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Lucy, Esq.
Lucy, Esq., Lawyer
Category: Consumer Protection Law
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Experience:  Lawyer
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I would like to cancel a remodel contract with a general

Customer Question

I would like to cancel a remodel contract with a general contractor in California after the 3-day rescission. Husband was laid off and would have to re-prioritize spending. Brought the hardship up to the contractor, first he said that he will check out the time the office spent and work done to charge me for cancellation. There has been no actual work except half an hour meeting the designer to select the bathroom tiles. The office prepared the proposal and contract, that was it!. He is dragging his feet on the cancellation with much delayed or no response, now he says he wanted me to pay 5% of $108,000 the total project estimate but there is no clause about the penalty for cancellation in the contract. I did pay a $1000 deposit upfront. What are my options of getting out of the contract with little damage? I don't want to be bound to the contract and not being able to afford it with husband losing his job.
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  Lucy, Esq. replied 1 year ago.
Hi,

My name is ***** ***** I'd be happy to answer your questions today. I'm sorry to hear that this happened.
There is never a right to cancel a contract after any recission period, whether the contract says so or not. The law actually frowns on penalty clauses in contract, so many people don't use them. But that doesn't mean that the contractor isn't entitled to any damages.
The contractor actually has a legal right to charge you from the profit he would have made from the job. If he decided to sue you for breaking the contract, that's what he would get. Even though, in the real world, you have a good reason for breaking the contract, in the eyes of the law, it doesn't make a difference. Five percent of the original (minus what you already paid) is quite possibly less than what he would get if he had to take you to court for his lost profits. He's not entitled to the full $108,000 (because much of that would have been spent on materials or labor), but it's likely that he built more than 5% profit into his estimates.
One option you could try is to see if he would accept a payment to delay the contract until your husband is working again. That way, you get the decreased spending you need, but he's not losing out on money entirely. The only other option is to keep negotiating - but keep in mind that the law isn't on your side here. A judge isn't allowed to consider whether someone had personal circumstances that made it very understandable for them to cancel a contract.
It's important that you are 100% satisfied with my courtesy and professionalism. Thank you.
Customer: replied 1 year ago.
I am willing to pay for what his damage/s were by not doing my project, but not the profit that he would make by doing my project. The permit has not come down and there is no real work has been done yet. At this point he only mentioned about he is considering charging me 5% for cancellation but we did not agree to that amount and there is no formal cancellation form from him either. I want to see a closure so I can move on. The contractor chose not to respond to my calls. He said he would work with me and give me a response by Monday, then Tuesday, Wednesday came and gone, now it is Thursday and there is still no response.
I feel the longer I let it go the more risk I would be in. I am thinking to initiate a written cancellation notice so I can move forward to get a closure on the contract. Do you think it is the right thing since he appears to hold me hostage on the contract by not responding? If yes, how should this cancellation notice be worded, and what effect would it serve? Thanks for your input.
Expert:  Lucy, Esq. replied 1 year ago.
Legally, his damages for you not proceeding ARE the profit he would have made if he'd completed the project. He doesn't get the full contract price, because he didn't have to pay workers, buy materials, get permits, etc. But the profit is what he'd have had if the work was completed, and if you go to court, that IS what a judge will award him.
If it would give you peace of mind, you're free to let him know in writing that you've decided to cancel the project. We are unfortunately not able to write a cancellation notice for you or tell you what it should say. He's not bound by any language you use about what you're willing to pay him as a result of the cancellation, and the notice will not prevent him from suing. Your legal position is weak here, so while I understand wanting the closure, I can't say that pushing for a quick resolution will necessarily make him more willing to work with you.
Customer: replied 1 year ago.
Shouldn't he have to provide proof of damage/s if we have to go to court. I know in real estate deal, a buyer's default does not guarantee the seller getting the deposit if the seller can find a replacement buyer timely unless there is proven damage such as the market has tanked or there is no other buyer. Often times the defaulted buyer walked free in a robust housing market since the seller incur no damage by getting new buyer. I can see some parallel here with him filling the slot with other projects especially this is very busy season for contractors. If he demand unreasonable fee from me with no work done then making profits from the replacement customers, wouldn't the judge look at this a double dipping?I could actually compromise to do a much smaller project, I guess you would say he has the right not to accept it and proceed with a demand for high fee for cancellation of the original project.
