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The client was sued for $70,000 for a copyrighted image placed by the designer on the website. The client then sued the designer, resulting in a messy situation. The video provides tips on avoiding such nightmares, emphasizing the importance of a solid contract. The YouTuber, not a lawyer, shares their own contract template for web design projects, advising viewers to consult with their own attorney for legal advice. The template is a good foundation that can be customized with additional details or legalities as needed.