Customer Wants Out of Contract

2972 Views 7 Replies 8 Participants Last post by Floorwizard, May 1, 2005

Spectatorz

Discussion Starter · Apr 29, 2005

I am looking to get some feedback on this situation :

A customer asks a contractor to put together a spec house project from the ground up to include getting financing along with property to buy and build on, design and construction along with all the details. Contract is signed, deposit made, work begins with loan app, (submitted and approved) design and drawings started and almost completed, multiple properties evaluated as a full time search is ongoing. This process takes 3 months payments being made to Contractor cover time and costs until at the start of the 4th month customer changes their mind and decides not to continue with the project because it is not as "Easy to Do" as they expected.
The Contractor then :
A- Tears up the contract and says "Have a Nice Life."
B- A Contract is a Contract "There is No Way Out"
C- Requires payment of a "Substantial Sum of the Projected Profit in order to be Bought Out of the Contract "

What do you people think ?
Am I missing another reasonable option ?

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metalroofer

· #2 · Apr 29, 2005

If I was the contractor and was paid up to date for my time, I would let client bail. Hey, people change thier mind all the time. They are the ones out of pocket. Wish them well and unless you don't want to, let them know you would be happy to resume project where it was left off if they ever change thier mind again, no questions asked. This would be the mark of a professional. My opinion anyway. Met.

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red_cedar

· #3 · Apr 29, 2005 (Edited)

If one is paid up to date, one has not incured any losses, so if it ever went to court, my belief is one would only prevail if there was a loss of some kind. Let it go and concentrate on a better prospect.

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Teetorbilt

· #4 · Apr 29, 2005

I'm in agreement with all of the above. Leave the customer with a good feeling, he may pass this along to others who will finish their project.
I would make sure that he understood my disappointment.

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hatchet

· #5 · Apr 29, 2005

I don't quite understand.. if you say spec house are you saying you got the construction loan? Hmm.. then you say deposit made.
Anyway - if the case is that you got the financing I would say C and file a claim for loss of anticipated revenue. You're not a bank - but now you're stuck with finishing and trying to pay for the interest. That may be ok if you have the finances to go long enough without a buy out.
If the case is you are not financing the project - then you bet let it go.

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Mike Finley

· #6 · Apr 29, 2005

My vote would be to follow the terms of the part of the contract that deals with this situation.

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Grumpy

· #7 · Apr 29, 2005

First off the contractor tries to talk the customer out of backing out and tries to deduce really why he is backing out "not easy enough" doesn't sound like a real reason, it's an excuse.

Assuming that there is no cancellation clause in your contract. If there is a cancellation clause then you have to do what it says. IMO.

Lets assume there is no clause and the customer won't back down and insists on cancelling then this is what I would do:

I'd submit a letter to the customer with an invoice for any remaining expenses left unbilled. Also if you haven't been including overhead and profit in your previous invoices I'd figure how much profit you'd have made from the work you've already done to date and include that in the invoice. I'd let the customer know that he can back out after he pays the final invoice.

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Floorwizard

· #8 · May 1, 2005

Leave the customer with a good feeling,

As long as you don't lose out at all.
But good point.

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