use in your contract is approved by your attorney -- he's the one that has to defend it in court!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby djlouie » Wed Sep 29, 2004 12:32 am

Thanks CJ!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby MusicDoctorDJ » Sat Oct 02, 2004 12:10 pm

A deposit by law is a refundable payment . . .

A reservation fee or retainer is not!

For example . . . when you put down a deposit to rent an apartment, the landlord is required to return it at the end of the lease and itemize any decuctions for damage, painting, etc..

But when you pay a lawyer a retainer fee, should you decide not to use his/her services, the retainer is kept for services rendered.

A reservation fee is also not considered a returnable charge since you in fact held this date for the client.

And if they cancel you can keep this payment . . . also for services rendered!

However, a reservation fee could be awarded back to the client if they can prove that you had reserved the date for someone else after the original client cancelled with you!

You're best bet . . . don't call it a deposit!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby AzPartyPleasers » Sat Oct 02, 2004 3:09 pm

Great information guys!

I'm always altering my contract for little changes i come across.

Does anyone have a sample contract that they would be willing to share? Or any insight on a webpage that would offer good information on some core staples that should be in my contract that i might not have in there?

TIA,

Matthew
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby MusicDoctorDJ » Sat Oct 02, 2004 9:59 pm

Here's mine in PDF format . . .
(purposely altered for internet posting so that it can't be interpreted as an original)

http://musicdoctordj.com/MDDJMCinvNA.PDF
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby Wolfie » Sun Oct 10, 2004 8:53 pm

Cheers, Carl (I think it's Carl?). :)

I agree. The term "Retainer" should always be used to represent non-refundable monies paid to secure a service.
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby DJStuCrew » Wed Oct 20, 2004 4:19 am

I use "reservation fee" simply because "retainer" sounds like I'm a lawyer, and I want to keep LAWYERS as far from my client's mind as possible! :)

I also stipulate that all "reservation fees" are non-refundable within my contract, so I think I've covered all bases.

As for "all we did," it goes WAY beyond writing a client's name on a calendar. That moment follows a LOT of activity. For instance, first I had to get that client's attention. That happened either through marketing (which I had to buy, and before that, design, and before that research) or referral. Once I got their attention, chances are they didn't just send a check. No, I spent time on the phone with them, and more often than not, sent an information pack. (Those alone take some time to assemble and have about $3.00 worth of materials in them BEFORE postage -- usually another $1.52.) Then I had an hour long meeting.

So my time and monetary investment to get to the point of "writing their name on a calendar" is significant, and if they cancel and lose their retainer, I don't feel as if I didn't EARN it. But I am a fair guy, not to mention that I live near an Air Force base, so I have a clause in my contract that if the event is cancelled in writing a certain number of days before the date, I allow them to apply their reservation fee to another date, provided it is unbooked. But that's just me.
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby DJStuCrew » Wed Oct 20, 2004 4:22 am

P.S.

Hi Fred!

Hi Doc!
"Support your local DJ: PARTY HARD! PARTY OFTEN!"
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby jwg » Wed Oct 20, 2004 4:33 am

Stu:

I think Reservation or Retainer coveys the same idea vs. deposit which can be refunded.

I like the word retainer. Yes it seems like a lawyer, but our clients are not only retaining our services BUT out talent and expertise in helping to play the reception of their dreams!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby MusicDoctorDJ » Wed Oct 20, 2004 9:25 am

Hey Stu . . . I see ya' ain't chillin' at 'Da Club' tonight! 8)
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby CJ Greiner » Wed Oct 20, 2004 9:40 am

This is where we get into a grey area here... which is exactly what we want to avoid in our contracts.
Why? Because those lawyers that "you don't want to sound like" will take your money.

A Deposit is the portion of money paid in advance of a date, possibly to "hold" it, but intended to pay for the services performed on that particular date.
If no services are performed on that date, then all the money is refundable, even if your contract says "non-refundable". The average Joe might not know this, but if it goes to court -- you bet their lawyer will!

A Reservation fee is the portion of money paid in advance of a date to do only two things: "hold" the date, and pay for the services performed on that particular date.
If no services are performed on that date, then all the money is refundable, even if your contract says "non-refundable". The average Bob might not know this, but if it goes to court -- you bet their lawyer will!
You could argue that "holding the date" cost you money... but good luck with that.

If you really want to be paid for services performed before the performance date, then your contract needs to state that. Most contracts are only good for a few hours on a particular date.

