Contracts

Jeremy England

What exactly entails a binding contract. What I mean is if I sign an agreement with a home owner on a certain price, I can't just say neverming and not do the project.

Shouldn't homeowner's be held to the same standard. If they sign an agreement with a builder to build their house at a certain price. Can they just say nevermind before you've actually started construction?

PipeGuy

Your agreement needs to include provisions for "termination" of the contract by either party. Such provisions will detail the reasons for which the contract may be cancelled and what remedies might be sought for costs or damages related to the termination.
Reasons for termination can include non-payment, non-performance, convenience, etc.

Flimmer

What I mean is that the customer may have some personal reason why they can't get this done at this time. I personally do not want to proceed on a project that a customer does not want me to do. They can be a headache enough when they want you to do the job, imagine if you make them do the job because of some binding contract.

What I tell my customers is that they have a three day right to cancel the project. I of course do not order any materials until that time has passed and tell them that I will do so, and they, at that point own the materials ordered..
This will usually prevent them from being a flake. But, if they still have something unexpected in their life happen and just cannot get the job done, well we are stuck with making a tough decision on whether we want to hold this customer to the contract.. If you do you will be putting your reputation on the linel, so we have never kept someones money, as our reputation is very important to us.

If the customer is trying to cancel to get a better deal well then that is a different story.. By law we can hold the down payment for 14 days from a letter stating that they wish to cancel, of course they don't normally write a letter right away, so it usually is longer before they get their money. I have went as far as to check local permit office to make sure that they are not still building. If so, then I have a warehouse full of materials they will be purchasing for their project & that is usually within the downpayment money.

We still have yet to have to keep someones money, but have come to an agreement to sell the materials to the customer at our cost, after they canceled out of the blue. Of course this was a truthful and honest customer who genuinely felt bad for what he was doing(Not the norm these days).

Sometimes taking it in the shorts, is just part of being in business for yourself.
Trust me, I'm a landlord, I know what taking it in the shorts is all about. Just mark down your losses and right them off at the end of the year.

Flimmer

Jeremy England

Thanks for the responses. I know I made a mistake spending money on the project before they closed their loan. I tried to get the preliminary things out of the way so we could get started quickly. That was a mistake and it's lucky I didn't get their permit when they called or else I would have been out another 2000.

I've started on a termination paragraph and also started to ask for earnest money. It is tough to implement that in this area because no one that I know does it.

Mike Finley

That should make it all the easier. Since you will be the first contractor in your area to start operating like a real business. You can use that as one of your strengths to set you apart from the competition.