# Contract obligate you to keep working even though you "know" you won't get paid?



## TigerFan (Apr 11, 2006)

*Contract obligate you to keep working even though you "know" you won't get paid?*

I need some advice.

I am working a contract on a home and we are in "Stage 3" of my progress payments.

We have stalled work on the job because I "know" that I will not get paid on the completion of the Stage 3 items. The customer has let me know in a few different ways that they want work done now that is not required to be done at this stage of the game.

Am I obligated by law to keep working on the Stage 3 items even though I know that we won't get paid at that point? It requires me to lay out several thousand dollars more to get complete on Stage 3.

This is the cliff notes version - I can give more detail if needed.


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## A.W.Davis (Oct 17, 2006)

Thats a great concern......fortunately we have never been put in any situations like yours (and hopefully never will)

I am feeling there is missing info that doesnt add up here, so you may want to provide a little more info. Cant you do a written change order for extra work?


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## Fence & Deck (Jan 23, 2006)

Sounds like a typical customer who holds out the threat of non payment in order to get some freebies.
I know it sounds glib, but if you gently let the customer know there is such a thing as small claims, or civil court, they sometimes change their tune.
If not, proceed with completing the contracted work. 
If there is no valid reason to walk off, don't. There has to be a breech in the contract for you to take action. If they have paid everything they are supposed to to date, you can't stop because of a feeling.
However, from today forward, document everything you do, insist on change orders for the least little thing, take pictures of everything, record all dates and times as well as all discussions about anything, and keep every receipt for everything you buy.
If and when you do go to court, the one with the most credibility wins.
I lerned my lesson a while ago. No matter if you are desparate, don't let the client intimidate you!


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## Brock (Dec 16, 2007)

perfect oppurtunity to rework the entire contract. i've been in a similar situation. this could work into your favor. here's how you do it.

1. renegotiate.approach H/O and say your getting nervous about payment and you want an amicable pay sructure that is different from your original agreement.

2. change structure. set up the new plan to include many small payments (like two per week) and include the items he wants completed now. this way he feels like you are giving him something,when you are really just completing the items in a different order.

Customer gets to write 9 more small checks instead of two more big ones, and you get to stop the work each time he fails to write your check.


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## tnt specialty (Apr 19, 2007)

Both are good advice......Don't walk off the job! If you do, you may end up owing the HO alot of $ in the end.....


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## ChrWright (Jul 17, 2007)

All sounds good but Stone Mountain has the most practical advice.

Maintain a good attitude but don't let them walk all over you. Stick to your plan, timetable, & scope of work.


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## cmec (Nov 3, 2007)

Fnish the job , Then slap a lein on it:laughing: and then get even


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## Fence & Deck (Jan 23, 2006)

I should have mentioned: a contract works both ways. If, technically they are not in breach, but seem to be trying to intimidate you, you cannot walk off the job. Then YOU are in breach, and they have every right to sue you for their extra costs. If they ARE in breach, for example late on a payment (even 1 day) you may have justification to walk. How big is the contract? How much is left? How many more payments do they have to make? What extras do they want for free? Are those extras remotely related to the contents of the contract? would not doing them unreasonably hold completion of the contract up for you? have they told you ponit blank they won't pay for the extras? What are they saying when you tell them "this is going to cost so much?
Lots of things to think about. For the couple hundred $$ a construction lawyer might cost, you should probably talk to one. But go to a lawyer experienced in construction law, not a general practitioner. It's worth it, trust me.


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## Ed the Roofer (Dec 12, 2006)

NO, you not obligated.

But, depending on your states laws, there are procedures to folow.

I was supposed to get my 2nd 33% from a HO in November, 2006 on a very large roof job. $ 7,000.00 was due. I recieved only $ 1,000.00, with a promise of the remainder the next week on Friday. 

I supplied wim with a 7 day notice, kept on working on the approved change order, but held off ordering the $ 6,000.00 worth of shingles until I received the balance of the payment due. 

I gave him a certified mail notice that if I were not paid on that 7th day, we would be forced by his breach of the payment terms in the contract to stop work plus the additional costs of protecting his roof until he made good plus the costs of tear-down and re-mobilization in the event he later on came up with the funds.

