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The client was sued for $70,000 for a copyrighted image placed on their website by their designer. The client then sued their designer in return, creating a messy situation. In this video, the importance of having a solid contract template for web design projects is emphasized to avoid similar nightmare scenarios. It is advised to consult with an attorney for legal advice on contracts. The speaker shares their own contract template as a foundation, which can be customized to fit specific project needs.