Deposit on custom?

Jewelry Discussion
1

As has been mentioned here, a deposit on custom orders is often 50%,
the rationale being that hopefully, at least you’ve covered your
material costs.

That theory is fine until you get stung on a big one involving
customer owned goods(you cannot generally JUST sell it elsewhere).
Trying to collect is a pain and a distraction. Not to mention your
lost labor which you could have spent on something that actually
pays. Yes there are legal options you can pursue but that eats up
more time, money and energy when a safer, saner policy might have
avoided the problem entirely. Clients’ circumstances can change
quickly these days, we take a risk on being paid the balance.

I believe its time to revisit the deposit issue. Anyone want to
weigh in on this?

Personally, I’m not here to build inventory thru customer breach of
contract. Value is meaningless until its liquidated.

2

Neil, I require 50% down which is non refundable and the rest prior
to shipping. If necessary I allow time to have checks clear and
credit card purchases funded into my account before shipping.
Sometimes I will take a credit card number as the deposit, if it is
a client I have worked with before. I put the transaction through on
the card before shipping. I am very liberal with remaking the piece
if the client is not satisfied to the point of starting from scratch
to please the client. I can always send the finished piece to one of
my galleries to sell or if necessary scrap it. Usually I have
learned enough about the engineering with the first piece that the
second goes much faster, I am losing money but not that much. Keeping
the client is worth losing money for the first piece. Losing money
does not have to mean paying for a job but, reducing the profit
margin to less than usual, even if it is zero. I rarely have to
remake a piece from scratch, 2 in 10 years, redesign the existing has
happened 3 times in 5 years. If the piece is a complete redesign and
make from scratch I have to charge as it becomes apparent that the
client has not been clear enough about the desired piece. Redesigns
during construction of a piece also require re-pricing, it pays to
let the client into the process sometimes if they are not clear about
what I am talking about or I am not clear about what they are talking
about. For an expensive gold or platinum piece I will make a model in
silver first to make sure we are on the same page and also to help me
understand the construction, this helps me cost out the materials
and time as well.

The 50% deposit, in my pricing structure, more than covers the cost
of materials. I try to be very up front about what stones I am going
to use for them, if they are out of town, I may even ship the stone
to them so they can see it before I start work.

Trust is the key to this or any other business.
Sam Patania

3

I try to get a 50% deposit, but really only to make sure the
customer is truly committed. Years ago my Dad took in a custom job
with a deposit. He carved a wax shank and fabricated a setting for
the customer’s diamonds and called her to come in to approve the work
so far. Two months later, the customer came in and told him she had
decided to buy a new Corvette instead of the ring, so could she just
get her stones and deposit back. Dad told her she could have her
stones back, but the terms of the non-refundable deposit were clearly
stated on the customer’s receipt, which she had signed and received a
copy.

A week later he got a summons to appear in small claims court. He
called his lawyer and was told he should probably give her a refund,
but if he decided not to, he should be covered by the statement on
the receipt and the lawyer would represent him if needed. Long story
made short, the judge said that even though Dad had finished the
majority of the work, he was not out any metal or stones and could
sell the piece if he finished it, so he had no losses to cover with
the deposit. The lady on the other hand had not received anything of
value, and was therefore entitled to a refund of her deposit. He
further said that her signature on a "non-refundable deposit"
statement did not constitute a valid contract because there was no
transfer of property as the job envelope implied there would be,
therefore Dad had no contractual or legal right to keep her deposit.
The judge also decided that because the lady had to go through so
much trouble to get her deposit back, Dad owed her an additional
$100. He then warned him that this sort of "non-refundable deposit"
statement could be construed as being consumer fraud and that if he
were to appear in his court again in such a suit, he would not be so
lenient.

So much for the value of a signed statement on a customer’s receipt.

