*
Had a meeting with one of my customers yesterday…I was picking up the second big check for a timber frame addition that we will be starting the foundation for in a week and a half. The timber frame is in fabrication as we speak and the structural panels are being delivered on Tuesday…they have already paid me over 25k for the design, plans, permits, and construction deposits. Never mind the fact that I have been working on this for eighteen months to put it all together. So we are finishing up a meeting finalizing some of the last details (tile selection, style for the cupola, etc.), when the husband says to me, ” I hate to bring this up, but we’re not really sure we want to build this… how much would it cost to stop it at this point?”
I just had to laugh…what the hell are people thinking? I told them it would wind up costing them everything they have paid to date, plus probably about another twenty grand. They seemed to think that was reasonable, but I’m just shaking my head…
Replies
*
Nick,
Be thankful you don't have Mr. Michaelson "Clients for Hell"
*Nick,Bad sign....red flag.......how much? Get out now. Take what you have into it and get away fast. Sounds like there my be some money problems that came up for this client that don't concern you. Don't wait for the axe to fall on you too. Get out!!Ed. Williams
*nick.... make it as easy as you can for thses people... and keep them reassured..but go to an attorney and lay it out.. have him draft a release for you .. "" and the last little formality, now that we have the expenses to date taken care of, ..is our mutual releases of each other ..""then do something nice for them.. when they get back on their feet .. you'll be the first one they call.. or refer to their friends..b but hey, whadda i no ?
*I'll second Mike's advice exactly.
*Well, we all know that the hardest part of a job is done before ground is ever broken. All that planning and mental energy that goes into the early planning and selling of the job, that's what either generates profits, or doesn't. I say Nick is entitled to a fair profit from this job for all the hours he put in, putting the whole thing together. Hell, if they're down to tile samples, I'd say the tough part is about done.
*Are your designs proprietory? Can someone take over construction of the project now that you've done all the hard work? Make sure the release excuses you from all liability in case they move forward with another contractor.
*Did you ask them why? Maybe they've fallen on hard times, had a change in circumstances, have a problem coming up that you're unaware of. Backing away can be done after they answer, but don't assume. Maybe they're just being honest with you and realize that they got into something that was a mistake. Nothing wrong with being honest.SHG
*You're 100% correct. Honest is the best policy. But doesn't it say something about our business when it seems to be the last thing we expect?One of the common threads running through this forum is how many times people have been screwed by their customers. Kind of a shame, don't you think?
*Joel, no matter how each of us tries to anticipate that will effect our bottom line, we still get the occasional surprise.The only way you can combat that is to plug an extra point ot two into your overhead, then religiously every week, write a check for that percentage to go into a reserve account and just let it accumulate interest. Then when the unexpected happens, you lose no sleep over it because you then transfer those needed monies into your checking account. I finally learned from situations like yours after about 10 to 15 years, so that's what I did. Besides doing small remodels, I do a lot of small jobs for about 95 condo assoiciations. Most are under $500. I know that I will get an occasional complaint, justified or not, and is typical since we do about 100 repairs per month. So, a little over a year ago, I decided to increase my hourly charged rate by $1.50 and each Saturday when Barb pays bills, she writes a check for $1.50 for each hour Dave and I worked that week and deposits it into a reserve account. Once a month, we take back from that reserve for any call back labor time, and at the same charged labor rate. That system covers the 2-4 hours per month in call backs. It also covers mistakes by one of the mangers and subsequently where we wasted an hour or two as a result. Fopr example, last week I got a Work Order to water proof the footing around a bay window. Dave picked up the materials needed and drove there to do it and found out we already water proofed it about a year ago. The person who checked the condo each week made a mistake. The week before, after driving for 30 minutes to meet a property manager to look at a repair, she forgot the key to the condo - 1.5 hours lost. My system eliminates the necessity of me having to eat that 2 hours or complain about the lost time. The annual total is not much - maybe $3000 per year, but it's still $3000 per year I don't want to loose, and shouldn't loose. What's left over annually is just excess profits.