Expert:  Lucy, Esq. replied 1 year ago.
His proof of damages is the agreed contract price minus the estimated amounts for labor, materials, etc. He should have that if he's got reasonably good business practices.
It's entirely possible that he would be willing to compromise with a smaller project. The only way to know is to ask him. He'd actually have a harder time collecting damages from you if he declined a smaller project, because he does have an obligation to mitigate his damages by trying to find other work. The problem is, if he claims that he had the ability to do both your job and whatever other jobs he finds, then he's still lost money by your cancellation. And it's not uncommon for contractors to work on more than one project at a time, depending on the size of his company.
Customer: replied 1 year ago.
I am going to take another angle. They could not deliver signing a CalGreen checklist timely when they were approached for city permitting process. They were giving me the run around while the city said they are the qualified professional to sign the checklist. While I was after them for this, my husband was laid off. I used 'hardship' to cancel not to cause conflict in relationship and it is somewhat true, at the same time, I was losing confidence in their lack of competence in providing the checklist signoff. I have lost trust as well given their unwillingness to help. In the end, they did produce the signed checklist for me to submit to city but it was done haphazardly and could produce much complication in the inspection process. So the other half of the reason was my dissatisfaction with their customer service and follow up. If I had used this reason to cancel the contract I am afraid that they would refuse cancellation all together. Do I have more leverage in using 'dissatisfaction with their lack of service' to cancel. If their attitude was more supportive, I would not lose trust in them and will be open to work out a compromise. At this point, I want out to minimize future loss in both money and peace by continuing working with them. This is a contractor over promise and under deliver and the designer is a push over and not a good listener for special need of the customer.
Expert:  Lucy, Esq. replied 1 year ago.
That's actually a much better approach. Hardship isn't a legal reason for breaking a contract, but the other party's breach is. If you can establish that you had reason to believe that he wasn't going to do the job at all, or if he knew you had a (written) deadline that he was failing to meet, that is a legal reason for firing him. To hold him to a strict deadline, you need something like "Time is of the essence" in the contract. Otherwise, the judge will look at whether the job was started within a "reasonable time." If they're failing to get permits and delaying your job and not giving any indication that they're going to actually start, then they broke their promise first.
Yes, the decent thing for them to do when they hadn't started the work would be to let you cancel because of your changed circumstances. But the law doesn't always require us to behave decently. I appreciate what you were trying to do, but their failure to perform puts you in a much stronger legal position.
Customer: replied 1 year ago.
Hi Lucy:
The contractor agreed to cancel finally but the cancellation letter says the following:
"This letter is to signify that we agree to your request to cancel the home improvement contract which was signed on June 8, 2015 for $108,588.00.
You have called our office and informed us of your intent to cancel the contract due to financial difficulties to continue with the project.
We are amenable to your request to cancel provided that you commit not to do the project with another contractor in the next 6 months. The downpayment of $1000 will not be refunded to you.
Please sign on the space below as indication of our agreement."I might start a smaller project within 6 months once we re-organize our finance but I don't want to do the project with them any more because I don't like their support thus far. I am trying to decipher this cancellation letter and potential consequence/s. Do they mean the contract will be cancelled regardless of the deposit situation; I will get the deposit if I don't start the project within 6 months with someone else, I will lose the deposit otherwise? I am most concerned is if they will come after the whole project price if I start the project with someone else within 6 months after I agree to the cancellation letter. Please help to clarify risk/possible remefications. thx.
Expert:  Lucy, Esq. replied 1 year ago.
I'm glad you've managed to work things out with them.
They're not returning your $1,000 deposit at all. But if you hire another contractor to do the same project, they'll sue you for the full profit they'd have made on the job, like we talked about before - essentially because, if you pay someone else to do the same job, they think you didn't really have a financial hardship (although I understand that things change, and it hopefully won't take your husband 6 months to find another job).
The phrasing "the project" means only that you're not allowed to do the same project with another contractor in the next 6 months. You could also get into trouble of the projects overlapped. For example, if you had them remodeling your entire kitchen, and you had another contractor do your kitchen floor only, they could try to claim a breach. But if you had them coming to do your kitchen and you hire another contractor to redo your bathroom, that's allowed.
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