Client asking for refund on completed job.

[imuhammadazeem]

I am a physical prototype developer. I completed prototype development and showed pictures and videos at each stage; on which client released milestones.

Recently, the item got shipped to client. But due to mishandling during shipment, the prototype was damaged. Now the client is asking for refund of each and every penny. All payments were done long ago on video proofs of work done. How can I address this issue?

[petra_r]

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Muhammad Azeem U wrote:
All payments were done long ago on video proofs of work done. How can I address this issue?

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When was the last milestone released to you? If within 30 days, the client can dispute the entire contract.

It sounds like you did not package the prototype well enough for shipping.

[imuhammadazeem]

The last milestone was released more than 30 days ago.

I have visual proofs of packaging that it was done right. I am going to claim it to the shipping company but still how can client ask for refund of the work for which he already paid.

[petra_r · Accepted solution]

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Muhammad Azeem U wrote:
The last milestone was released more than 30 days ago.

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Then the client can no longer dispute. Only mediation is now possible, which can't force you to refund anything.

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Muhammad Azeem U wrote:
I have visual proofs of packaging that it was done right.

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By definition, if something is damaged in transit, that in and by itself is proof it was not adequately packaged.

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Muhammad Azeem U wrote:
 how can client ask for refund of the work for which he already paid.

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They can because the terms of service allow them to. However, if it's been past 30 days since the last milestone was released, there is no process that can force you to refund unless you volunteer to do so.

[prestonhunter]

What percentage of this project was creative development and thought, versus physical materials and physical construction?

If the project cost was $1000, and 90% of that was creative development and thought, then none of that 90% has been lost. Only the 10% associated with the physical materials and assembly has been lost.

If the client paid for that 10% again, paying a total of $1100... Or if the freelancer purchased replacement materials and re-did the assembly work... or if the two parties "shared the pain", splitting the cost... Then the whole project would be a success.

Petra makes an excellent point in pointing out the fact that the prototype's shipping was inadequate.

But if I am the client, I know that the freelancer who developed and assembled the prototype once can do so again. It is difficult for me to imagine a legitimate business scenario in which the client needs this prototype and now decides he no longer needs it just because it was damaged during shipping.

Why is this client asking for a refund instead of figuring out a way to get a replacement?

Does this client have any proof that the prototype damaged during shipping?

It concerns me that the freelancer has videos showing that the prototype was adequately packaged, but the client has no evidence that the prototype was damaged when it arrived. But having said that, I know that items can indeed be damaged during shipping.

It is possible that what SHOULD HAVE been adequate packaging was insufficient to protect the prototype from damage due to unexpected mistakes made during shipping. If that is the case, then it really could be said that the fact that the prototype arrived damaged was not the fault of the freelancer OR the client.

So who should pay for the mistake?

The freelancer doesn't want to refund money and probably is not going to be compelled to in any way. If the client wants to recover funds, then the client should get those funds from the shipper, and the freelancer should cooperate 100% in the client's efforts to do so. For example, the freelancer can provide videos and photos showing the packaging done before shipping.

What kind of business operation is this in which the cost to reassemble and re-ship an already developed prototype isn't a trivial cost compared to the importance of the prototype in the overall scheme of things?

It is my opinion that the freelancer should not refund the full cost of the project to the client, but SHOULD offer to refund the cost of shipping. Furthermore, the freelancer SHOULD send all digital files associated with the development of the prototype to the client.

If the client NO LONGER WANTS the prototype, then the client should not feel obligated to pay any more money to have it reassembled. But at this point in time, the client has no right to receive a refund aside from the cost of shipping.

If the client wants this prototype then the client should ask the freelancer what it would cost to reassemble the prototype and should pay to get that done. The freelancer needs to do a better job of shipping the second time.

[imuhammadazeem]

I missed reading your full response earlier. But now I read it completely. Thankyou so much for addressing the issue with so much details. The things are exactly as you decribed in the end.