Bottom line lessons learned: #1 - US courts will almost always side
with the consumer. #2 - Don’t think for a second you are immune to
customer abuse because you have your customers sign some kind of a
statement on your receipts. You’re not. I’m not saying don’t do it,
just that if push comes to shove, a judge may decide it’s not worth
any more than the paper it’s printed on. #3 - Do whatever it takes to
avoid going to court. Your chances of winning against a consumer are
far less than even and a judge may very well decide to punish you
instead of deciding in your favor - even if the facts and documents
are on your side.

If a customer of mine backs out of a custom job and wants their
deposit back, I will give it to them with a smile, in the hope that
they will at least remain my customer. If they get aggressive enough,
they’re going to get it back anyway, so I might as well make the best
of the situation. I prefer to try to keep the customer even if I lose
the deposit, or at least avoid giving them a reason to bad-mouth my
business, as opposed to losing both the deposit and the customer, and
all their friends and having my name appear on a court docket,
possibly in a newspaper or even a TV consumer advocate segment on the
10:00 o’clock news.

Just another one of the risks of doing what we do. Nobody ever said
this was going to be easy. Or fair.

Dave Phelps

4

Dave,It is too bad that the judge did not acknowledge you dad’s time
as valuable; he spent time making a design, and had that woman
completed the process she had start, she would have had an object of
value. What would the judge say to other service professions where
there was no tangible object bought, but one had to give time as
there service, such as lawyers and judges? I think he got a bad deal.

Melissa

5

David -

I can see the value of trimming your losses, but why in the world
would you want to keep such a customer? If they are willing to screw
you once, they will do it again, when it is worth their while. OK,
flatter them and keep them from sh!++!#& on your name, but don’t do
business with them again. Trust me, there are all kinds of things
you can say to get out of skanky entanglements.

In any case, thanks for the eye-opener! Fore-warned is fore-armed.

best regards,
Kelley Dragon

6

We don’t require a deposit and on top of that we give them 30 days
to return it if they don’t like it, just as we do on merchandise out
of the case.

We very seldom have a problem. We have a process we follow with all
custom work that seems to weed out and help avoid any misconceptions
that might lead to an unhappy result. With the initial visit we have
a custom works heet that the salesperson fills out, so that along
with the fun and exictment of the customer helping to create
something that fullfills their dreams, we are sure that all of the
right questions are being asked and answered. If a center stone
purchase is involved that is also worked out during the initial
visit. The customer comes back in a week to see detailed colored
sketches, done to scale, of what was discussed. They see at least 4
variations of the design, if they need more sketches we do them.
After they select a sketch we carve or mill a wax model for them to
approve, often the stones accompany the wax. The customer comes back
in a week to view the wax, all of the details are discussed and any
questions are answered. When they approve the wax we take about 10
days to produce the finished custom job… Up to this point everything
has been done at no charge. They pay for it when they pick it up. The
whole process typically takes about 3 weeks.

We watch to see how many go aheads we get and how often something is
returned (thankfully not often). We will try to understand what went
wrong in those cases and try to learn not to repeat the same mistake
(because there are so many new mistakes to make!).

This process has been continually refined and working great for us
for years and years. Customers love it, love how easy and fun it is.
They tell their friends and it just keeps on working. If they want
to make a deposit we let them, but we don’t require it.

Mark

7 
I can see the value of trimming your losses, but why in the world
would you want to keep such a customer? If they are willing to
screw you once, they will do it again, when it is worth their
while.

If a customer is difficult coming in the door, they only get worse.

8

Dave,

Long story made short, the judge said that even though Dad had
finished the majority of the work, he was not out any metal or
stones and could sell the piece if he finished it, so he had no
losses to cover with the deposit. The lady on the other hand had
not received anything of value, and was therefore entitled to a
refund of her deposit.

I’m wondering if a person rewords the contract to include a
statement that the nonrefundable deposit covers labor involved in
the design so you have a legitimate claim to keep the refund. A
lawyer might be able to shed some light on this.

