The key to defending yourself in a dispute with either a supplier or customer is to have a clear written contract setting forth your agreement.  I'm amazed how much business gets done with the perverbial handshake.  This may not help you in this situation but, in the future, here is a link to an independent contractor agreement template that could help you fashion a short contract for this sort of work: http://www.medlawplus.com/forminfo/independentcontractor.htm .  If your arrangement has service levels (i.e., the amount of work to be performed is variable and payments vary based on level of work each month), this template may better suite your situation: http://www.medlawplus.com/forminfo/servicelevelagreement.htm .

Hello vlval3,  I'm brand new here so take this reply as being from a 'newbie'.  My business provides software and services to other small business.   98% of my clients absolutely love us and would (and do) often refer others to us.   The 2% drive me NUTS... Fortunately, my partner who is much less emotional than I, always tells me to 'Kill them with Kindness'.   And that's absolutely what we do.    The small short term benefit I would get from keeping a client's fee that is dissatisfied makes no sense if it in any way harms our reputation as a service that takes customer satisfaction to be our highest guiding principal.   I suggest you buck-up and give a refund.  Either way, best of luck and make lots of money.  

In theory, issue the customer the refund. Let's say for example you're right and they really don't deserve a refund. This is one customer out of your entire customer base. You ask the question... What can a customer really do? Really they can 'try' to go after you in small claims court, but if you're sure it's solid thats not a worry. However, lets look at the reputation aspect.   One person alone can damage your OR 'Online Reputation', with tons of sites on the internet like ripoffreport.com, complaintsboard.com, etc you'll find one person can give a very negative view of your business. In theory they can registered with this sites multiple times and post several complaints against your company. These sites also tend to rank at the top of Google search results, so if someone Googles your company they see negative stuff appear first.   They can also file a report with the BBB, which is then on record regardless of the outcome. They can report a complaint with city, county and state agencys that keep a database on business complaints.   With all this whats the simple solution? Just give the customer the refund and never do business with them again. Try to adept future policys to prevent this from happening again.

Sorry I accidentally pressed the wrong button before ending my question.     I need to know what my rights are as a small business owner. A customer is threatening to take things to the next level if I do not give her a refund.   She is clearly not entitled to a refund and I want to know whats the worst she can do if I do not give her a refund. The business is a cleaning services business. Please help me. Thanks.