Identify Both Your Rights
If a contractor has been sent to your property to perform repairs or services, you may have certain rights, and remedies, even if there is no written contract. Your rights may be based on an implied agreement as a result of you having a conversation with the contractor where the services and terms are "agreed upon" (i.e. shopping for re-roofing of your home).
There are a few actions that you may take that will waive your rights under the contract. First, if you allow the contractor to continue to work after the contract’s deadline has passed, you may operate as a waiver of the contract and any deadlines therein. Similarly, if you continue to allow the contractor to work knowing that he is working outside of the scope of work agreed upon, i.e., you hired him to clean the gutters and instead he is painting your house, you may have waived your rights and agreed to the new scope of work . Second, you may have waived your rights under the contract if you fail to notify the contractor of his breach of the contract and the breach is of a continuing nature. For example, if the contractor does not meet the terms of the contract audit trail, you should notify the contractor. You cannot simply do nothing.
Your rights may be limited by a contract with your neighborhood association or you may have notice of a contractual waiver of your rights if you are working with contractors recommended by an insurance company. If you have had a conversation with a contractor to whom you wish to terminate the contract, we recommend that you send the contractor notice to terminate the contract and preserve your rights. It is strongly recommended that you contact an attorney before taking actions that may impact your rights.
Recalling Evidence of Wrongdoing
Documented evidence of the contractor’s inadequate performance, misconduct, or other basis of termination will significantly assist in mitigating exposure to a potential lawsuit. Evidence that demonstrates a breach of the contract will also assist in mitigating damages. In addition, evidentiary proof will strengthen your position in a legal proceeding if one goes forward. Even if you have a contract with your contractor, it is best practice to have proof of what was agreed upon and whether the contractor performed as agreed.
Communication: A contractor’s failure to communicate with the homeowner/landlord is a basis for termination because communication is an implied term of every contract for service. (See Restatement [2d] Contracts, § 235.) An email alerting the contractor to the fact that its estimate is higher than the contract price is evidence of communication sufficient to establish that the contractor failed to clearly explain the reason for the increased cost. Determining whether your contractor failed to communicate with you only requires an understanding of what information was required to communicate the reasons for additional costs. Documenting any instances of a lack of communication from a contractor is also beneficial in establishing that a contractor is not adhering to your contracting agreement.
Performance Issues: Evidence that a contractor’s work is subpar or improper is needed for termination. Practically speaking, this evidence often comes in the form of pictures or videos showing performance issues. Pictures are beneficial because they do not discriminate between the alleged good and bad at a distance. Pictures only showing the poor workmanship gives the homeowner/landlord the benefit of the doubt, which is especially important given the subjective nature of construction contracts. If a bad job is documented, trying to explain the reason for your termination in the positive light in which the contractor would argue must be difficult. Pictures showing the extent of work performed versus promises made provide irrefutable fact.
When a homeowner or landlord discovers that their contractor has engaged in improper work, it is often important that they obtain this information in a permanent form. The homeowner or landlord should consider documenting performance issues through email, video, and/or photographs because it ensures that there is information available to confirm the claim should a dispute arise. It is highly recommended that unclear communications not be relied upon in a dispute. Video and pictures keep it simple and make it easy for everyone to see what the dispute is really about.
Breach: It is also important to note that simply because there was performance does not mean that a breach did not occur. Breach has been defined as the violation of a contractual obligation by reason of a failure to perform a promise. (See Restatement [2d] Contracts, § 235.) A contractor’s breach of a duty under a contract triggers a capital duty to prevent that breach. (See Restatement [2d] Contracts, § 5 et. seq.) The duty to prevent a breach or to mitigate a loss provides an additional reason to document performance issues because if a homeowner or landlord has notice of a breach and they ignore it, their damages may be increased. A contractor’s breach of duty to perform only part of the contract price is a claim for damages. A homeowner or landlord may recover only on the basis of the actual damages suffered, rather than consequential damages, as a result of the contractor’s breach.
Notify Them of Your Decision
Once you determine that you have cause to fire a contractor, regardless of whether there is a contract, you should consider how you should best communicate your decision.
You should communicate clearly, professionally, and only write down what you can prove. If you are going to say something, in writing, that you cannot prove, then you might as well take your chances.
Most importantly, you should not use this as an opportunity to vent about why the contractor sucks or how you should have fired him or her sooner. In other words, do not label the contractor, and then try to substantiate your opinions by writing them down. Even if you are legally able to do so in your jurisdiction, what good does it serve you to waste your time? If the contractor has done something really bad or illegal, notify the relevant authorities outside of the termination and let that process take care of itself; do not jeopardize that investigation by including it in your notice of termination. If the contractor does try to sue, you want to have a clean slate or at least be able to point to evidence of what he has done wrong without having to deal with your impeachment in the process.
Keep in mind that if the contractor sues as a result of the termination you will probably have a deposition in which he will definitely use anything you have ever said in order to pull statements out of context in an effort to substantiate his claims against you.
Prepare for Reactions
Consider these 6 options:
1. Mediation
Mediation involves the use of a neutral third party to facilitate a discussion between the separating partners. With mediation, the mediator does not make a judgment or impose a solution on the parties. Mediation can be very effective if: This is less about the issue of having no contract. Consider it in terms of dispute resolution avoiding litigation.
2. Arbitration
Parties can also agree to arbitration, in which a neutral third party listens to the case and makes decisions about the outcome. However, unlike mediation, arbitrators have the authority to select binding legal solutions.
3. Demand Letters
A letter demanding payment or action can help to settle disputes. An attorney can help to write an effective letter that builds a case. After sending a demand letter , the other party has time to respond and make a deal for repayment.
4. Negotiation
Sometimes a business can negotiate a full repayment or a structured payment arrangement. Surrounding this topic can be a variety of arrangements such as discounts, credits, or discounts. There are many ways money can flow without creating conflict about who gets that money.
5. Lawsuits
In some cases, it is necessary to file a lawsuit to recover funds or assets owed by an independent contractor, but a lawsuit is very costly. Even then, it is very hard to get the contractor to repay swiftly.
6. Seek Legal Counsel
A lawyer can help end the relationship in a way that protects you from future litigation as well as provide assistance if litigation is required.
Protect Yourself Against Future Issues
Preventing similar issues in the future is often as important as successfully resolving the problem in the present, as contractors can create significant difficulties for businesses. To prevent confusion in the future about whether or not a contractor is being terminated, it is important to have a clearly-written contract.
In addition to increasing the chances that a contract will be enforceable in the event that the contractor breaches, having a written contract can make it easier to terminate an independent contractor. Many verbal agreements between a business and a contractor are vague, making it confusing to both parties exactly when the contractor is expected to begin working, what specific duties he or she is responsible for, how those duties should be performed, and how long the contractor will be working .
It is critical to include these terms in a written contract in order to avoid future disputes. Some other important contract terms that should be included are those pertaining to: confidentiality and protection of intellectual property/ trade secrets; the circumstances under which the contractor can be terminated; the process for termination; applicable state law; how changes will be made to the terms of the contract; possible circumstances for renegotiation; compensation; and the requirements for expenses reimbursement.