Pat Gebes

9

We do a lot of custom - it’s all done in good faith, no deposit,
nothing up front. We get stung maybe 3% - 5% of the time. Our system
sort of ensures we aren’t going to proceed until we’re sure the
customer is solid on their order. We will also be stuck with
occasion re-do’s of custom orders, as the client changed their mind
on something.

We just consider all of it a Cost Of Doing Business, exactly like
re-repairing at no charge that junk hollow chain that comes back:
“You just fixed this last (whatever) and it broke again!”.

Pete

10 
If they are willing to screw you once, they will do it again, when
it is worth their while.

Good point, Kelley. It’s true that some people will try to get
something for nothing, but in cases like my Dad had, a woman that can
buy a Vette for herself will eventually want some earrings or
something. People occasionally just change their minds. Many people
of substantial means can be somewhat impulsive and are quite often
used to getting their way, as they well have a right to be in a
jewelry store, imho. Such folks are usually appreciative if you let
them win, but can be brutally vindictive if you don’t. My approach to
that is to take it in stride, keep it light hearted, and hope for the
best. That kind of thing happens so rarely that our conversation is
really not much more than a philosophical exercise anyway.

If I were to be faced today with the same scenario that my Dad dealt
with, I would immediately ask her what color her new car is, what
model it is (rag-top, C-5, C-6 or maybe even a ZO-6!), and if it was
parked outside I would go out and OOH and AHH all over it. Then I’d
go back in the store, offer her a glass of wine and find a stone that
matches it, set it down on top of the ring I had been making for her
and then sketch out a matching pair of earrings, while my office help
drags their feet writing the refund check. Chances are better than
even she’s going go for it, she has already demonstrated that she’s
in a mood to treat herself well. If I can’t close then, at least a
seed has been planted. Guaranteed she’s going to think about it that
evening and she’ll have a check burning a hole in her pocket. I might
as well give myself a shot at getting it back.

At any rate, I’m very picky about what customers I fire and why.
Changing one’s mind about a custom job doesn’t reach the threshold.
In fact, I can’t come up with anything right now that does.

Mark’s attitude is spot on in my book. I may revisit the whole
deposit thing in favor of Mark’s method, which is pretty much how I
used to do it before the market dumped, turning cash flow into cash
trickle. It’s kind of fun to get the whole payment at once, instead
of only half when you deliver it. Plus it really does make you pay
attention even more to customer service and what the customer wants
if you know that they know they can walk away from it without so much
as a phone call. Which they very, very rarely do.

Dave Phelps

11 
If I were to be faced today with the same scenario that my Dad
dealt with, I would immediately ask her what color her new car is,
what model it is (rag-top, C-5, C-6 or maybe even a ZO-6!), and if
it was parked outside I would go out and OOH and AHH all over it.
Then I'd go back in the store, offer her a glass of wine and find a
stone that matches it, set it down on top of the ring I had been
making for her and then sketch out a matching pair of earrings,
while my office help drags their feet writing the refund check.

Dave, I like your style!!! I always try to be nice even when
situations don’t go as planned, and like to make the other person
feel as though they’ve won. It’s a good philosophy to have for life
in general and extends to being curteous when doing mundane things
like driving through a car park or being in a queue. My hubby’s
family are lovely, but they all think such curteousness constitutes
being “walked all over”! Kindness breeds kindness and you usually
find it paid back to you in the future, which I guess is Dave’s take
on dealing with customers.

Helen
UK

12 
If a customer is difficult coming in the door, they only get
worse..

Agreed, although the odd one gets a little better. I can understand a
medium sized business not requiring a deposit, but for small
businesses the deposit it essential, not only to cover the cost of
materials and time but to guarantee the jeweller won’t get screwed.
Whenever the jeweller I trained with, took a deposit from a customer
he would explain that it was to cover some of the costs of his time
and materials… Also someone mentioned about fixing a hollow chain
free of charge…Tell them it’s a piece of crap and that you have
to charge them to fix it? Surely you’re not just soldering it
together but polishing it up as well? I can understand if it’s a
friend or a loyal customer, but if it’s just one personcoming in
every week saying “It’s broken again because you didn’t fix it right”
It’s not your fault and you shouldn’t have to give out handouts.

