I've dealt with charges backs with a client in a similar situation, be calm and call paypal, at this point there is no need to deal with the client work is done. Tell paypal that the work is done and the client has it explain your tos to them as well.

They don't take kindly to people who get works,items, ect or agree to tos then put another persons paypal at risk. This is what I've learned from similar experience.

But do this immediately the faster you do it the more serious they take you. Definitely don't let it sit. Phoning a paypal representative is highly recommended.

EDIT: also be calm and polite as possible.I know situations like this can be stressful but a Representative at paypal would rather deal with a calm client/pp user than anything else.