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The client was sued for $70,000 for a copyrighted image placed on the website by the designer. The client sued the designer in turn, leading to a messy situation. The video provides tips on avoiding such nightmares, emphasizing the importance of using a proper contract template for web design projects. The speaker is not a lawyer and does not provide legal advice, recommending consulting with an attorney for specific contract details. The contract template shared is a solid foundation for adding necessary legalities and details.