Laura
London

13 
I'm wondering if a person rewords the contract to include a
statement that the nonrefundable deposit covers labor involved in
the design so you have a legitimate claim to keep the refund. A
lawyer might be able to shed some light on this.

I am not a lawyer, so please do not act on what is follows without
consulting an attorney!

Let me try to offer some insight on judge’s decision. A legal
contract consist of “offer” and “acceptance”. Another requirement is
that each party “suffered a legal detriment”, but more about it
later.

Client walks in to the shop and says that he/she would like to order
a jewellery. This is known as “an invitation to make an offer”.
Jeweler says it is going to cost X dollars. That is an “offer”.
Client says O.K. That is an “acceptance” and contact is formed. Since
deposit is not a part of contact it will not be honored by a court.

Same scenario but jeweler makes a deposit a part of contract. Could
he keep the money in case of client changing his mind ? Only in some
limited circumstances. The purpose of any law is to achieve justice.
The justice in this case is that both parties “suffer” equally. If
jeweler keep deposit, the client is out of the money with nothing to
show for it, while jeweler keeps material which can be reused
(windfall profit ). In the eyes of the court it is injustice.

If jeweler want to be able to keep deposit, he/she should be prepared
to show that they “suffered” as much as client losing total amount of
deposit. The legal doctrine is knows as “detrimental reliance”. If
jeweler can show that in reliance on client’s promise ( if deposit is
not deemed part of the contract, it is known as gratuitous promise
and therefore is not enforceable ) he/she lost as much money as
client losing deposit.

Leonid Surpin

14

That’s very Zen, Helen. It kind of comes back to the Golden Rule:
treat people how you’d like to be treated; with kindness and
respect. If they do something else, let them. Don’t take it
personally. One can take care of themselves and hold their boundaries
without dumping on or mistreating others.

Michael

15

I must throw in my two cents here on this issue when it comes to
courts and judges laywers and the law #1 the details and the
specifics matter if you read the original post it was stated that
the judge hearing the matter said "it is implied by the contract that
goods were to be provided, and the client recieved no goods " the
contract did not imply goods AND services. Services would be a
craftsmans time spent on the custom order.

in this case Dad kept the partially finshed ring he gave back her
stones and kept her money if his craftsmans time was not specified on
the contract as having value. what do you expect the judge to say ?
if the craftsmans time was specified then he should have had a better
lawyer. let us take a look at literature shakspeares The Merchant of
Venice, Shylock appears before the court with Antonio to have his
bond one pound of flesh cut from nearest antonio’s heart, he shows
his bond 3000 ducats passed due now it is the payment of antonio’s
flesh, the court of venice has granted it must be so, but, Portia
appearing as the doctor make observation that the contract makes
mention of flesh, not flesh and blood Shy lock may have have his
pound of flesh but should he in doing so he is not allowed to shed
one drop of blood, shylock loses.

we must all endeavor to study and become more learned in the ways of
the world

goo

16

Laura- When ever I have to repair something that I’m pretty sure will
break at another place later,(say an old hollow chain or a worn
tennis bracelet or watchband), I always make a xerox of the piece
before I repair it. Then when they come in later and say, “It broke
where you fixed it.” I can show them the xerox of where the original
break was. Have fun and make lots of jewelry.

Jo Haemer
www.timothywgreen.com

17 
Long story made short, the judge said that even though Dad had
finished the majority of the work, he was not out any metal or
stones and could sell the piece if he finished it, so he had no
losses to cover with the deposit. The lady on the other hand had
not received anything of value, and was therefore entitled to a
refund of her deposit. 

I'm wondering if a person rewords the contract to include a
statement that the nonrefundable deposit covers labor involved in
the design so you have a legitimate claim to keep the refund. A
lawyer might be able to shed some light on this.

I don’t need to be a lawyer for this one. I’ve been there done that,
and I can say the following without hesitation.