I stil am going through the court system, but I filed a timely perfected lien and am suing for breach of payment terms and breach of contract, along with the attorneys fee clause in my contract plus late fees, which are legaly spelled out and agreed to in the contract.

Unless you think he will come up with the money, find the proper legal way to put his job at a stopped and hold status.

Ed


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## TigerFan (Apr 11, 2006)

Here's a little more info and the progression of things:

They have made 3 of a planned 8 payments (Initial, Stage 1 and Stage2). Every payment so far has been done in two checks - ie, initial was a 3k, then an 8k at the request of the owner. Stage 1 and Stage 2 were, say 5k, then 6k (Stage 1), then 8k, 3k (Stage 2) at the request of me.

We were at my calculation 70% of the way through Stage 3 and I requested a partial payment. HO has balked and dug in their heals. I finally said, fine, I'll finish Stage 3, but expect payment in full immediately thereafter.

HO feels they are paid ahead on the job and wants some repair items, which I have no problem with, and some additional items done in Stage 3 because "it seems like they should be done now anyway." HO has an atty friend "helping" him and when I sent them correspondence that said I would complete Stage 3 100% but expect payment immediately, atty said that was not what they agreed too - I'm looking at the contract saying, yes it is.

Complicating factors are 1) HO has a son who went to work for another contractor who I believe wants the rest of the job and 2) a former carpenter of mine is contacting the HO and running my company down.

Anyway, I'm just wondering if I can validly halt now without laying out a few thousand more dollars when I know they are not gonna pay and continue to dispute what has to be completed in their minds for Stage 3 to be due and payable.


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## Aframe (Mar 24, 2008)

In Mass, suspicion of not geting paid in the future are not grounds for not fufilling your end of the contract. 

IMO Follow your contract with out doing any of the added repair or additional items. IF you do them use change orders/extra work contracts and bill for those items when completed.
Dont wait until completion of entire project




good luck


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## Brock (Dec 16, 2007)

Oh, in that case, don't walk away,run. Send him the certified letter, demanding your phase three money or you can't continue. He most likely will have his son's firm finish it. You won't be getting another penny from this guy. He has entered the "unreasonable zone". Once the customer is inside that zone your done.


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## AtlanticWBConst (Mar 29, 2006)

It looks like you "may" have to fight for that money, in court. We have been there too.

Alot of good advice has been given thus far.

Here's some things that we made efforts to do, in a similar situation:

1.) Remember to keep this professional and not make it personal. Even if the HO gets personal, keep your dignity, and stay professional.
2.) DOCUMENT EVERYTHING (Phone calls, notes, conversations, phone messages...everything)
3.) Certified Mail = It's your friend.
4.) Fullfill EVERY aspect of your current contract.
5.) If possible, have another independent person, worker, work-associate... present during every conversation with the HO (phone calls too).
6.) Do not do any extras. If you do, bill for them immediately, and seperate from the current contract.
7.) Give Written Deadlines (like Ed Talked about).

The point is that you want to be able to show a judge that you did everything professionally, and by the book. You want to be able to show that you went all the way with your obligations, and you communicated each step of the way. Especially when it came to clarifying what was part of the current contract, what was not, and what money was due, and not paid.


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## CA Contractor (Nov 29, 2007)

Don't do any extra work w/o a signed change order. In our contracts, it states changes/additions require signed change order by ho w/half payment @signing of change order, then balance due upon completion of change, not @end of job. Too many times ho requires several things, they all add up & don't need hassle @end of job trying to collect all money! Good luck.


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## Mitch M (Dec 4, 2006)

I agree with the documention part. Since we cannot see the whole contract and also where you are it is really hard to say from our point of view. Either way talk to an attorney. If the contract is clean then complete the contract part only and if they want changes then get change orders signed and paid for them up front. 
After I got burned by a client I revised my contracts and I still add to it every now and then based on comments like you have said or other things that I have come up with.
I also agree with the comment of having someone else there for proof of what was said. Just make sure you do it by the book. I know everyone says do this and do that and then fight it out in court. The only ones that win are the attorneys. If you get a judgment against the client you still have to collect. Don't let yourself get in that position in the first place.


