A project comes in from a client the agency just landed. The concepts are close to ready for presentation. Then the client cancels the project without warning. Once the initial frustration passes, what actually happens next?
Bill for Work Already Done
Recover at least a portion of the time invested, even if full recovery isn't possible. That starts well before cancellation ever happens: never begin an assignment without an approved estimate signed by an authorized client contact, and always include clear payment terms in the project agreement for what happens if the project gets cancelled after work has started.
Some agencies simply bill for hours logged against the project when it's cancelled. In practice, clients who cancel a job after formally authorizing the work are often the same clients most likely to push back on paying for the time and expenses already incurred. That's exactly why every contract, scope of work approval, or project agreement should include a kill fee clause.
The Kill Fee
The kill fee originated with film production and freelance writing, and the concept transfers cleanly to agency work. It's an agreed-upon percentage of the total project estimate, charged if the client cancels, postpones, or rejects the initial concepts outright. Current industry guidance from creative-rights organizations generally places kill fees somewhere between 20 and 100 percent of the estimate, scaled to how far the project had progressed at the point of cancellation: a lower percentage for early-stage cancellation, and full payment for work that reached completion before being killed.
Build the kill fee clause directly into the client contract or project agreement, and make a habit of reviewing it with the client at the moment the assignment is accepted, not after a problem arises.
Where the payment terms already include a deposit or an initial phase payment, that payment can simply serve as the kill fee, and the agency keeps it without further negotiation. If very few hours were logged, or the project was just getting started, use judgment about whether to reduce or waive the fee.
A complete kill fee clause should also address a few other points:
- All materials delivered to the client so far must be returned to the agency.
- Any use of work created for the cancelled project without the agency's written consent may violate copyright or intellectual property law, exposing the client to legal action and additional fees.
- All ideas and materials created for the project remain the agency's property unless a separate agreement transfers ownership.
Artwork Ownership
This is often the hardest part to explain to a client mid-cancellation, which is exactly why it needs to be explained well before that point. Cover copyright ownership at the very start of a project, alongside any negotiation over ownership of illustration, logo design, or photography needed to complete the work, and be explicit about what is and isn't included in the final deliverable.
Be ready to offer the client a buyout of the concepts or partially completed work, with an appropriately priced copyright transfer, if that's the outcome both sides actually want.