  1. Dave’s dad got screwed.

  2. If the law in that jurisdiction allows such things, then the law
    needs to be changed. NOW.

Bear the following in mind; I am NOT a lawyer. What I am about to say
is true only for where I am and your mileage may vary. The first time
I had to go to court for this sort of nonsense I hired a very good
contract attorney. I learned the law as it applies to MY area.

It’s called theft of service. Your father lost his very valuable
time, and the lady did receive something of value. HIS TIME. The
time he took doing the work SHE requested he perform.

In such cases, it’s called misrepresentation, and fraud. He was
approached by a customer, and a contract was entered into to produce
a piece of jewellery. The guarantee for that product is that it meet
the design criteria. Whether or not the person chooses to change
their mind is irrelevant. The contract is valid. Lawyer’s don’t give
free representation, locksmiths don’t explain how to open your car,
plumbers don’t walk you through fixing your leaky faucets and
jewellers don’t make custom pieces without clients. These are
service industries.

The judge obviously didn’t understand the difference between
Wal-Mart and your fathers custom made product. This is a distinction
that is vitally important if you want to win such cases.

Granted, for Dave’s father its water under the bridge now. However,
I strongly urge EVERYONE who takes or considers custom orders to
consult a very good lawyer, and lean the law in their area. There
are differences and it is true that some places still do not
recognize your time as a valuable commodity. In most places however,
a properly written contract covers these things, and customers are
made painfully aware that their down payment is NON REFUNDABLE.

Dave does have a point though about some customers being worth
enough to bend your rules for. That’s a distinction that can only be
made by the jeweller.

My lawyer called me one evening from in front of a very nice
restaurant. He had locked his keys in the car and he and his wife
were eager to return home. It was late, and well after normal hours.
When I told him the cost would be $55.00 plus an additional time
charge, he started to complain. I reminded him that he charges me
$100.00 to write a letter. He paid without another complaint.

Make sure that your customers know that they are also buying your
time, and that you consider it to be very valuable. It will serve
you well in the long run.

Frank

18

Pete

We do a lot of custom - it's all done in good faith, no deposit,
nothing up front. We get stung maybe 3% - 5% of the time. Our
system sort of ensures we aren't going to proceed until we're sure
the customer is solid on their order. We will also be stuck with
occasion re-do's of custom orders, as the client changed their
mind on something.

If you choose to do work that way, it’s a good thing to have a plan
to cover the few orders that never get completed. Money and human
nature being what it is and all. It’s happened to me from time to
time.

Re-repairs on junk products though. Thats a direct no-no. Make the
customer very aware of the quality of the product they have, and
tell them that you guarantee ONLY the work YOU perform or even no
guarantee at all if the item is truely bad junk.

I come across a lot of junk in my work, and I absolutely refuse to
repair someone elses trash at my expense. I make the customer aware
of the situation, and advise them to replace poor quality or faulty
products or materials. If the customer chooses not to, or simply
can’t afford to it’s their call. On the other hand, I won’t fix
something I didn’t sell or break on my dime. On the other hand, if
its something I built, I will repair over and over again. Sometimes
even after the warantee expires.

Frank

19

My deposit covers all materials, the rest is my labor/profit.

John

20 
I'm wondering if a person rewords the contract to include a
statement that the nonrefundable deposit covers labor involved in
the design so you have a legitimate claim to keep the refund.

It all depends on who the judge is, and a lot of it depends on what
kind of mood they’re in. Sort of crazy that’s the way the justice
system works, but there it is. Unless you’re someone special, you
don’t get to choose who decides your case. I don’t think a re-wording
would have convinced this judge. He was pretty adamant, and a little
bit angry (and a bit of a pri**). My Dad’s lawyer didn’t make a dent
with the lost labor argument. A different judge may have decided very
differently. We’ll never know. If you go to court, you take your
chances.

Court stinks. Avoid it if there is any way you can.

Dave Phelps