How to convey a bad news to the client?
When something has gone wrong the client needs to know three things:
If you are not completely honest and transparent you will get found out later and will compound the trouble.
If your relationship with them is good then you probably will survive - presuming this is not completely catastrophic - but you will have to provide a decent remedy.
If your relationship is bad, then prepare yourself for them to start playing hard-ball with you on the terms of your contract.
HTH
Addendum: A good comment below about telling them as soon as possible, which I am happy to surface in this answer as requested. It reminds me of a saying "the sooner and in more detail the bad news is known, the better for everyone". As in life, so in project management.
With an emphasis on the solutions you propose to address the bad news.
We will not be able to have a moon controlling functionality in our system (due to ...) but we can and will deliver the weather changing module which is almost just as good for your world domination plans.
Be honest and try to offer effective and realistic solutions instead of things that'll end up being more bad news.
Managing your clients/bosses expectations is a great way to avoid this.
In an engineering discipline, the old adage remains true:
Under promise. Over deliver.
If you've already got the bad news, well:
"Give the bad news all at once, and the good news little by little. -- Machiavelli" :)
Seriously.. investigate damage control or remedial measures before hand. Set them up in place to make sure it doesn't happen again. Fall back to a contigency plan if needed and you have one .. Be objective, sincere, apologetic and don't play the blame game.
Be truthful, since nothing is more distracting than lies.
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