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madoff12 02-23-2011 08:11 PM

Contract breach
 
Guys, I need help with contract Breach issues. I have hired General Contractor to build restaurent. We have singed contract to build restaurent for $90,000. As per contract I have paid 14,000 to conractor. He did not start anywork yet or not applied for any permit but just purchase insurance only.

I want to breach contract as this contractor is not trustworthy. Everytime I asked him about anything he just said that it is extra cost. e.g I asked him for grease interceptor installation as township require. one day he gives cost of $10,000 next dayhe gives $20K day after he gives $15K. He lies in each and every sentence.

yesterday I went to him and said please cancel contract and give our rest of money back. He said he doesn't want to cancel contract . Then I said Ok cancel contract and don't need our money back still he doen't want to cancel contract and want to take me on legal action.

Under his contract these are general provisions. I am really worried . I need your opinion.

Overhead and profit 10% included in the price

A. The Bid shall be valid for five (5) days from the date hereof.
B. All inspections will be coordinated with the Building Department by contractor.
C. All work shall be completed in a workmanship like manner and in compliance with all NJ and National building codes and other applicable laws.
D. To the extent required by law, work shall be performed by individuals duly licensed, insured / authorized by law to perform said work.
E. Contractor may at its discretion engage subcontractors to perform work hereunder, provided contractor shall fully pay said subcontractor and in all instances remain responsible for the proper completion of this Contract.
F. All change orders shall be in writing and signed by both Owner and contractor prior to start of the change order or at xxx’s discretion.
G. xxx warrants it is adequately insured for injury to its employees incurring loss or injury as a result of the acts of XXX or its employees and subcontractors.
H. XXX shall obtain all permits necessary for the work to be performed. Permit fee will be paid by the customer.
I. XXX agrees to remove all debris and leave the premises in broom clean condition.
J. All disputes hereunder shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association.
K. This Agreement shall be construed, given effect, and enforced in accordance with the Laws of the State of New Jersey.
L. This document constitutes the entire Agreement between the parties and there have been no promises, agreements, stipulations or understandings that have not been incorporated into this Agreement. This Agreement supersedes any prior understandings or written or oral agreements between the parties, respecting the subject matter.

Leah Frances 02-23-2011 08:54 PM

From your description and the contract shown it does not sound like he has breached the contract.

VIPlumber 02-23-2011 10:16 PM

Consult with a lawyer. This in not a DIY legal site.

HomeSealed 02-24-2011 08:56 AM

Seriously, If you are building a restaurant and can afford to let this guy keep $14k just to walk away, I'm guessing that you have some legal counsel. This is a VERY complicated issue, and contractors nor homeowners won't be able to give you any real advice, other than to talk to your lawyer.

hyunelan2 02-24-2011 09:00 AM

If you breach the contract, you will probably be liable for much more than only the money you have already outlaid. Your breaching of the contract could leave you liable for the entire contract amount -depending on the reliance and detriment the contractor has on receiving that money.

From the small amount of the contract you posted, it does not sound like he is in breach. He purchased insurance, which is a good-faith deed that he plans to finish the job. Were there any time stipulations put in the contract? If not, you are stuck until which time no-work being started would be an unreasonable amount of time (and it's up to the court/jury to decide what is reasonable). Always put some timeframe on a contract, it gives you another avenue to escape it if need be.

nap 02-24-2011 09:17 AM

Quote:

Originally Posted by hyunelan2 (Post 597052)
If you breach the contract, you will probably be liable for much more than only the money you have already outlaid. Your breaching of the contract could leave you liable for the entire contract amount -depending on the reliance and detriment the contractor has on receiving that money.
.

Actually he wouldn't be liable for the entire gross cost of the job. Profit from the job is more likely what he would be liable for. As such, he may have already paid the profit on a $90k job. In fact, given that the profit for construction is around 4%, he may have actually paid well more than the profit expected.

hyunelan2 02-24-2011 09:47 AM

That's not necessarily how it works. If the contractor had costs or did something in reliance on being paid from that contract - the party in breach could be liable for that.

For example, if you hired me to move a bunch of dirt and I went and bought a bulldozer, then you breached the contract - I can sue you to recover the cost of the bulldozer. Since I bought that bulldozer on reliance of being paid for that contract, your breach has to reimburse me for that detriment. It goes pretty-far in court though. If I went and bought a new Mercedes for my wife, because I was going to get paid from your contract, your breach would also leave you liable for that.

nap 02-24-2011 10:10 AM

Quote:

Originally Posted by hyunelan2 (Post 597067)
That's not necessarily how it works. If the contractor had costs or did something in reliance on being paid from that contract - the party in breach could be liable for that.

For example, if you hired me to move a bunch of dirt and I went and bought a bulldozer, then you breached the contract - I can sue you to recover the cost of the bulldozer. Since I bought that bulldozer on reliance of being paid for that contract, your breach has to reimburse me for that detriment. It goes pretty-far in court though. If I went and bought a new Mercedes for my wife, because I was going to get paid from your contract, your breach would also leave you liable for that.

No, you cannot (successfully) sue for the cost of the dozer. The cost of the dozer would have to be amortized so the only costs apportionable to my job would be the time actually calculated to be spent on the job. At the very most you might be able to recover the difference between purchase price and market value after the calculated hours are applied towards depreciation.

and your car situation; I needed a good laugh today.

