Hi all,
About 4 months ago I signed a contract with clients for a sizable job, about 250K.
The clients put down a signing deposit. The job was to start when they sold their condo in Houston. Since then the housing market is down, and they have to sell their condo for less.
Given that, they want to scale the job way, Way, back.
My question is where does that leave me with this contract?
I don’t want to be a jerk but I was counting on this job and arranged
my business to deal with it.
I do one of 3 things as I see it.
1- Take what little work I can and walk away.
2- Take the small amount of work they are offering and ask for
compensation for leaving the rest.
3- Get a lawyer.
Thank you for your thoughts,
Tom
Replies
Here's what I'll bet a lawyer will tell you. You can enforce the contract, going to court if necessary, but you'd be shooting yourself in the foot. If you force them into a contract they don't have the money to pay for, in a practical sense they won't pay you. Sure, you can do a lien, but you'll have to wait for the money and possibly fight in court.
So you have to ask yourself if the job is so important that it's going to be worth all the heartache and fighting, delayed payments, etc. It doesn't matter if the job is lucrative if they don't pay. Think if there is an alternative (take the small job and look for other work) that would keep your sanity and reputation as a profession builder intact.
Here's what I'll bet a lawyer will tell you.You can enforce the contract, going to court if necessary, but you'd be shooting yourself in the foot.
You are correct. His damages, if he wins, will at most be the overhead and profit on the job and his legal fees to get that may be substantial.
As far as the deposit is concerned, he should hold it until he decides what to do about the new, smaller, job. As others have pointed out, the client would have to sue to recover the deposit, so if the OP is inclined to keep it without doing any additional work, he should have a lawyer review the contract to make sure that keeping the deposit is both consistent with the contract and with whatever local law might apply.
Edited 7/9/2007 12:00 pm ET by smslaw
Thanks so much for all your thoughts on this "sticky wicket", here is what I have proposed to the homeowners.I have indicated that I am sympathetic to their new financial condition and will try to
work out a reasonable middle ground with them. We could write this as an addendum to the existing contract or in a new contract. I wouldn't attempt a lawsuit but if they really want to void the contract I would like to get some sort of payment for that. For future contracts I think I'll put in some sort of clause about this sort of thing.
I try to not count my chickens before they're hatched but I've never had this happen before
on a signed contract with a deposit. Bummer!TomYou Don't Know.
You Don't Want to Know.
You Aren't Going to Know.
I don't want to do business with anyone who doesn't want to do business with me, much less with someone who is forced into honoring a contract. I don't see anything good resulting from a relationship like that.
Do you have language in your contract dealing with the deposit? When it's refundable and when it's not?
Huck said it first. I just agreed with him.
number one is talk to your lawyer and review the language in your contract surronding that deposit.
Normally the reason for th edeposit is to cover the costs if a client reneges on the contract, which apparently theyare doing.
It will then be up to you whether to re-negotiate and keep busy, or taake the money and walk to find work to fill your scehdule.
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Taunton University of Knowledge FHB Campus at Breaktime.
where ...
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Ok, I'm not a contractor, just someone with a regular day job, but here's my take:
As others have said, trying to enforce the existing contract or getting some compensation money is probably going to be difficult to impossible, and will probably sour relationships. They probably feel like they got screwed by the market, the world, and/or the final buyer of their condo. You don't want them to feel like they're getting screwed by you too, right?
Treat it as if you were starting fresh with this customer - if the job they now want you to do is within your business scope, and you're otherwise comfortable dealing with them, then do the new job and try to put the other issue behind you.
Otherwise, go on your merry way. Not sure how to deal with their deposit, though.
Don
no way would I forget my deposit and start totlaly fresh. There are costs associated with committmemts and that is the reason for deposits. He'll need to make a valid assessment of what the change is costing him to apply to the deposit before re-negotiating.Makling the client feel good is fine and well, but not when it costs me money for something not my doings
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I would have to say that your only practical option would be to take the project that the client is now proposing and tack on a charge for all you preparation work for the larger (now cancelled) project.
If the client makes a stink a friendly reminder that they are "in fact" in breach of contract. All you are asking is to be paid for what you have put in. If they make a stink you might remind them that you have the legal right to go after a hell of a lot more but you are more interested in getting them into their new home. It's called playing hardball with a sprinkle of compassion.
Sometimes what is your right to do isn't always right to do.
Dave
I think this reinforces the point that you SHOULD take a deposit for scheduling a job, and you should be prepared for the possibility that the deposit is all you'll get, along with the huge inconvenience of having the client cancel the job. The OP likely cannot force further payment without going to court.
Yeah, the deposit is to get on the schedule. We get a percentage before work begins also. Very important to stay ahead so that we're never working on our own money. No problem allowing a customer with changed circumstances to end the business relationship, but no way I'm going to have to try and recover payment for work preformed but not paid for - "can't get blood from a stone" as they say.Huck said it first. I just agreed with him.
well spoken
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
No, they are NOT in breach of contract. No work has been performed. I have never heard of a court enforcing a specific performance case for services (which is what this would be). Only when there are goods involved AND the goods are unique, like a work of art or a house. I couldn't even get a contract for sale of an auto enforced (I was the buyer).Don't even think of attempting a lawsuit. It would be a waste of money. In the only issue in question is the deposit.
"No, they are NOT in breach of contract. "
Uh, yes they are. Whether or not work has started is irrelevant. There is a legally binding contract. The homeowners have breached it by informing the OP that they will not go ahead with the project per the original deal. The real question is "what are the damages?" Did the OP expend any funds, forego income opportunities, etc. based on this contract? If so, those are damages that are attributable to the breach. While a court will not likely order specific performance, it will likely award breach of contract damages that are proven.
That said, litigation is rarely worth the cost. The OP would be well advised to attempt to negotiate a new contract for the new scope of work and a fair resolution for the old contract. They should be treated as separate, though related, issues.
Mike HennessyPittsburgh, PA
Edited 7/9/2007 10:38 am ET by MikeHennessy
yes they are in breach of contract. Once the money was exchanged, it was validified.Lawsuit? The builder is holding the money. The client would have to be the one to initiate a contract to get the deposit back, not that it should ever need to go that far.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Since you are coming on breaktime with this question it tells me what the answer is to your question. You don't know enough to make a clear call, therefore you should spend the money to have a consultation with an attorney but not any attorney. I can't emphasize enough that you need to consult withan attorney at the least is well versed or that specializes in construction law. This is critical for both your wallet and results.
Take the rough with the smooth. Just like for the HO, things have changed. Change the job, make it all good and carry on.
If you try and go after them the only winner will be the lawyer. Odds on the judge will go with them.
You can also bet the HO will tell all how they got ripped! (in their eyes)