As small business owners, it is nothing out of the ordinary for inquirers–or even booked clients!– to stop responding to you after a few weeks of communication (aka being ghosted). The term “ghosting” or “ghosted” means that someone has ended all communication with you without explaining why.
When this happens it likely means that they retained services elsewhere or simply changed their mind in some respect. Yes, it would have been nice for clarification but, if it's just an inquiring client, overall no real damage has been done. But, what happens if you legally sign a contract with a client and they cease communication? You have a few different options that we will go over below, but keep in mind that in order to receive payment you MUST follow the terms of the contract throughout the entire process.
When being ghosted there are a few things to review:
- If your contract mentions “ghosting” activity, and
- Should you file a claim.
You should regularly communicate and contact a client when you fear they are ghosting you and the contract. There needs to be evidence that you have attempted to reach out to clients without fail, especially if you need to pursue a legal route. You should do this by emailing, calling, sending certified letters, and/or invoices if you have them. This shows that the client is trying to escape their legal obligations of the contract and that you are trying to enforce the agreement. However, you should look at reasons as to why they are ghosting. It could be their own financial situation or personal circumstances. It is helpful to mention in your letters that you are willing to work out alternative payment arrangements to amicably end the contract while receiving payment in smaller segments or a lower amount if possible. If your business is not able to provide alternative payment options that is perfectly fine, and you should continue to invoice the client for full payment.
2. Put Clauses In Your Contract
As small business owners, it is nothing out of the ordinary for inquirers–or even booked clients!– to stop responding to you after a few weeks of communication (aka being ghosted). The term “ghosting” or “ghosted” means that someone has ended all communication with you without explaining why. When this happens it likely means that they retained services elsewhere or simply changed their mind in some respect. Yes, it would have been nice for clarification but, if it's just an inquiring client, overall no real damage has been done. But, what happens if you legally sign a contract with a client and they cease communication? You have a few different options that we will go over below, but keep in mind that in order to receive payment you MUST follow the terms of the contract throughout the entire process.
Fee Clause with a non-refundable retainer and mention of liquidated damages.
A retainer is a certain amount a client pays when rendering services and signing a contract. Many small businesses require a non-refundable retainer fee to ensure that if a client ends services, they still are being paid for any incurred costs (in legal jargon, this is called ‘liquidated damages’). This fee is used for actually starting the project or is there to book a date on your calendar whereby you will say no to other inquiries for that same date.. This fee is an initiative for clients to not ghost you as they have paid a portion for your services, and if they do ghost the contract then they will not be refunded that amount. In addition to the term ‘non-refundable retainer’ in your fee clause, make sure you also have the term 'liquidated damages’. By using this term, you and your client are agreeing in advance at the time of booking that the retainer is the amount of your damages should they ghost you and they are paying up front for that amount.
A Dormancy Clause or Delays Clause (TLP puts this language in our “Communications Clause”).
A dormancy clause is to set guidelines of what will happen if the client does not properly communicate. Dormant refers to the client not communicating to the point where you can no longer stay on course of the project without any delays. A great way to use this in your contract is to say “If the client does not respond or communicate for 4 weeks then the Company reserves the right to alter deadlines accordingly or terminate the contract in full.” In this case, the client cannot say they ghosted the contract due to missed deadlines on your part. This will come in handy during a legal suit by showing you attempted to stay on course but their lack of communication made it impossible.
Rights to Termination or Cancellation Clause.
This is probably the most important clause of any contract. Whether you are signing a contract for yourself or with a client there should ALWAYS be a termination/cancellation clause. When it comes to ghosting, you need a legal way to get out of the contract and still be paid for your work. The rights to termination/cancellation clause should specifically outline reasons the contract can be cancelled, what happens if it is cancelled, and requirements for payment, such as a cancellation fee. For example, a good clause to include is a “Cancellation of Services by Company Clause” that explains you are able to cancel as the service provider in the event of a complete breakdown of communication and that the client will be held responsible for all costs incurred up to the point of termination. Here, you are immediately giving yourself the right to terminate the contract without legal repercussions and stating you will still require payment.
3. Seek Legal Counsel and Sue In Small Claims Court
After exhausting all other options available, it is likely time to seek legal counsel and file a suit in Small Claims Court. Your attorney will likely send out a Final Demand Letter to help encourage the clients to respond before court, however it may not be successful. When pursuing this route, you should consider if the cost of the contract is worth the cost of litigation. If it is $600 dollars it may not be worth filing a claim, but if it is $5000 dollars then you likely should (usually filing in small claims court will cost you around $20-200 depending on your county’s filing fees). Also remember, each state has a maximum amount allowed in Small Claims Court so if your contract exceeds that, you will need legal counsel to take the case to a different court level.
As much as business owners try to keep clients engaged and active during the contractual process, it is important to recognize when lack of engagement turns into ghosting. More importantly, it is critical to know what to do if you are being ghosted. Your time and services should never be wasted on ghosted contracts, especially when they result in you losing other clients. Remember, contracts are legally binding documents that need to be fulfilled even if the client changes their mind.
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.