The threat of lawsuit is more relevant if they were to violate copyright and take work done for hire and resell it, or set up their own site to compete with you on your own codebase; this is especially true if you give them access to your systems as part of the process, rather than bring in an isolated component. I agree that failure to deliver is rarely worth the squabble; but for these more extreme cases, knowing that there's legal recourse can prevent problems from occuring in the first place.
