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Question DetailsAsked on 8/10/2017

We had to let our contractors go due to never showing up, lying, etc .We had no contract but he' s sueing? Can he?

We hired in March, they said they would get to it right away, there was no contract. They kept saying next week until finally 2 months later they poured basement walls then nothing. We had a meeting with them to say we are not pleased with timeline plus he didn't follow our plans and made decisions on his own that cost extra money. He would come for a few hours and get a small amount done. 4 months and only basement down, he worked all day with 2bother guys and all they got done was platform that was done wrong. We had to let them go. They went to the bank the next day demanding 18,000 We asked the county attorney he said we don't owe them. Now their sueing 😡. They have cost us a fortune and we have no house 😩😪. Can he? Advice?

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How did you get into what sounds like a new house construction, or at least a major addition, without a written contract ? Or maybe you don't think there is one but he does, because the bid/proposal form he gave you with the bid, and you maybe signed to accept it, actually was covered in fine print on the back making it a contract (under his terms) once you signed it. Very common with standard contractor forms like bid sheets/ proposals.

The suit - or threat to sue - might just be a bluff, or might be real.

Making decisions on his own - depending on the contract, assuming he is the general contractor, he may well have certain leeway on that, particularly if his proposal had fine print on the back making him your project manager or giving him design authority. Otherwise, and certainly for any significant item, a change order should have been prepared by him each time proposing the change and stating his proposed associated cost and schedule effect, for your signature or refusal (refusal would then lead to negotiation on the need for and terms of the change, or maybe denial by you for optional items not actually required for the construction).

You say no contract - you mean no WRITTEN contract, but in most or all states, only real estate (land) and sometimes vehicle transfers have to be in writing - other types of transactions, including construction projects, can generally (though not bright to do so) be under an oral contract - handshake agreement basically. Because he has being doing work on your property with your knowledge for some time and you have allowed it, you certainly have at least an implied contract - if there is no written contract at least a time and materials open-ended cost-plus arrangement which would be presumed to be based on his bid or proposal in lieu of other contracry facts, which is near the worst possible situation for you.

Not likely to turn out good for you, because by not having a written scope of work, plans, specs, price and start/completion date, etc you have put him in the driver's seat - plus even if he leaves the job or completes it at reasonable negotiated cost, you will be out legal costs, and quyite likely lose your construction loan or have the bank wanting to renegotiate it at a higher risk factor - meaning higher rate. Plus with the construction dispute on the record and likely associated credit rating damage, the permanent mortgage you are likely to have in the paperwork or pending after construction may well go to a much higher rate or higher required down payment - which could be catastrophic to your financial picture, so there is more at risk here than just the construction cost. (Plus possibly issues about temporary living cost or such if you planned a certain move-in date and have released your existing lease or have committed to a sale on your existing house.

Also - of course you know this now - letting the job drag on and on without promptly taking affirmative action to shape him up or kick him off the job as soon as he quit showing up or started not following the plans was a mistake, because by not taking action he can argue that you must have been satisfied with both his work quality and his progress or you would have objected.

You are stuck now with a situation where he will likely say what he feels his work is worth, or that you owe him the entire amount to finish the job because you terminated him without cause - breach of contract. You will counter-argue substandard work (which if you don't get expert testimony or failed building inspection you have a weak case) and delays in completing the work (but no written schedule evidently so nothing to compare that to) - so without scope of work and project schedule it will be largely a he said /she said situation, and unless you can prove his work is grossly inadequate or contrary to code he will almost certainly be awarded at least the fair market value of the work done to date including overheads and profit - maybe more depending on whether the court or any arbitrator it goes to thinks you were justified in terminating him or not.

And if you did not have plans and specs and detailed scope of work for him to work to, his Bond (he is bonded and licensed and insured, right ?) may well not have to cover job completion for you at original proposed cost - especially if you terminated him before calling his bond, which in many cases eliminates the bonding coverage because it generally is in effect on a particular job only for the duration of the job plus any warranty period.

As for the county attorney saying you own him nothing - I am real surprised he would stick his neck out that way, UNLESS the contractor is not licensed or some such detail AND your state (or rarely local city) law prohibits him from taking a dime for unlicensed work done - a very few states have that sort of provision.

You clearly need an attorney (sorry, no Angies List categories for that much-requested service) experienced in construction contracts, breach of contract situations including contractor claims lawsuits, and real property liens. Special attention to the lien issue, because a lien against your house not only makes it unsaleable until the lien is released, but is likely to at least freeze if not terminate your construction loan, and can also cause destruction of your credit rating. That can then lead to immediate payment demands on potentially ANY other loans or lines of credit you have - credit cards, student loans, mortgage, car payments, etc - under acceleration of payment provisions that a default or lien/judgement on any one loan invokes a mutual default clause on the others. A nasty twist in the fine print of many credit and loan agreements which a lot of people and even some lawyers do not know about till it hits you.

And discusss with attorney contractor's licensing and bonding status (may strengthen your case if required by law and he is not/does not have), notifying the bank (presumably they are holding a construction loan) not to release any further funds to him pending resolution of the issue, the need to notify your homeowner's insurance company about the suit (most policies require you proimptly notify them of any suit against you or they can deny coverage), and similar factors like finding out what current permitting and inspection status is, probably getting an expert engineer or architect expert opinion of the quality and suitability of the work done to date and the value of that, reconciling what you have paid versus what he has billed to date (plus presumably the $18,000 he demanded), etc.

Hate to say it, but not only are any payments made to date unlikely to be refunded in the next year or so (if at all), but your construction loan and real estate arelikely to bein limbofor at least several months and commonly more like a year or more unless your attorney is able to get his attorney to sit down with both parties and maybe a professional negotiator or mediator to work out a suitable agreement - which at this point I would say would be for termination of the contractor with no more work, because you certainly do not want to be working with him any more, and likely ditto from his standpoint.

Then you can look at getting financing in hand to restart - though if you have true winterin your area you might be pushing the limit on getting any further concreting needed in before freezeup, and will be looking at a fall/winter construction at best, which is likely to extend the completion date quite a bit and commonly in wintry areas will cost more for construction than nice weather construction. You and your architect (which you should have one of on the job) would have to discuss whether the weathering effect on framing will be acceptable to you, and scheduling constraints to put in the contract with respect to complete drying-in and at some point HVAC functionality before doing drywall and interior finishes, for instance.

And of course, afterall is said and done, sounds like an appropriate Review on Angies List mioght be in order, with attorney vetting of it to keep you out of trouble and to comply with the terms of any settlement.

Answered 3 years ago by LCD

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