Questions Regarding Contract Cancellation

 
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Old 12-17-2017, 06:25 PM   #1
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Questions Regarding Contract Cancellation


I recently encountered my first job cancellation at the request of the property owner. I've been in business for myself for just under a year, and up until this incident, everything has been relatively smooth sailing.

Quick overview of the situation:

I put in a bid to do a bathroom remodel in an apartment. The bid was too high for the property owner (PO), I adjusted to my price to fit into his requested budget, roughly $1500 difference.

PO sends 50% down, per contract.

PO requests bids for total apartment renovation in 2 other units in the same building. Once again, bid was too high, I adjust to his requested budget.

A week after receiving 50% payment for bathroom, PO calls me. Says he brought in another contractor who under bid me by $5000 for the other 2 units and decided to sell my current contract (bathroom remodel) to this other contractor as well, and that I was to return the initial 50%.

At this point, I had already allocated a portion of those funds to labor and material/tools leaving me short of his 50% down payment.

How do I proceed?

I know that in Ohio, contracts can be cancelled within 3 days for a full refund. This was a week after receiving payment. Obviously, the PO has the right to use any contractor they want but, what are my options as far as returning the money after I was paid and contracted to the job?

Do I have him buy me out of the contract? Do I just return the money and cut my losses? I turned down other work to accommodate his schedule and his rescinding the contract effected me and my business negatively.

Any input would be helpful. Thanks all and Happy Holidays.

Dave Dixon
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Old 12-17-2017, 07:55 PM   #2
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Re: Questions Regarding Contract Cancellation


It sounds like a breech of contract to me. But I'm no lawyer.

You stated he had 3 days to cancel but he waited a week ? You have some options unless the laws in your state say otherwise.

IMO, it's a total breech of contract. If your presented him with your own contract, both parties signed it, money was exchanged and the ball began rolling, it's considered a valid "legal and binding contract."

You might say "too late pal,...we made a deal, I scheduled you in my books, purchased materials and the work will commence as per our agreement."

Or inform him about the "breech of contract" issues and state your losses because of it. If he wants to hire another guy, demand that you will collect a set dollar amount for compensation/losses and damages.

It might end up in the court systems or your state laws may dictate the outcome. IMO, I'd avoid any lawyer and court proceedings and come to a agreement with the guy. I'd press hard for some type of compensation though. OTOH..Sometimes a guy might just return the money and move on to greener pastures and chalk it up as a lesson learned.


"Breech of Contract." This is an excellent piece of ammo to always have written into your contracts. You can put a hefty BOC penalty ($$$$$) should anyone back out of a contract after the allotted time.

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Old 12-17-2017, 08:01 PM   #3
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Re: Questions Regarding Contract Cancellation


Quote:
Originally Posted by DixonServices View Post
...............decided to sell my current contract (bathroom remodel) to this other contractor......
WTF does this mean? How can your contract be 'sold' to someone else?
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Old 12-17-2017, 08:07 PM   #4
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Re: Questions Regarding Contract Cancellation


You had a contract, he failed to exercise his right to cancel in three days, which because it was a commercial job, that was generous of you to give him.
Then he changes his mind for whatever the reason and wants his deposit back.
Do not give it to him.
Explain what you told us and tell him he was too late to cancel.
Then shut up and wait for a response. he who talks first has lost.
See what he says at this point and go from there .
As it is a business and not an individual on their own house the law should be different.
Personally I would not do the work, but accept liquidated damages of 25% of the contract to walk away

Be thankful you did not start the work..
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Old 12-17-2017, 08:08 PM   #5
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Re: Questions Regarding Contract Cancellation


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Originally Posted by 480sparky View Post
WTF does this mean? How can your contract be 'sold' to someone else?

I bet English is not his first language.
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Old 12-17-2017, 08:17 PM   #6
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Re: Questions Regarding Contract Cancellation


Born and raised in Cincinnati, Ohio. English is definitely my primary language. Haha

What I meant by "sold my contract" is this:
He saw how cheap this other contractor was and decided to give him the job that he contracted me to do. Maybe sold wasn't the right word. He contracted me, paid me then cancelled and gave the work to a cheaper contractor.



I had considered a breach of contract option, but I'm doing my best to keep it civil and out of court jurisdiction.
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Old 12-17-2017, 08:20 PM   #7
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Re: Questions Regarding Contract Cancellation


My contract states ďdeposits are non refundableĒ


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Old 12-17-2017, 08:26 PM   #8
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Re: Questions Regarding Contract Cancellation


yeah breach...not breech...lol. sorry.

I was bourn in Buffalo NY and speaka da engleesh good. well. speak well? speak good?

yeah.
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Old 12-17-2017, 08:36 PM   #9
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Re: Questions Regarding Contract Cancellation


So the question now is: What does the contract say about cancellation?
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Old 12-17-2017, 09:00 PM   #10
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Re: Questions Regarding Contract Cancellation


That's the problem. I've never had to add a cancellation clause to any of my bids. This is literally the first time I've ever experienced someone doing this. I've had cancellations, but never after having received payment. Ohio's laws state that the owner has 3 days to cancel before the contract is binding. Another problem is, I didn't even get a chance to start the work before this other guy shows up on the site...
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Old 12-17-2017, 09:13 PM   #11
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Re: Questions Regarding Contract Cancellation


