So You Want to Terminate Your Contractor? Know the Risks Before It’s Too Late

You hired a contractor for a remodel or repair project at your home. It started with high hopes, but now, the project is over budget, late, and you are questioning the workmanship. You’ve simply had enough and want to terminate the contractor. Can you? Yes. Should you? Maybe, but it is critically important to know the risks before you do. 

 

This situation is a common inquiry we receive from potential clients, and sometimes, it’s too late and the homeowner has already terminated their contractor. If you ultimately decide to proceed with termination, you should understand the potential consequences and make sure to follow the proper procedures. Otherwise, it could cost you. Here are a couple key questions a homeowner should consider in determining if, how, and the risk of terminating a contractor:

 

1. What does your contract say? The first step is always to review the contract. Hopefully, it is in writing. The contract will provide the rules and framework for the project and any disputes arising out of it. Some contracts contain more specificity than others, but they often discuss breach (default), opportunity to cure, type of termination, and proper notice. Here are 6 things to look at in your contract.

 

2. Are you in breach of the contract? Often, neither the contractor nor homeowner have followed the contract to the letter. Not all breaches are equal. The contractor may have stopped working or is delaying work; however, if it is because you have failed to make payment according to the terms of the contract, you might be deemed the first breaching party. Your potential claims may be limited or waived if you terminate at this point. There may be an ability to cure your breach and then terminate, which could save your claims.

 

3. Does the contract require you to give the contractor the opportunity to cure the alleged breach of contract? Sometimes this cure period could be 3 days and other times as much as 45 days. If the contract requires you provide the contractor an opportunity to cure and you fail to do so prior to terminating, you could waive your ability to recover for the defective work. 

 

4. Does the contract distinguish between termination for cause and convenience? Termination for cause can be warranted when one party material breaches the contract. Termination for convenience takes place when no breach has occurred. If the contract distinguishes between the two, the available remedies and resulting claims for each can be significantly different. Terminating for convenience may require payment of a fee to the contractor, waive any warranty, and/or limit claims for defects discovered later. A common circumstance is a homeowner who thinks they are terminating for cause, but it in fact turns out to be for convenience and they are then stuck with limited claims and paying a fee to the contractor.

 

5. What type of notice do you need to provide? Ensuring you provide the proper notice of termination is important. The contract will usually state who, where, and how notices need to be sent (e.g., certified mail, hand delivered, or email). It may also specify the information that needs to be included in the notice. Washington courts have long held the requirement of strict compliance with written notice provisions in construction contracts. For something that seems straightforward, it is a common pitfall with significant consequences.

 

The decision to terminate your contractor should not be taken lightly as the risks and consequences of failing to do it properly can be substantial. It can be a difficult conversation when a potential client says they already terminated the contractor, but failed to follow the proper procedure and without due consideration of the risks. 

 

If you’re considering terminating your contractor and want to discuss your options, please feel free to contact us.