How to Terminate a Contractor
- Document the issues you are having with your contractor
- Terminate a contract based on good cause or a material breach of the construction contract
- Follow timeframes and notices that are required in your contract
- Ensure that there is a termination clause in your contract before you sign it
The first thing you have to do is to document the issues. Make sure you are taking lots of pictures, sending emails or even text messages as long as those text messages are getting backed up. Look at your construction contract. Ideally, you should have a written contract. That is your form of negotiated contract versus the proposal or estimate that was given to you by the contractor which you might have quickly or blindly signed. Whatever it is, pull that document out and see what it says with respect to terminating the contract. If you signed the contractor’s form of contract, it may say nothing helpful; most contractors are not going to put in a provision in their contract that gives you the right to terminate. That doesn’t mean you can’t terminate; it simply means that the termination clause is not clearly articulated in the construction contract.
Termination Based on Cause
The reason for the termination can be based on cause, something that they are not doing but they committed to do. Maybe they are not paying their subs; maybe you have liens on the property even though you have paid the contractor; maybe the work is late based on the construction contract schedule or time frames; or maybe the work is shoddy and has to be redone. For any of those reasons, typically you have what is called good cause or a material breach of the construction contract. If you do, then the best thing to do is give the contractor written notice to cure. Write a letter or an email to the contractor articulating all the reasons why you believe they are in default, or in material breach of the contract, give them 7 to 14 calendar days to cure those default (if no time frame is set in the contract), after which you will terminate them for cause.
Your contract may specifically set forth the types of time frames that you need to follow if you are going to terminate. If so, follow those timeframes and give the notices that are required in your contract. Not long ago, we looked into a contract on behalf of a client. The contract required that the client send a 48-hour notice of intent to terminate with an opportunity to cure. After the expiration of the 48 hours, they needed to send another 48-hour notice. Subsequent to that 48-hour notice, then the termination took place. Every contract is different. You need to look at your contract and see what it says.
Assuming that you followed that process and you have terminated the contractor, it is important to then take the following step:
Document Everything that Happened in that Project
Take lots of photos. If you are going to have another contractor come in and fix or finish the work, it is important that you have lots of pictures and videos of the work as it was left by the defaulting contractor before the replacement contractor comes in and touches anything.
Find that replacement Contractor and have them give you an estimate
Find an expert who will survey the job and give you a report and an estimate to fix the work that is defective or to finish an uncompleted job. The replacement contractor would identify all the work that is currently in place that needs to be fixed and a detailed estimate of the cost to fix it. If there is work to finish, you should ask for a separate invoice to finish the work. It is nice to have that breakdown between what was defective and needs to be fixed and what was incomplete and needs to be finished. That will serve you well if there’s a dispute in the future.
Make sure that you don’t make the same mistake that you did with the first contractor with the second contractor
Have a written agreement reviewed by a construction attorney so that you don’t have issues in the future – especially the same issues you may have had with the first contractor you just terminated.
Finally, don’t wait to obtain the right advise from an expert like a construction attorney to help you navigate through the process of termination. If you do it wrong, it can cost you big time. The best time to hire a construction lawyer is before you sign the construction contract so that the construction lawyer can review the contract and give you advice on the best way to deal with various issues including how the contract covers default and termination. For example, a construction lawyer may add what is called a termination for convenience clause into your contract, that would give you the right to terminate the contractor for no reason at all and potentially limit the damages that the contractor can recover from you in such an instance. Don’t wait to get help and call a construction lawyer.