An update is, the upwork dispute is already in process. I have submitted all my proofs of work.

An interesting part is, the client didn't show any picture of prototype as it was exactly received. Instead, he shared visuals of all assembly dismanteled and broken.

Anyways, the only favor I can do is to offer refund for shipment charges.

P.S. Can you please guide me, if the case goes in arbitration, would I be having same opportunity to proof my work against payment? What would be the worst case for the case and my upwork profile?

[petra_r]

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Muhammad Azeem U wrote:

An update is, the upwork dispute is already in process. I have submitted all my proofs of work.

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Did the client dispute within 30 days of the last milestone having been released? Because you previously said:

Muhammad Azeem U wrote:
The last milestone was released more than 30 days ago.

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That is very important - because it determines whether there is a basis for a dispute or not. There is no money in escrow, right?

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Muhammad Azeem U wrote:

What would be the worst case for the case and my upwork profile?

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Worst case scenario would be that you'd have to refund the entire contract.

As far as "proof of your work" is concerned, it gets tricky - it doesn't necessarily matter whether the work was done. It matters what the client received. If you arranged the shipping, the responsibility lies with you. You should have adequately packaged it (the fact it's broken is proof that it was not adequately packaged) and insured it for the full contract value. 

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Muhammad Azeem U wrote:

Anyways, the only favor I can do is to offer refund for shipment charges.

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That may not be your choice and it's hardly a "favour" - 

Can't you offer to redo the prototype?

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[prestonhunter]

re: "Can you please guide me, if the case goes in arbitration, would I be having same opportunity to proof my work against payment?"

By definition, if this goes to arbitration, it means that both sides present their case to the arbitrator. The arbitrator may ask specific questions. The arbitrator will allow you to send supporting documents. The arbitrator will allow you to send your explanation of events. Presumably the arbitrator will consider all of these things.

I do not know if this will go to arbitration.

If it does, I do not know what an arbitrator will think. But if I was the arbitrator, these are some of the things I would wonder about:

What proof is there that the client didn't damage or dissemble the prototype himself in order to try to get money from the freelancer?

If the prototype was damaged during shipping, then why doesn't the client seek recompense from the shipper, not the freelancer?

If the client sincerely wants the prototype, then why isn't he arranging for the freelancer to create a new one?

[petra_r]

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Preston H wrote:

What proof is there that the client didn't damage or dissemble the prototype himself in order to try to get money from the freelancer?

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When you receive a parcel and the stuff in it is broken, you send it back to Amazon for a refund. You don't have to prove the courier didn't break it. bAmazon may try and get money from the courier, but the courier will respond with "if it's broken it was not packaged adequately" which mostly works.

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Preston H wrote:

If the prototype was damaged during shipping, then why doesn't the client seek recompense from the shipper, not the freelancer?

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Because: a) the client is not the shipper's customer and/or b) the shipment was not insured and/or c) the insurance does not cover the value.

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Preston H wrote:

If the client sincerely wants the prototype, then why isn't he arranging for the freelancer to create a new one?

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Do we know the client wouldn't be OK with the freelancer replacing the broken prototype (for free)?

Bottom line, a product is the seller's responsibility until it is in the hands of the buyer, including the transport risk. That's why you insure stuff you send to customers.

[imuhammadazeem]

I understand your explanations but I am not here selling a pre-manufactured product (like Amazon). I have charged the client for the service, I have purchased the materials and paid for the labor and service charges.

So, (even) if my shipment was unadequate or improperly packaged. How does it questions to the work that was already completed? How can I be liable to the complete contract?

I can bear some portion of the loss but how I can do all over again for free.

[prestonhunter]

Yeah... the client's story just doesn't add up.

[petra_r]

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Muhammad Azeem U wrote:

How does it questions to the work that was already completed? How can I be liable to the complete contract?

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The client now has nothing at all for the money they spent.