*The reality of the situation is that the customers are just very indecisive people. They are an extremely nice couple who are in their 60's, and they are having a hard time deciding on whether or not to spend 150k on a house that they may move out of in a few years. I bear them no ill will for their uncertainty, it just that it blows my mind that they could be so uncertain on a project that we have been planning for such a long period of time.It has been a very tough job to plan from day one because of their indecisiveness. In retrospect I would not have pursued it if I had known how agonizing it was going to be. So if they decide not to do it, I will breathe a sigh of relief that I won't have to deal with it any more.But the fact remains that I have invested an extraordinary amount of time in this, and I expect to compensated. In addition, we have a signed contract, and their should be some penalty for breach. Furthermore, I will have a huge scheduling problem, since all my men were going to work on this project for the next few months. There is no way I can line up another project quickly enough to take its place. Last of all, I will have to look like a fool with my vendors and subs when I call them to cancel all the material orders and work scheduled.So, I am not mad about it, and I am not going to punish them or hold them to a contract they don't want, but I am going to require that they cover the costs of all materials that I will have to pay for, and pay me something for my time and the lost productivity of my crew.They are meant to call me tomorrow and tell me their FINAL decision. I think I have already learned my lesson, but maybe someone else out there will gain something from reading this.
*Nick, at 58 I'm in their age bracket. Here's what they may be contemplating:1. Sell in a couple of years and move closer to one or more of the kids, or Florida.2. One of them isn't in great health and may die soon - option item #1 for the surviving spouse.3. One dominates the other and perhaps had a change of heart to maintain peace in the family. I think we all experience that here and there.4. Both are as you said - wishy/washy types and take 2 hours even to decide just to take a shower or a bath.5. One or more are getting pressure from one or more of their kids. Their inheritance you know. They would reather have the money than having to contend with real estate. It's the "Don't let "them" piss away "our" money" syndrome. It happens here daily.6. Any other thing concerning those in that age bracket, and pressures from relatives.Guess this applies to that bumper sticker that says "Dodo happens". And you're right. You're entitled to lost profits AND lost ovehead that this job would have provided. Like you said, don't punish them. Just get reimbursed for your loses. It's fair.There is really no lesson here, other than the only thing that's guaranteed in life is death.
*nick... i just went thru nine months of the same thing...luckily , the permits were really dragging the thing, so i had to hustle other jobs into the schedule to keep things running..as a result , we had some really good small jobs we used as fillers, did i say REALLY good..i mean REALLY GOOD....i bet, if you call up some of the ones you put off and tell them you got a big hole in your schedule...they'll snap you up..in the end , the $170K job became a $60K remodel... .. i did get all my design time and permits paid for .. the main victim was the clients i put off while i was dealing with this one....there is just no sure thing ...
*Nick:Good on ya for just figuring up your costs and letting them out for that amount. While a customer cancelling in mid-stream may be new to some on this Board, in fact it is very common.There is nothing nasty, unfriendly or subterranion about them cancelling. They just have had a change of plans. Besides, what difference is it to you as long as your expenses are covered? Most of the time it is unwise to try to do a bunch of psychoanalysis, or any other kind of analysis for that matter.That is why a wise contractor has a cancellation clause in the contract. It should cover mutual responsibilities in the event either party finds it necessary to cancel.
*I agree with you Fred about having a cancellation clause in the contract if the customer cancels so that you don't lost profit as well as costs. But, if I was a customer (and when I am a customer), I would never agree to a clause that allows the contractor to cancel. Take a roof off, make your profit and then move on to a more profitable job while the rains pouring in? I don't think so.The problem with people saying that a contract should cover everything is that no contract in the history of man has ever covered everything. And never anticipated every contingency that comes up in the course of work. The issues are smaller for smaller jobs, but still there are going to be problems that fall outside the contract.Even when it comes to the description of the work, there are always grey areas where reasonable people can differ in their understanding of what was to be done. The best defense is a good working relationship. And the best way to have one is to not take a job with someone when you know the relationship is wrong before you start.Contracts are great when you are suing each other. Relationships are what avoids lawsuits. Don't place too much trust in contracts (though you should still have a solid contract) and put more effort into communication and understanding.SHG
*I agree with SHG that "The best defense is a good working relationship." I would point out, however, that the process of putting together a good contract can go along way to establishing that relationship.In the course of putting together the contract, the parties should be trying to anticipate what might happen (both the intended work and obstacles to it.)By agreeing beforehand what will happen in given circumstances, a lot of agrument can be avoided when something does happen, and its a lot easier to negotiate a solution before emotions start running high.That's not to say every deal needs weeks of pre-K negotiation and 1 200p K with 500 pages of attachements and exhibits, but it helps to discuss the key issues beforehand.Bob
*here's two phrases that apply.. one i got from joel's grampa this AM..((The ones you can't trust are the ones that don't trust you.". ))the second one is from the lips of strother martin.((what we got here, ... is.. a failure to comunicate)))[Cool Hand Luke]
*While I understand your points SHGL I take another perspective that I think is much more realistic. First, to me the primary purpose of a contract is to put down in writing all those points that could be contentious if they arise later in the deal. If addressed early in the contract they serve to minimize the likelyhood they will actually happen. This, I think, is because if the parties can communicate well up front their chances of having something happen that ends up in the courts is reduced.Next, I have known several contractors who had to cancel a contract. That doesn't mean the job didn't get done well. It just meant the cancellation clause was invoked and someone else finished the job on the original contractor's dollar, or the contractor's insurance/bond company's dollar. Most of the time this has not been due to bad ethics; just that the contractor had problems they couldn't overcome.