If you want your contract to pay you for the work you've already done, the work you do between now and the date AND the work you do on that date, you should consider this:

A Retainer Fee is paid upon the signing of the contract and can do many things, including pay you for all the services you've already performed for the client, the services you perform between now and the performance date, "hold" the date for the client -- but NOT pay for the services performed on that performance date. (The remaining balance pays for the services performed on that date.)
This fee CAN be "non-refundable" if you can demonstrate that you performed the functions that you were "retained" for prior to the performance date: Holding the date, providing a consultation, various office fees, time spent on planning, etc.

It's still a good idea to say "Non-Refundable Retainer Fee" in your contract so the client can't argue that they didn't understand the legal definition of "Retainer Fee".

Legal Note:
1. Always consult with YOUR lawyer for the final say.
2. Nothing is set in stone -- if the client can prove gross negligence on your part, then the judge will very likely award them MORE than your retainer fee -- refundable or not! (So don't be grossly negligent! :lol: )
Last edited by CJ Greiner on Wed Oct 20, 2004 11:33 am, edited 1 time in total.
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby Jem-star » Wed Oct 20, 2004 9:56 am

A lot of us in the Tampa Bay area are using the term, "Booking Fee". It seemed to get the approval of an attorney that visited us at one of our local DJ meetings.
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby MusicDoctorDJ » Wed Oct 20, 2004 9:58 am

I'm starting to think that, in this sue-happy society that we live in, we probably need to make sure that we keep records of the amount of time that we spend on each and every client!

Every minute on the phone with them . . . all meetings . . . drive time . . . music shopping . . . . computer time . . .

You never know when we might get called on the carpet! :shock:

:?

It's also funny how our clients don't seem to think that when we purchase music for them it is an 'expense' to us!

They think that it's just music that we needed, anyway . . .

Of course, we all know that most of the time we have most of the music that we would ever need, and most of the time their strange music requests are just obscure tunes that we will probably never ever use again!
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby Jumpin' Jeff » Wed Oct 20, 2004 10:07 am

Hi All!

Great Site!

I must say that I've been a follower of the "retainer" mentality for some time as well!

This is a great topic that needs to be discussed with all in the industry. Whatever they take from it then so be it, but I would recommend that you use Retainer over reservation or deposit as well.
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby Jem-star » Wed Oct 20, 2004 11:01 am

MusicDoctorDJ wrote:It's funny how our clients don't seem to think that when we purchase music for them it is an 'expense' to us!

They think that it's just music that we needed, anyway . . .

Of course, we all know that most of the time we have most of the music that we would ever need, and most of the time their strange music requests are just obscure tunes that we will probably never ever use again!


Music Doctor; Maybe I'm too open to my clients, but I always tell them that if there's a song they need, then HEY! I'll get it. I also tell them that if there's a tune that someone wants to use or hear, and I don't have it, then perhaps it only means that I need to add it to my collection.

Now...whether I play it for them will always be up for discussion between us, advising them that any advice I offer them about their music selection comes from over 20 years of experience, which, hopefully, is what most folks are looking for.

Just don't forget the number one rule in services when applying your advice: The customer is always right.

However, our job is to offer them options.


P.S: Do Mork & Mindy still hang out in Boulder?
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Re: Contracts: Using 'Retainer Fee' vs. 'Deposit'

Postby CJ Greiner » Wed Oct 20, 2004 11:13 am

I think that's what MusicDoctorDJ was saying:

He does get those obscure songs for them, I'm sure... it's just that the clients sometimes forget what an expense that can be!

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"Non-Refundable Booking Fee" sounds like it may work as long as it's made clear that the purpose is to cover booking expenses, office expenses, time spent before the event date, etc. However, if the client is led to believe that the only purpose is to hold the date of the performance, then it goes back to my discussion of "Reservation Fee".
So... be careful.
A Reservation fee is the portion of money paid in advance of a date to do only two things: "hold" the date, and pay for the services performed on that particular date.
If no services are performed on that date, then all the money is refundable, even if your contract says "non-refundable". The average Bob might not know this, but if it goes to court -- you bet their lawyer will!
You could argue that "holding the date" cost you money... but good luck with that.


The retainer fee, by definition is for all of those things that happen before the performance date, and no detailed explanation is required in your contract -- that's why it's inherently safer to use.

But... like I said: If YOUR lawyer feels he can help you keep your "Booking Fee" for a canceled date... then go with what he says!
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