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Question DetailsAsked on 7/3/2017

We gave a contractor a $1000 deposit and never received a contract we would like a refund and are being denied

We were told we would get a contract when we mailed the check but never did, we have since found a company that will do it for 1/3 of the cost and the original contractor will not return our deposit even though no work has been done and we never signed a contract as he didnt follow through with mailing one as he said he would. Is this legal for him to do? The deposit was paid by check and has been cashed already.

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1 Answer


Course you realize by now that making any payment without a signed contract in hand (or more commonly done simultaneous with signing) was a mistake. And of course, if you have found another contractor who will do it for 1/3 the cost, assuming HE is a legit contractor and competent, means presumably the original guy was not chosen based on competitive bids ? Or maybe the sedond guy is not bidding the same scope or quality of materials or such - but unless you just took the first guy's quote without competitive bids or doing a pre-estimate of what the job should cost, the fact the second one is only 1/3 the cost may be a major red flag too.

[One aside hint - beware, if applicable - there are some scam gangs operating out there which get one to arrange for a job and get an advance like in your case, THEN another member of the scam gang contacts you and offers a significantly lower price and ALSO gets a deposit from you - so you are out double the bucks or more to the same gang on a double-scam. So if the second guy contacted you initially rather than vice-versa beware. I have seen reports of this in the news and on contractor blogs about this happening in the past couple of years across the country, especially on post-storm (hurricane, tornado, major hailstorm etc) siding and roofing replacement jobs. There is some rumor it may be related to the gypsy familes that roam around offering cheap siding and roofing, but could also just be a local group doing it - crooks tend to hear through the rumor mill what works and what does not, so scams that work spread fast.]

You will probably say you trusted the first guy or have a general trust in people - but with people you don't know (or even many you do) the problem is you have no way of knowing who is honest and who is not (look at the number of family members who scam/cheat/steal from their own family), or who is such a poor businessman you should not be doing business with him anyway. For instance, even if you presume he is a legit contractor and just a poor businessman who does not keep up on his paperwork, what does that say about how he will keep up with orders and invoices and sub payments and such on your job, or on how well he will stay on schedule ?

Depending on how things sit, here are some action options, roughly in the order I would consider them in your shoes:

1) send him a certified, signature required return receipt letter stating he has not followed through with his part of the agreement so as there is no contract, therefore you are demanding immediate full refund of the deposit within X days - say maybe 7-10 calendar days might be reasonable to allow for mail transit time both ways. You could also gently but clearly state that if he fails to refund it within that time frame legal action will be taken. Of course, if the letter is on a lawyer's letterhead it carries a lot more weight and will be seen as more of a threat, but also costs a few hundred $ out of your pocket for that so for a $1000 deposit I might wait on that option if I were in your shoes to see how he responds.

BTW - if he comes back and says you have an oral agreement anyway and want to do the job, you do not have to - receiving a written contrat from him was part of the initial agreement or intent to sign a contract - so it is clear a WRITTEN contract what what you intended, and without a contrat being dated and signed by BOTH of you there is no contract in effect, and he has to return the deposit unless there was a written agreement (like a signed bid with legalese on the back maybe) at that time. Course, having paid the deposit makes it tougher than the simple case it would be otherwise.

2) contact his bonding company with a claim for refund due to his default on the agreement - though without a contract that is an iffier thing than if you had a signed contract and he then failed to do the work.

If you treat this as a fraud issue, you could also potentially file a claim with his insurance company (business policy if he has business insurance, or his homeowner's policy (less likely to provide coverage but might, especially for a fraud claim) if he operates as an individual sole proprietor - but same issue with the no contract making it less clear than otherwise.

If you have nothing indicating who his bonding or insurance company is contact the state licensing authority (he is licensed, right ?) - he may have had to file that info with them.

City/county building department manager may also be able to tell you if this guy is a real contractor or someone they have never heard of, and maybe if they have heard previous csimilar complaints which might drive you toward a criminal fraud complaint right off the bat. And if local licensing is required they might have bond /insurance policy info on him.

3) if you think he skipped with the money, contact your local police fraud unit and see if he is a known player for this, and maybe file ccriminal charges. If he is legit that would certainly get his attention. Whether you contact them first or go through step 1) and maybe 2) first is a judgement call - because if he is a scammer then 1) would give him notice it is time to skip town and of course if a scammer there will be no bond or insurance to claim against.

If he is licensed as he it required by law be (assuming a license is required in your state/county/city for the type or $ amount of work he was going to do) that would probably be an indication that he is more likely NOT a scammer - maybe just a poor businessman or a contractor who uses advances on future jobs to cover his costs on current jobs till he gets paid - called job kiting (similar to check kiting, though in only some states where deposit trust accounts are required is it generally illegal for him to do that).

4) if you intend to treat this as fraud, talk to your bank - there are money fraud and laundering provisions banks can take (like freezing his account or freezing at least the $1000) until this is resolved.

5) suing him for the refund - you are in the Small Claims Court claim $ range for most states. This assumes you can find him to serve the suit to - that he has not skipped town. Course if you find he has skipped town, then option 3) and 4) including possible federal interstate fraud violations if he left state would be a possibility, but local police would still be the starting point in that case

6) a few states have consumer/homeowner compensation funds for this sort of thing, most not. Contacting the state licensing board would tell you if they can help - but even if no state compensation fund if he is licensed they might put some pressure on him (putting him at risk of losing his license, so a real threat if he is a legit contractor) or they might file legal action against him if he is not licensed, for operating without a license. If he is NOT licensed but should be, proof of his non-licensed status can, in many or most states, serve as evidence of fraud on his part for offering his contracting services without a license and is in itself a crime in some.

Here are some similar previous questions with answers which might give you a few more things to chew on too, though some will be repeat of the above:

Answered 3 years ago by LCD

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