*I'm not against contracts, Fred. I've just spent far too much time dealing with them as a lawyer to put too more faith in them than relationships. No contract can ever cover every contingency. Relationships allow people to deal with the unforeseen by working it out fairly rather than screaming at each other and suing.As far as cancellation clauses are concerned, I would never sign a contract that included one. If I contract with you, you perform. If I wanted the other guy, then I would have contracted with him. And if you have a problem with finishing the job, it's no different that if the customer has a problem paying for it when the job is done. And as far as practicality is concerned, how many people here want to have a performance bond on every job?SHG
*I agree with you SHG, and is why the following is included as the last paragraph of the cover letter for my large project contract:"Finally, there is no contract in the world that could contain enough phrases, stipulations and clauses to substitute for plain old fashioned trust, a sense of fair play and the respect we must have for each other. For that reason, we embark on a venture as "partners" for the limited duration of your project. As a partner, please do not hesitate to ask questions, clarify situations or let us know if we can be of further assistance to you. We will do the same. A friendly, yet business like relationship will guarantee that not only the completion, but the process as well, will be pleasurable for both of us."
*That's a pretty good clause, Sonny. While there's nothing legal about it, it conveys the bottom line message and (assuming the customer reads the contract) it places it in their face while they are thinking about their obligations and yours. It makes it clear that the writing is not a substitute for fairness and honesty. And it tells them that it applies to you as well. The only word I would change is "pleasure" in the last sentence, for which I would substitute "satisfying experience." SHG
*Well SHGL I don't see how you and I differ as far as the first paragraph of your post goes. What I said about relationships is what you said. You just wrote as argumentatively.As far as the second paragraph I guess you just wouldn't hire many contractors. The fact is that contractors failing to complete their jobs is a fairly routine happening. Fortunately it isn't too routine and it is something that most folks don't want to happen. So, discussing up front what will happen if the contractor, for whatever reason, fails to complete the job is a reasonable and prudent thing to do. That doesn't mean that anyone wants to sever the relationship. It just happens due to a wide variety of events; from heart attacks to family emergencies to insolvency.
*Just thought I would update for anyone interested...The client ultimately decided to go ahead.Here's a picture at about 3:30 today... I'm glad they decided to build it.
*looks great.. i like the canoe-ed roofs on the mainhouse too..are you going to do slate on the post and beam ?
*So what was the deal? Did you ever find out what happened? Can you share? That framing looks great! what part of the country is this? ( looks like the south)Steve.
*Hey Nick,Glad things worked out. The¥ will be happy with it. Looks like some skylights are planned?MD
*I have very stern cancellation penalties in my contract and even interest and late fees for overdue payments. In a majority of the time contractors look to why a client cancels as to decide whether or not to release a client from a breech of contract issue and whether or not to go after loss of profits and costs incurred. This may be why Sonny analyzes the situation. Here are two examples:1 the client wants to cancel because of medical reasons, diagnosed with cancer lets say. Most would release the client with minimal cost.2 the client finds someone that will do it cheaper after they signed a contract and the process is in motion but no physical work has started on the job site.What then?
*Thanks for the compliments, guys.Mike - the roof will be architectural asphalt to match the existing house. I wish it was going to be slate.Steve - this is in suburban Philadelphia.Mad Dog - there will two south facing skylights as well as about as many windowes as you can possibly cram into a structure this size.
*Where in Philly? I'm just guessing, but I'll say Montco or Bucks?
*Radnor, Delaware County.
*My next guess. I went to Carroll HS in Radnor.
*
Had a meeting with one of my customers yesterday...I was picking up the second big check for a timber frame addition that we will be starting the foundation for in a week and a half. The timber frame is in fabrication as we speak and the structural panels are being delivered on Tuesday...they have already paid me over 25k for the design, plans, permits, and construction deposits. Never mind the fact that I have been working on this for eighteen months to put it all together. So we are finishing up a meeting finalizing some of the last details (tile selection, style for the cupola, etc.), when the husband says to me, " I hate to bring this up, but we're not really sure we want to build this... how much would it cost to stop it at this point?"
I just had to laugh...what the hell are people thinking? I told them it would wind up costing them everything they have paid to date, plus probably about another twenty grand. They seemed to think that was reasonable, but I'm just shaking my head...