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## Stevelsc8721 (Feb 21, 2008)

*Getting One Up On Home Owners*

I have paid for my education dearly, so I play the game of leaving a small pocket recorder in one of my locked tool boxes, When the home owner comes to check on things if they talk by the tool box you can here what they have to say and take action. I have herd many happy clients and sceamers that I have beat at their own came, It takes one to know one, where did I get this from? Read Henery Fords Biography on business:thumbup:


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## Heritage (Mar 20, 2007)

*This is the clause I have in my contract. It's simple and doesn't leave much room for interpretation. Stick it in your contract, next time this will be a non issue...hopefully:laughing:*


*1. **DEFAULT BY OWNER*
If payment of any of the amounts to be paid to the Contractor are not made at the time specified, or if the Owner defaults in any of the other covenants or agreements, the Contractor may, at its option, cease work and treat the contract as repudiated forthwith on the occurrence of such default, and the Contractor may recover payment for the work already completed plus damages, including loss of profit together with interest therein at the same rate of interest as on overdue payments.


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## Heritage (Mar 20, 2007)

Oh and btw, on my last contract the rate of interest on overdue payments was 25% a month. I got into a little dispute with them...nothing major. I credit the rate of interest. I think it shook some sense into them and put things into perspective. It was my leverage vs their insanity...leverage won.

I would be all too happy for them to breach. I would file the papers with the court...then wait. Then when their final balance has multiplied enough times...go enforce collection.


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## Ed the Roofer (Dec 12, 2006)

If you are going to use a clause that may be rejected by the court systems, please also add a "Severability" clause, in the event that one clause gets tossed, it wil keep intact all other clauses without prejudice.

As far as the 25% interest rate per month, that would be a violation of the usory statutes, but the HO would not know that until they speak with their attorney.

Ed


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## J F (Dec 3, 2005)

This won't help on this occasion, but we always get a 20% deposit with additional payments scheduled *prior to the start* of next phase (see attached pdf). That way, if there are some small items still to be finished up on the current stage of work it won't hold up the next contract payment.

And most important...only leave 1-2% of contract balance due for your last payment.

We're always ahead on payment schedules, so if someone were to get funny we've been paid up to date, including profit. Never had a problem yet (knock on wood).

J


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## TigerFan (Apr 11, 2006)

J F - thanks.

I actually downloaded that about 2 months ago and have incorporated it into our new contracts. 

Unfortunately, this job is an old contract.


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## J F (Dec 3, 2005)

Yeah, I thought I posted it (or another contract) elsewhere. Hope you can work your way around this current situation, keep us informed. Good luck.

J


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## GSE (Aug 24, 2007)

Stone Mountain said:


> Lots of things to think about. For the couple hundred $$ a construction lawyer might cost, you should probably talk to one. But go to a lawyer experienced in construction law, not a general practitioner. It's worth it, trust me.


It took us a while to go the lawyer route, but after we learned how much, it saved us and actually brought a profit the every job, now we use the lawyer from day one of the contract, on any job over $2,500 he looks over every contract, and acts if there are any payment problems, he deals with the customer, and gets action fast in a professional way.


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## LNG24 (Oct 30, 2005)

25% interest huh, hope you don't have to go in front of a judge with that. He/she will toss out your entire case with stuff like that.


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## ChrWright (Jul 17, 2007)

Yes, 25% is dreaming... they teach that in high school:

Only banks are allowed to gouge consumers that much.


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## Ed the Roofer (Dec 12, 2006)

Here is a Severability clause that I referred to earlier on, if you do not want your entire contract invalidated by a judge for that illegal usory rate of 25% being applied.

Ed

*Article 14)* Severability – If any provision of this agreement is found to be unenforceable, then such provision will be modified to reflect the parties’ intention. All remaining provisions of this agreement shall remain in full force and effect.


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## Brock (Dec 16, 2007)

GSE said:


> It took us a while to go the lawyer route, but after we learned how much, it saved us and actually brought a profit the every job, now we use the lawyer from day one of the contract, on any job over $2,500 he looks over every contract, and acts if there are any payment problems, he deals with the customer, and gets action fast in a professional way.


