Contract termination dispute

What is the name of your state? CA

I was trying to start up my own business and contacted a graphic designer to design the website for me. We just met and talked about all the requirements, never signed any contract in writting. Everything was vocal. For some personal reasons, I couldn't start up my business and informed the graphic designer not to continue to work on the design. So far, he has only shown me the mockup of the homepage, that's it. But he demands for 50% of the original compensation for the entire project. I think it is too much.

My question is since we never signed any papers. Do I have still any legal binding with him? Am I still liable and have to pay him the amount he is asking?

In our vocal conversation, we never mentioned about the early termination terms. Now, he even said he will hire third party collection agency to collect money from me. Can he do that? But what he is based on to collect money from me?

I was trying to start up my own business and contacted a graphic designer to design the website for me. We just met and talked about all the requirements, never signed any contract in writting.

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No problem, verbal contracts can be enforceable.

My question is since we never signed any papers. Do I have still any legal binding with him?

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Yes. You had a verbal contract, which is enforceable. Normally verbal contracts can be pretty tough to enforce in court -- it's often a "he said, she said" situation. But here, the designer actually started to "perform" under the contract, so he will be able to show that a contract existed. It may be a bit difficult to show the exact terms of the verbal agreement, but that doesn't necessarily work in your favor.

For some personal reasons, I couldn't start up my business and informed the graphic designer not to continue to work on the design.

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This is called "anticipatory repudiation" -- you breached the contract. And because of your breach, he can stop performance and immediately attempt to recover damages. How much he can sue for will depend on how much work he put into the website. In general, he should be able to collect his actual expenses to date plus the profits he would have made on the project.

If you think the 50% is way out of line, let him sue you, then the courts will figure it out. You could also try and negotiate with him. But you breached the contract, so you are lon the hook for damages. If you do work something out with him, make sure you get a signed release when you pay him to protect yourself.

My response:

Excellent response. Right on target.

IAAL