Attorney sitting with client discussing construction contract
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By John R. Merlino Jr. Esq.
Founding Attorney

The same laws apply to builder contracts as other service contracts. Violating a builder contract can bring serious consequences, including damages in a contract lawsuit. Before you hire a contractor, you must be certain that you want to form a binding deal with them.

Once you sign the contract, your options for backing out are limited. The options depend on the terms of the agreement, whether the builder did anything to trigger your concerns, and how much of the contract was performed.

What is a contract?

Non-lawyers often have a very different view of contracts than lawyers. To non-lawyers, a contract is usually a signed piece of paper that describes each party’s obligations.

But to lawyers, a contract is a concept. A contract is a legally-binding obligation that arises when the parties mutually agree to certain terms, including consideration by each party. This means that parties may be bound by a contract:

  • By orally agreeing to terms
  • When they agree on essential terms, even if non-essential terms are left out
  • If one party makes representations that the other party reasonably relies upon

The idea behind making it so easy to form a contract is that contracts are essential to commerce. Without binding agreements, people and businesses would be unwilling to perform services or sell goods to each other. Liberally construing contracts helps these transactions happen.

Ways to Get Out of a Builder Contract

This does not mean that you are stuck with every contract you make. You may have options for backing out of a builder contract depending on your circumstances.

Look at the Terms of the Contract

Contracts often have termination clauses. You can use this clause to terminate your contract. For example, suppose that you hire a contractor for a $50,000 remodel and pay a $5,000 deposit. The contract might allow you to terminate within three days of the execution of the agreement. You may lose your deposit, but you will avoid paying the additional $45,000.

Raise Any Circumstances that Make Performance Impossible

Customers do not often back out of builder contracts simply because they have buyer’s remorse. Instead, a change of circumstances may make performance impossible. Impossibility is a defense to a breach of contract. If a court agrees that performance was impossible, you can terminate your contract without paying damages.

But keep in mind that impossibility requires you to show that performance was impossible, not merely difficult. For example, suppose that you signed a contract to build a ten-story building, but zoning officials denied a variance and only approved a five-story building. You might have a defense of impossibility.

Similarly, if you hired a contractor to renovate a building, but the building burned down, performance might be impossible.

But if you want to back out because you lost the investor who was going to pay the contractor, you might not be able to meet the threshold for impossibility.

Look for a Breach by the Building Contractor

You can breach a contract that has already been breached. So suppose your contractor was supposed to start working on your project on May 1st because you had a grand opening scheduled for May 30th. If the contractor did not show up on May 1st, you may have grounds for terminating the contract.

But be aware that you can ratify or acquiesce in a breach through your words or conduct. Suppose the contractor sent an email on April 15th saying the project could not start until May 5th because the building materials were on backorder.

If you did not respond to the email or simply responded with an “okay,” you might have ratified or acquiesced in the breach. As a result, you might not be able to use the builder’s conduct to excuse your termination of the contract.

Terminating a Builder Contract

Improperly terminating a building contract can expose you to a lawsuit for damages. To discuss your contract and whether you have grounds to get out of it, contact Merlino & Gonzalez to talk to a real estate and elder planning lawyer in Staten Island, NY.

About the Author
John is a fierce advocate and the office guru for problem-solving and brainstorming. He guides clients through every stage of a real estate transaction from offer to contract, navigating through nerve-shattering home inspection and title clearance concerns, maintaining constant contact with lenders, conducting the actual closing, and continuing to advise clients with regard to any post-closing concerns.  John brings a practical and fair-minded approach to the process which has earned him the respect of his clients and peers.