Since the job has not started, it is unlikely much of anything has been purchased for the job. Since there was some insurance purchased, that would be recoverable. Heck, he hasn't even gotten permits yet. Actual expenditures to date, if applicable only to this job would be recoverable. Expenditures that would need to be amortized (such as the purchased dozer) would have to be calculated so the actual apportionable costs could be calculated and considered.

I did make a mistake though. The contract states 10% profit (wow, I know a lot of contractors that would love to be making 10% profit). That calculates to $9000. So, $9000 plus expenditures apportionable to this job and away he goes. I would bet it $14k pretty much covers it.

hyunelan2 02-24-2011 10:15 AM

Quote:

Originally Posted by nap (Post 597079)
No, you cannot (successfully) sue for the cost of the dozer. The cost of the dozer would have to be amortized so the only costs apportionable to my job would be the time actually calculated to be spent on the job. At the very most you might be able to recover the difference between purchase price and market value after the calculated hours are applied towards depreciation.

and your car situation; I needed a good laugh today.

The dozer example I used was assuming the dozer was only going to be used on your job - so 100% would be apportioned to you (was trying to keep it simple).

As for the car, a graduate class I took called "Business Law" says what I posted is true. In fact, that exact example was used. A contractor purchased a new car for his wife (a Mercedes), the contracting party breached the contract, he sued saying he purchased the vehicle on reliance of being paid that contract money, and won. I'll have to look though my stuff to find the case name.

nap 02-24-2011 10:48 AM

Quote:

=hyunelan2;597081]The dozer example I used was assuming the dozer was only going to be used on your job - so 100% would be apportioned to you (was trying to keep it simple).
well, unless the job is going to last 20-30 years, it would not be a reasonable example.

Quote:

As for the car, a graduate class I took called "Business Law" says what I posted is true.
they taught you wrong.




I
Quote:

n fact, that exact example was used. A contractor purchased a new car for his wife (a Mercedes), the contracting party breached the contract, he sued saying he purchased the vehicle on reliance of being paid that contract money, and won. I'll have to look though my stuff to find the case name.
You do that. It's called detrimental reliance. The next thing you need to look up is "mitigation of damages". If you could reasonably argue I was liable for the cost of the car due to detrimental reliance, you would have a duty to mitigate your damages. So, that in itself would reduce the damages to the difference between purchase price and the value at the time if the breach.

I can go much further and totally erase any liability for the car if you really want to but I suspect a 3 page argument on why I should not be responsible for the purchase of the car is not what you want to read this morning.

hyunelan2 02-24-2011 11:02 AM

Quote:

Originally Posted by nap (Post 597090)
I can go much further and totally erase any liability for the car if you really want to but I suspect a 3 page argument on why I should not be responsible for the purchase of the car is not what you want to read this morning.


Any lawyer can argue all they want to "prove" there is or is not liability in their own interpretation of the law. It is all up to the courts to decide whom is correct, and the precedents set are the rule of the day.

Regardless, the OP needs a lawyer, but would probably be best not to breach the contract.

nap 02-24-2011 11:12 AM

Quote:

hyunelan2;597100]Any lawyer can argue all they want to "prove" there is or is not liability in their own interpretation of the law. It is all up to the courts to decide whom is correct, and the precedents set are the rule of the day.
absolutely. Do you want me to provide case law citations to support my argument?

My point in the last post was; you are due only your damages. You must take action to reduce or prevent any damages once you have become aware of a change of circumstances. Your failure to do that means you don't get to come after me for all of your losses, just what you could not prevent.




Quote:

Regardless, the OP needs a lawyer, but would probably be best not to breach the contract.
I'll agree they need a lawyer. Not in agreement about not breaching the contract. He shouldn't do it without a lawyer advising him of the liabilities resulting from the breach but I cannot say he shouldn't breach the contract.

hyunelan2 02-24-2011 11:21 AM

Quote:

Originally Posted by nap (Post 597109)
My point in the last post was; you are due only your damages. You must take action to reduce or prevent any damages once you have become aware of a change of circumstances. Your failure to do that means you don't get to come after me for all of your losses, just what you could not prevent

Right... mitigated damages. Back to the Mercedes example, if I purchase the car before the breach occurs - how could I mitigate that? Now, it would be completely different if the breach occurred and I kept on spending like that check was coming when I already knew it wasn't.

nap 02-24-2011 12:18 PM

Quote:

Originally Posted by hyunelan2 (Post 597118)
Right... mitigated damages. Back to the Mercedes example, if I purchase the car before the breach occurs - how could I mitigate that? Now, it would be completely different if the breach occurred and I kept on spending like that check was coming when I already knew it wasn't.

you sell the car. or have it valued.

That way, you would then be able to state actual damages. If you chose to keep the car after that, it's on yuo.

fungku 02-24-2011 12:19 PM

Quote:

I asked him for grease interceptor installation as township require. one day he gives cost of $10,000 next dayhe gives $20K day after he gives $15K. He lies in each and every sentence.
Quote:

C. All work shall be completed in a workmanship like manner and in compliance with all NJ and National building codes and other applicable laws.


Do you have a timeline or schedule on your contract of when work is supposed to start? Did he miss it, you seem to have expected him to start when he didn't...



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