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The client was sued for $70,000 for a copyrighted image that the designer had placed on the website. The client then sued the designer, resulting in a messy situation. The video provides tips on avoiding similar nightmares, emphasizing the importance of using a solid contract template for web design projects. The speaker is not a lawyer and does not provide legal advice, so it is advised to consult with an attorney for legal matters. The contract template shared in the video offers a strong foundation for adding necessary details and legalities for a successful project.