The legal status of advance payment
Thread poster: Narasimhan Raghavan

Narasimhan Raghavan  Identity Verified
Local time: 06:14
English to Tamil
+ ...
Mar 28, 2011

Before posing my questions, let me give a few background information

Some few years back a client asked me for a quote, which I submitted and asked for some advance payment. The client gave the payment and sent me the files too.

After finishing the files I phoned him and invited him to come to me with the remaining payment and get the translation. It turned out that the so-called client was actually acting on behalf of a lawyer who was the actual user of the translation. The lawyer came on the line and started negotiating with me. He said that the advance amount should be considered as full payment and I should just give the translation. He refused to pay me the remaining amount.

I just cut him short and told him that he would not get the translation either and there was no question of my returning the advance. The final bill was actually ten times the advance. There the matter rested.

He had to forgo the advance and I did not deliver the translation and yet my labor remained unpaid.

Have I acted correctly?

Now there is another instance.

This was a big project. The client sent me files and I ran them through PractiCount & Invoice. Payment was not in rupees but in US dollars. I asked for 25% advance which I got.

As the project progressed I went on submitting bills and in each such bill I deducted the advance on a pro rata basis. Suddenly the project seems to have stalled. I have been paid up to date and around 25 % of the advance is remaining.

The client has not said anything so far other than to say that the pending files will be subjected to a new priority list of execution.

If this is actually the case, no problem. But suppose the project were to be shelved what about the question of remaining advance?

The points to be considered here are as follows:

1. My quoting rate took into consideration also the quantum of work involved and that quantum has so far not come.

2. Can the client ask for a full refund of the pending advance?

3. Can I take the stand that he can adjust them from future works (these are sure to come, if not now, at least afterwards)?

4. The advance is in dollars and it is difficult to pay given the exchange rules of my country and further the amount thus involved is considerable.

5. What is the legal position of the advance? Can the client claim full refund or am I entitled to refuse to pay it by other than the means as envisaged by the point 3 above?

Thanks in advance for the valuable inputs from my colleagues of Proz.

REgards,
N. Raghavan


 

Lennart Luhtaru  Identity Verified
United States
Member
English to Estonian
+ ...
Some math Mar 28, 2011

As I understand, you offered a discount rate this time.

a=normal rate
b=current wordcount
c= payments from the client as of now

If "a * b ≥ c", then you don't have to pay them anything, because it's a normal sum for this project with your normal rate.

If "a * b ≤ c", then it would be logical to agree (if client asks for it) on a partial refund of "c – (a * b)"

I believe this would be a professional solution in this case and understandable to both parties.

[Edited at 2011-03-28 05:14 GMT]

[Edited at 2011-03-28 05:15 GMT]


 

Sheila Wilson  Identity Verified
Spain
Local time: 01:44
Member (2007)
English
+ ...
Admin costs Mar 28, 2011

Lennart Luhtaru wrote:
If "a * b ≤ c", then it would be logical to agree (if client asks for it) on a partial refund of "c – (a * b)"


I agree that that sounds like sensible advice but you would need to take into account the cost of your time in sorting all this out (the arithmetic alone would take me a while!icon_smile.gif) plus any commission charges and losses due to exchange rates (I'd compare the rates at the start of the project with the rate you will be using and make sure you don't lose out.

For the previous affair I think the answer was there in your post: a lawyer said that you were in the wrong and yet he didn't take any further action to get his translation for the sum he'd already paid? He obviously knew perfectly well that you were in the right. I suspect he no longer needed the translation and wanted to avoid paying for it. It depends a lot on the way the documents were worded, of course, but an advance payment can very well be a part-payment.


 

Jan Willem van Dormolen  Identity Verified
Netherlands
Local time: 02:44
English to Dutch
+ ...
Country Mar 28, 2011

You may want to consider in which country the agreement was legally made. The laws of that country apply, and laws in countries do differ. Sometimes vastly.

 

imatahan  Identity Verified
Brazil
Local time: 21:44
English to Portuguese
+ ...
Dollars Mar 28, 2011

If you send them payment through Paypal, for example, it makes the conversion into dollars authomatically for refunding the client.

 

Alex Lago  Identity Verified
Spain
Local time: 02:44
Member (2009)
English to Spanish
+ ...
You need to have a contract Mar 29, 2011

I'm sorry to say this is obviously happening to you because no contract was signed.

