Have
you heard those words from an owner? Last week I got a call from a contractor who
had been told exactly that. He still had tools and equipment on the job. He was
owed money. His crew and subs expected to be paid. Now what?
A
contractor terminated for good cause could be liable for both the extra cost of
finishing the job and the cost of fixing everything the owner didn’t like about
the original work.
What
would you do?
First,
understand there is only one cheap, quick solution in a case like this: a heavy
dose of common sense. An owner who orders a contractor off the job has grievances,
either real or imagined. Offer to resolve every one of those issues. Then make that
offer in writing. Save a copy for your file. An owner who refuses your offer to
continue work on the owner’s terms has breached the contract. If the case ends up
in court, you’re the one who acted reasonably. Documents in your file will prove
that.
If
common sense doesn’t help, the law has answers. An owner who orders a contractor
off the job without good cause has committed a breach of contract. The contractor
is entitled to payment for work completed plus lost profit. But an owner's breach
of contract is excused if the contractor was the first to commit a material breach of the agreement. A material
breach is a question of fact, usually decided by a jury.
The
courts could take years to decide who committed the first material breach. Legal
fees in a case like that will be many thousands.
Better Choices
Arbitrate. If your contract requires
arbitration, do exactly what your contract requires. If you have agreed to arbitrate,
no court will hear the dispute. Mobile mediators and arbitrators are available in
nearly every major city. Some will meet on the job site and provide a written decision
in a matter of days. That decision is fully enforceable, just like a judgment in
court.
Record a lien on the property. Lien rights are entirely
separate from contract rights. A recorded lien gives you the right to foreclose.
But watch four points: (1) Where a license is required, unlicensed contractors don’t
have lien rights. (2) If the construction site is the primary residence of the owner,
there are no lien rights if the owner didn’t get the Federal 3-day right to cancel
form. (3) Your lien must be recorded promptly after work stops. (4) You have a limited
time to bring a foreclosure suit after recording a lien. Wait too long and your
lien rights are gone.
Look to your contract. Many construction contracts
give either the owner or the contractor or both the right to terminate – either
for cause or without cause. If your contract has a termination clause, contract terms
will explain who has to do what after termination.
A
good contract is your best protection against an unreasonable owner. The best contract
drafting tool I know is Construction Contract Writer. The trial version is free.