I think legally (and that's all that matters in arbitration) that is a pretty compelling argument. The client does not have what they paid you for.

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Muhammad Azeem U wrote:

I understand your explanations but I am not here selling a pre-manufactured product (like Amazon).

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I create bespoke items. If they arrive damaged, I still have to replace or refund them. 

Can I just circle back to this

Did the client dispute within 30 days of the last milestone having been released? Because you previously said:

Muhammad Azeem U wrote:
The last milestone was released more than 30 days ago.

That is very important - because it determines whether there is a basis for a dispute or not. Unless there is money in escrow... is there?

[imuhammadazeem]

There is no money is escrow. Everything was paid in advance.

[petra_r]

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Muhammad Azeem U wrote:

There is no money is escrow. Everything was paid in advance.

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Did the client dispute WITHIN 30 DAYS of the last milestone being released?

This is super important

[imuhammadazeem]

If dispute date is 'Time of call' then it was December 29. Whereas the last milestone was released on November 19.

[g_vasilevski]

Hi Muhammad,

Feel free to follow up directly on your dispute with any additional questions you may have and our team will assist you further. To learn more about our dispute process, check out this thread. Thank you.

[petra_r]

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Muhammad Azeem U wrote:

If dispute date is 'Time of call' then it was December 29. Whereas the last milestone was released on November 19.

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The dispute date is the day the client contacted Upwork to dispute.

If that was after December 19th, the client is outside of the dispute deadline and there can be no arbitration. If it was after December 19th, you can't be made to refund a thing on Upwork, by Upwork, or in any way associated with Upwork. 

All Upwork can do if the client was outside the dispute period, is try to find an amicable solution. You would not have to agree to such a solution.

The mediator, in that case, should have made that 100% clear.

See here: 

1. Dispute Mediation Deadline: Dispute Mediation must be initiated within 30 calendar days of the date that funds in Escrow have been released to the Freelancer in order to be eligible for the Dispute Assistance Program under this Section 6.2. Any dispute over funds that have been released from Escrow more than 30 days prior to the date the dispute is filed is no longer eligible for submission to the Dispute Assistance Program.

[imuhammadazeem]

Mediator hasn't cleared about this, I think I need to ask him about this because I am sure of dates.

[petra_r]

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Muhammad Azeem U wrote:

Mediator hasn't cleared about this, I think I need to ask him about this because I am sure of dates.

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If you are sure that the client can't have initiated a dispute before the 19th of December, don't "ask the mediator" about it. Inform the mediator that as the dispute deadline had already passed, no dispute is possible, only non-binding mediation.  

Upwork need to abide by their own legal terms. One of those terms is that clients can't dispute. let alone arbitrate released milestones, if they have missed the deadline. 

[feed_my_eyes]

The client can still do a credit card chargeback, though, can't they? (If they paid for something and it was broken upon arrival?)

[petra_r]

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Christine A wrote:

The client can still do a credit card chargeback, though, can't they? (If they paid for something and it was broken upon arrival?)

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Yes. But that'll cost them their Upwork account. The OP would still lose the money that way.

The situation is very unfortunate all round because the client has literally nothing now. Money gone and broken prototype. 

Should have been properly packaged and adequately (to full value) insured.

[feed_my_eyes]

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Petra R wrote:

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The situation is very unfortunate all round because the client has literally nothing now. Money gone and broken prototype. 

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Definitely. I'm sympathetic to the OP's predicament, but frankly, if I had paid for something and it arrived broken, I wouldn't hesitate to do a chargeback - no ifs, ands or buts about it. All of the previous posts about what happened and how it happened and that there's video evidence and what not - all very unfortunate, but the bottom line is: the client didn't get what they paid for. (And the credit card company will take the client's side on that.)

[petra_r]

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Christine A wrote:

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the bottom line is: the client didn't get what they paid for. (And the credit card company will take the client's side on that.)

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I'm fairly certain arbitration would, too. It's really a no-brainer.