You should have a contract to use with all your clients, obviously some clients have their own contracts and you may be required to use theirs instead of yours, but whichever the case may be there should always be a contract between the parties and any good contract should cover the matter of advance payments and what happens to them.

In my case sometimes I sign my own contract and sometimes I have to sign the clients (usually translation agencies make you sign their contract), but I always sign a contract of some kind.

In the case of my contract, if there is an advance payment and the client cancels my contract specifies the following:

"Cancellation or withdrawal by Client. If the Client cancels or withdraws any portion of the service(s) described in article 1 above, prior to the Translator completing the service(s), then, in payment and consideration of the Translator's time and/or performance of said service(s), the Client shall pay the Translator the portion of the fee indicated in article 2 above equal to the percentage of the service(s) actually performed, but in no case less than 25 % of the total of said fee.
In the event the Client made a down payment for the service(s), said down payment shall be deducted from the amount owed to the Translator by the Client, and any excess amount shall be promptly returned by the Translator to the Client, and any amount pending after deducting the down payment will be promptly paid by the Client to the Translator, in both cases according to the payment terms of article 4 above."

Now in my case if the client cancels then any part of the down payment left after deducting my bills (which are always a minimum of 25%) is returned to the client but you can obviously change your contract to suit your preferences.


 

Samuel Murray  Identity Verified
Netherlands
Local time: 02:44
Member (2006)
English to Afrikaans
+ ...
My opinion I Mar 30, 2011

Narasimhan Raghavan wrote:
After finishing the files I phoned him and invited him to come to me with the remaining payment and get the translation.


Are you one of those ransom-based translators -- i.e. you won't hand over the translation until the ransom (sorry: full fee) is paid, but you neglect to tell this to the client beforehand? Was the original agreement with the client that he would get the translation only after he has paid you the full sum? Or do you think it came to a surprise to him when you suddenly said "first pay in all, then get the goods"?

If the agreement contains a deadline for the translation but does not state that the client should pay before he gets the translation, then you are the party in default if you fail to delive the translation on time purely because the client hadn't paid yet. Many countries have laws about how long a customer may take to pay for something, and some countries even have regulations about prescribed late-payment interest (thereby implying that late payment is not necessarily considered breach of an agreement).

I just cut him short and told him that he would not get the translation either and there was no question of my returning the advance. ... Have I acted correctly?


If we assume that you had an agreement with the client that he would pay X amount before he gets the translation, and what happened here was that the client had simply tried to renegotiate the fee. There is nothing wrong with attempting to renegotiate the fee (though some industry associations prohibit their members from doing it), but if both parties don't agree to the new fee, then the old agreement is still in force. This means that the client owed you money but refused to pay you.

If the amount was large, I would have considered using a debt collector. Not handing over the translation (if indeed you had an agreement that full payment should precede delivery) was the right thing to do IMO.


 

Narasimhan Raghavan  Identity Verified
Local time: 06:14
English to Tamil
+ ...
TOPIC STARTER
The facts of the case are very clear Mar 30, 2011

The client handed over a sheaf of printed papers in Tamil. I was supposed to give him the translation into English.

I had asked for advance and also told him that he would have to pay the remaining portion of the payment and then only he would get the translation. As the original was a hard copy, I could not get at the word count. But I told him the word rate which I was going to charge on the translated text's word count to be obtained by the word counting software.

The client's agent agreed to all that and paid the advance. The trouble started when the actual client came and tried to renegotiate and asked me to deliver the translation just against the advance he paid already. He refused to pay as per agreement

Naturally I refused.

Regards,
N. Raghavan

Samuel Murray wrote:

Narasimhan Raghavan wrote:
After finishing the files I phoned him and invited him to come to me with the remaining payment and get the translation.


Are you one of those ransom-based translators -- i.e. you won't hand over the translation until the ransom (sorry: full fee) is paid, but you neglect to tell this to the client beforehand? Was the original agreement with the client that he would get the translation only after he has paid you the full sum? Or do you think it came to a surprise to him when you suddenly said "first pay in all, then get the goods"?

If the agreement contains a deadline for the translation but does not state that the client should pay before he gets the translation, then you are the party in default if you fail to delive the translation on time purely because the client hadn't paid yet. Many countries have laws about how long a customer may take to pay for something, and some countries even have regulations about prescribed late-payment interest (thereby implying that late payment is not necessarily considered breach of an agreement).

I just cut him short and told him that he would not get the translation either and there was no question of my returning the advance. ... Have I acted correctly?