Oh yeah? Whats that run ya?


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## Heritage (Mar 20, 2007)

Ed the Roofer said:


> Here is a Severability clause that I referred to earlier on, if you do not want your entire contract invalidated by a judge for that illegal usory rate of 25% being applied.
> 
> Ed
> 
> *Article 14)* Severability – If any provision of this agreement is found to be unenforceable, then such provision will be modified to reflect the parties’ intention. All remaining provisions of this agreement shall remain in full force and effect.


 
Ok, here's the deal...I'm really not a lawyer:laughing:.

I threw that 25% interest deal on my last contract for the first time. I didn't know that it wouldn't hold up, since...like someone else pointed out, lenders enfore even 50% interest/month...even higher. So if a private lender can do it, why can't I? Shouldn't the same rules apply? If not...why?

I know that the courts have their own interest rate on balances...and it's not much. Something like 1 or 2%.

I figured at the very least it could dissuade the HO from wanting to default.

Now I'm hearing the Judge will throw out my entire case because of it?

I know that this sort of thing happens all the time in tenant/landlord issues, where the landlord will make the tenant sign some lease with clauses that are superceded by the Landlord/tenant Act. But that's all...the common law over-rides the contract...it doesn't get thrown out the window. Seewhatamsayin?:sad:


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## Ed the Roofer (Dec 12, 2006)

It is called the Usory Law. (sp)?

From the little I understand it, banks, such as credit card divisions, run their branch out of a state with unlimited caps or very high ceilings on the rates allowed, such as in Delaware.

Without a Severability Clause, and I think it is also called a Closings Clause, if one aspect of your contract is found to be illegal, then the judge can invalidate the entire contract.

With the Severability Clause, only that specific clause that is found illegal can be dismissed from the contract, without affecting the other clauses.

*Google: Contract Severability Clause* for a better description, if that does not make sense ans also run the question by your attorney for your states application of it.

Why not limit the highest and most extravagent interest rates altogether? Their is a theory in economics, which states that it will basically even out and by forcing the lower rates en masse, it would upend the financial institutions and thereby the consumers.

Just add the clause and live by it. My interest rate states, 2% per month or the highest amount allowable by the governing jurisdiction. I am covered both ways, plus have the severability clause to shield the remainder of the contract.

Ed


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## TigerFan (Apr 11, 2006)

Brock reminded me of this thread and so here's the update. 

The bottom line is that you are in a good position when you are flush with cash and can afford to be very aggressive legally, which I was not. Outside of that, it's a crapshoot. Here's what we did, after talking with several locals (atty's and other contractors) and reading all the insightful comments on here (thanks yall!).

1- Made sure we had our documents in order, including responses to expected areas of dispute (you took too long, well here's our contractually allowable delays; your foundation work is faulty cause that pier is not touching anything, ya that's because when we raised the structure and built these 2 new piers the old one was no longer part of the foundation plan; etc).

2- Finished the work to complete Stage 3 and submitted the bills.

3- They didn't pay - shocker!

4- Demands notes and lien notices sent, yada, yada, yada.

5- Homeowner hired another (UNLICENSED!!) contractor to complete work

6- We turn in contractor to State Board

7- File the whole mess with a collections agency and let them take it.

The bottom line is I had to finish the work or I would be clearly in breach and all bets are off.

Bottom line #2 is that it would take $15k or so to initiate lawsuit, get engineers to examine our work and submit professional reports, etc... and I didn't have the money to start that route.

My contract calls for Arbitration prior to legals - and at this point I don't have anything to arbitrate from my side - I just wanna get paid. 

So rather than go arbitration, the advice was just send it to collections. The bill is valid and due. If HO has an issue with it is up to them to initiate arbitration or pay the bill. You're likely to end up in court over it anyway, so the collections first, arbitration second, lawsuit last strategy is your least cash-outlaying route to go in order to get paid.

The contract went to collections about 3 weeks ago, so we'll see where it goes from here.


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## RizzoMaryland (Feb 12, 2007)

Ed the Roofer said:


> NO, you not obligated.
> 
> But, depending on your states laws, there are procedures to folow.
> 
> ...