I don't know about Ohio, but here you don't need to have the clause to cover every scenario that you may encounter covering every situation... So the law looks at the matter in a very simple way i.e there was a meeting of the minds when the contract was signed, therefore each party is liable to deliver what they agreed too. Period.
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Old 12-17-2017, 09:30 PM   #12
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Re: Questions Regarding Contract Cancellation


On top of all of that the cancellation clause is not necessary as the law look at consumers differently than someone with a business. In other words, if there is a meeting of the minds and money has changed hands the contract is binding.
At least this in NY is how my lawyer explained it to me.
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Old 12-17-2017, 09:40 PM   #13
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Re: Questions Regarding Contract Cancellation


Hereís my take.....

you might have justification not to give his deposit back, however he might call your bluff and say OK if I canít get my deposit back then I want you to do the job which you would be required to do and honestly I would not want to be in that position because I guarantee you that he will be the biggest pain in the ass customer ever

I would Work out an agreement if you have any sort of money out of pocket invested and get out of that situation

Give him his money back and get out of there and go find work with customers that actually want you to be there and does not lowball you

There are a lot of great customers out there and this is not one of them

If a customer does not want me to do a job or they are so concerned over my price then honestly I donít want to do the job anyhow. I could care less if we have a contract or not

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Old 12-17-2017, 09:44 PM   #14
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Re: Questions Regarding Contract Cancellation


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Originally Posted by Windycity View Post
Hereís my take you might have justification not to give his deposit back, however he might call your bluff and say OK if I canít get my deposit back then I want you to do the job which you would be required to do and honestly I would not want to be in that position because I guarantee you that he will be the biggest pain in the ass customer ever

I would Work out an agreement if you have any sort of money out of pocket invested and get out of that situation


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He's already had the other contractor begin the work.
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Old 12-17-2017, 09:50 PM   #15
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Re: Questions Regarding Contract Cancellation


Quote:
Originally Posted by DixonServices View Post
He's already had the other contractor begin the work.


If thatís the case I would call an attorney that has experience in construction law and get advice because legally it can put you in a bind depending on the laws in your state if you keep the money

Spend a few bucks with a pro that knows all the specific laws could potential save you a lot of money and court time

If your state has some weird law that makes keeping the deposit illegal then you could owe him penalties, fines and interest on the money

Or he might advise you that it is your money to keep

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Last edited by Windycity; 12-17-2017 at 09:53 PM.
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Old 12-17-2017, 09:55 PM   #16
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Re: Questions Regarding Contract Cancellation


Quote:
Originally Posted by Windycity View Post
Quote:
Originally Posted by DixonServices View Post
He's already had the other contractor begin the work.


If thatís the case I would call an attorney that has experience in construction law and get advice because legally it can put you in a bind depending on the laws in your state if you keep the money

Spend a few bucks with a pro that knows all the specific laws could potential save you a lot of money and court time


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Thank you, and everyone else for the advice. It's very helpful for a newb lol

I'm 27, been in construction basically my whole life (my dad was a general contractor and built custom homes for 25 years) but I've never had these kinds of problems before. I want to do the right thing, keep my integrity, you know? I just feel like there should be some repercussions for his actions. You just don't do that to people and expect no consequences.
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Old 12-17-2017, 10:05 PM   #17
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Re: Questions Regarding Contract Cancellation


I fully agree with you and good luck!

however I have learned that you need to know the laws before you react to situations like that because it can cost you dearly if you are wrong.... and a lot of states have some weird laws and procedures on the books

For example in Illinois if you own a rental property you have to be real careful how you deal with tenants who decide not to pay rent, You need to follow the law otherwise YOU might be paying them for not following the law with proper notifications etc! Itís stupid but thatís that way it is



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Old 12-17-2017, 10:07 PM   #18
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Re: Questions Regarding Contract Cancellation


Personally I wouldn't refund the full amount basically for the reason he's backing out..being a cheapass. People can't just think it's okay to pull **** like this and not cost them anything.

I never take a deposit until I start the job and in 30 years I never had a contract cancelled.

Find out the laws in your state and follow that.
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Old 12-18-2017, 06:18 PM   #19
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Re: Questions Regarding Contract Cancellation


In California, the Three Day Notice To Cancel applies only to the homeowner contracting for work at their personal residence. The notice does not apply to rental properties nor to any type of commercial property, but I have seen some stupid judges apply it to rental properties.

Since you don't have a clause in your contract about giving back the money then you have to find out what your state's laws say. I would not give back one penny because you have to look at what the reasons are regarding why a person pays you a deposit.

If every person could give you a deposit and then get their entire deposit back then getting deposits would be senseless for the contractors. Every time I give someone a deposit I ask whether or not the deposit is refundable. If your customer did not ask about the deposit and there is nothing in the contract then I say, "keep the money for your time and effort".

I never ever ask for a deposit from customers because I don't like the feeling like I started my jobs by owing people money and I don't want my customers to worry about whether or not I will show up to do the job. But, one of my salesmen signed a contract for $38k two weeks ago and the customer wrote us a check for 10%. The job is scheduled to start on the 27th of December and I always ask myself what I will do if the customer cancels. Since I don't have one penny invested in the job I would give back 100% of the money because then I know the customer will call me in the future and give us referrals.

If you don't have a clause in your contract to give refunds then I would keep the money until and unless a court orders you to refund the money.
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Old 12-20-2017, 07:35 AM   #20
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Re: Questions Regarding Contract Cancellation


It sounds like a breach imo

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