If we assume that you had an agreement with the client that he would pay X amount before he gets the translation, and what happened here was that the client had simply tried to renegotiate the fee. There is nothing wrong with attempting to renegotiate the fee (though some industry associations prohibit their members from doing it), but if both parties don't agree to the new fee, then the old agreement is still in force. This means that the client owed you money but refused to pay you.

If the amount was large, I would have considered using a debt collector. Not handing over the translation (if indeed you had an agreement that full payment should precede delivery) was the right thing to do IMO.



 

Samuel Murray  Identity Verified
Netherlands
Local time: 02:44
Member (2006)
English to Afrikaans
+ ...
My opinion II Mar 30, 2011

Narasimhan Raghavan wrote:
The client sent me files and I ran them through PractiCount & Invoice. ... I asked for 25% advance which I got. ... As the project progressed I went on submitting bills and in each such bill I deducted the advance on a pro rata basis. Suddenly the project seems to have stalled. I have been paid up to date and around 25% of the advance is remaining.


The right thing to do with an advance fee is to keep it separate from your income and draw from it only when you've actually earned it. In the absence of a cancellation policy that both of you had agreed to, if the client suddenly cancels the contract, then you would have to give him back the money that you had not yet earned.

If a portion of the the advance fee was used to buy equipment that was necessary for doing the job, and you're not likely to use the equipment profitably for near-future jobs, then I think you can deduct that amount from the full amount, in addition to the amounts that you have earned, before paying back the balance to the client. But this rarely applies to translators.

The client has not said anything so far other than to say that the pending files will be subjected to a new priority list of execution.


This is where bookkeeping matters -- you'd have to ask an accountant in your country whether it would be okay for you to simply carry over the remaining amount on your books as non-income (or as a loan from the client, perhaps), if this drags on over more than one tax year.

Also, if a period of time goes by and the client does not send more work or authorise you to continue, then you should tell the client that it is better to cancel the agreement and that you return the unearned portion of the advance fee. You are not a bank.

1. My quoting rate took into consideration also the quantum of work involved and that quantum has so far not come.


You have my sympathy, but if you don't have a cancellation policy in place, the you can't take money for work that you did not do, even if the work was cancelled by the client, and even if you had set aside time specifically for that client's work.

Unless you can prove (or show, reasonably) that you have had expenses in anticipation of the client's work (i.e. that you need to deduct for from the money that you pay back to the client), then you can't simply keep some of the money to cover your [unspecified] loss.

3. Can I take the stand that he can adjust them from future works (these are sure to come, if not now, at least afterwards)?


You can try that argument, but if the client doesn't want to, then you have to pay him back his money.

4. The advance is in dollars and it is difficult to pay given the exchange rules of my country and further the amount thus involved is considerable.


I think it is reasonable to deduct banking fees (or similar fees, such as administration fees that your own accountant would charge in addition to his usual fee) that you would have to incur to get the money back to him. Tell the client beforehand what the likely costs would be.

If the client is aware that you're not in the United States, then I think it would be reasonable for him to accept liability for exchange rate fluctuations. If you had converted the dollars to rupees already, then his returned fee would be that rupee amount, and not from the original dollar amount.

In theory, all of this can be stated in a cancellation policy, but no-one wants to read and sign agreements of tens or hundreds of pages for a simple translation job...?


 

Narasimhan Raghavan  Identity Verified
Local time: 06:14
English to Tamil
+ ...
TOPIC STARTER
Update of the case of advance Mar 31, 2011

The client has sent another file of 71 pages and now it appears that the project continues. Hence my present dilemma is almost vanished (touch wood).

But the question raised by me is still relevant. In future, I will proceed as follows.

1. When a prospective client proposes a big project, I will ask for the advance and will start the work only after receiving it.
2. I will make it clear to the client as to how I propose liquidating the advance gradually from my bills submitted in the course of time.
3. I will be firm in saying that the advance can be liquidated only by the above method. If at any time the contractor decides to shelve the project, he has to take me into confidence and inform me at the earliest. I may agree to deduct the entire remaining advance from the current bill (if physically possible) Otherwise he will have to give work to cover the residual advance..
4. If after deducting the entire advance in this manner, he once again proposes a new project, the entire exercise as above will commence. This will discourage the client from trying to deduct the entire remaining advance by taking recourse to the step in 4 above.

Regards,
N. Raghavan


 


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