I have been in business for 19 years. When I was a couple years into the business I had a bride pay in full for her cake and then a month out call me crying that the wedding was off, he had left, etc., etc. I bought into it & refunded all but her deposit. Then I receive a call from the florist as to what size cake top was needed and what time would I be at the hall. Seems wedding was still on and a family member had offered to do the cake as a gift. I had asked for her cancellation in writing, which she had done, along with the groom leaving her story. OK, now is when it gets good. A couple of weeks later, I get served court papers from her suing me for the remaining deposit I hadn't returned. I go to court with my contract, her written cancellation and proof that the wedding went on as planned (she placed her wedding picture in the local paper). The judge listened to everything and then asked me why I bothered to have a contract if I wasn't even going to follow my own company policies. He was right, if I wasn't going to go by my own contract, who was going to? He said that if she had brought me in for the full amount, which she would have, he would have sided with me and I would have kept the entire balance. He then told her she was very lucky that I had refunded what I had, she wasn't getting anything else.
Fast forward to a couple of years ago, she comes in for her wedding cake for her upcoming second wedding, hoping I wouldn't recognize her. I did, she kept saying how sorry she was, I made her sign and initial everything on the contract, the wedding went off fine and I received a thank you card from her on how beautiful the cake was. Stick to your policy, no refund, you have turned away other business and in this economy, why should you take the hit when they have probably found what they think is a better deal.