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The client was sued for $70,000 for a copyrighted image on their website placed by their designer. They sued the designer in return, leading to a messy situation. In the video, the creator discusses how to prevent such nightmares, emphasizing the importance of using a thorough contract template for web design projects. This template provides a solid foundation that can be customized with additional legalities. It is crucial to consult with an attorney for legal advice regarding contracts.