Ed, 

How did this situation play out? And did you leave the HO roofless after non-payment in November of 2006?


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## Ed the Roofer (Dec 12, 2006)

RizzoMaryland said:


> Ed,
> 
> How did this situation play out? And did you leave the HO roofless after non-payment in November of 2006?


It is still playing out.

We took the homeowners deposition last month and mine is scheduled for sometime this month.

Non-Binding Mandatory Arbitration is scheduled for sometime in December.

After the 3 Judge panel makes their ruling, either party has 30 days to dispute the verdict and if not, then the ruling becomes a conclusion of the case. Then wage and asset garnishment notices will need to be filed and executed on.

If either party disagrees with the decision made and pays the $ 250.00 fee to dispute the Mandatory Non-Binding Arbitration decision within precisely 30 days, then the matter is scheduled for actual court hearing and put on the docket.

Ed


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## philner (Dec 27, 2007)

In addition to clauses about stopping work if any payment is not paid when due, and a $250 fee for restarting stopped work( which I adjust upward on larger jobs), and an 18% APR finance charge(1 1/2%/month). I have a clause which requires that the homeowner put the balance of the contract in an escrow account requiring both of our signatures to remove " If at any time the contrator deems himself insecure". This clause is specificly allowed and even recomended by The Mass. State Home Improvement Regulations. In the event that the work is paid for with a loan requiring bank inspections, the payment schedule becomes more frontloaded than usual. Phil


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## BKFranks (Feb 19, 2008)

Heritage said:


> *This is the clause I have in my contract. It's simple and doesn't leave much room for interpretation. Stick it in your contract, next time this will be a non issue...hopefully:laughing:*
> 
> 
> *1. **DEFAULT BY OWNER*
> If payment of any of the amounts to be paid to the Contractor are not made at the time specified, or if the Owner defaults in any of the other covenants or agreements, the Contractor may, at its option, cease work and treat the contract as repudiated forthwith on the occurrence of such default, and the Contractor may recover payment for the work already completed plus damages, including loss of profit together with interest therein at the same rate of interest as on overdue payments.



Here's what mine says:
All payments will be made within five (5) days after billing. Overdue payments will bear interest at the maximum legal permissible rate. If any payment is not made when due, Contractor may keep the job idle until such time as all payments due have been made. A failure of payment for a period in excess of said five (5) days shall be considered a major breach.

Also:
Contractor shall have the right to stop work and keep the job idle if payments are not made when due. Failure to make payment within five (5) days of the date that payment is due will be considered a material breach of this agreement. If the work shall be stopped for any reason, for a period of sixty (60) days, then Contractor may, at Contractor’s option, upon five (5) days written notice, demand and receive payment for all work executed and material ordered or supplied and any other loss sustained including Contractor’s usual fee for overhead and profit based upon the contract price. Thereafter, Contractor is relieved from any further liability.


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## Winchester (Jun 29, 2008)

I've got 24% on late payments and stop work. After that, I return to work as my schedule allows. Since I need to keep my 2 guys busy. I do need to add a clause about after a certain time of not working that the contract is breached and I can walk, while being owed money for wasting my time + interest. Thanks for whoever posted that

I look out for the best interest of my customer, my employees and myself in my contracts. No monkey business though. Not making the scheduled payment is a big no-no. Customer should have all the money ready to pay _before_ I even show up to do the work. There is no reason scheduled payments should be missed.


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## American1 lawn&landscape (Jan 30, 2021)

Ed the Roofer said:


> NO, you not obligated.
> 
> But, depending on your states laws, there are procedures to folow.
> 
> ...


Did the general contractor sue you for double what he owes you? They will do that where I live. You sue the general for 7000 he files a $14,000 lawsuit against your company. It scary because it’s real and you could loose your business over it. How long could you last In court against a multimillion dollar business? I’m not saying don’t but don’t back off if know you are right.


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## VinylHanger (Jul 14, 2011)

Did you come on here just to open up really old posts?

I mean, welcome and all, but these are very old.

Sent from my SM-N975U using Tapatalk


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