Expert: Peter M. Elliott - 10/1/2006

Question
I have almost finished building a house in New Hampshire,USA. I am acting as the general contractor and I had problems with a builder I hired. He signed a contract to finish work by March 30th and over ran the date. I then offered to let him determine a realizable date so I could make plans for other contractors to do their work. The schedule was not met and the builder was hedging and trying to get paid for work he started but never finished. Then he claimed he met the contract and wanted full payment. Finally, he stopped work and threatened to file a mechanic's lien if we didn't pay him.

He was trying to get what he could, rewrite the contract, and run away from the job with as much as he could get. Eventually, he did contact a lawyer and it ended up that his lawyer would settle for a small nuisance payment (I call ransom) to go away. His lawyer apparently knew there was no case.

As things turned out we found several non-code work that had to be fixed at our cost, other problems we had to live with, and that he broke the contract in  hiring his own subs to perform some of the work. It also turned out that his lawyer dropped the case for failure of his client to pay fees so they over ran the time limit to file a lien.

The questions I have are 1) can I safely tell the references he gave us and the consumer agencies about the problems we had with him (as well as show pictures to prove it) and 2) what can I legally do to get compensated for all the rework and other costs incurred. I don't want to chase after him for costs unless he decides to become a problem for me again.

Answer
Hi Chris,

Nice to know that experienced general contractors can have problems with builders <g>  

1.   It depends on your actual words.  Get them checked by a libel lawyer before publishing them.  Otherwise you might have to defend a case for defamation of character.  Rough but that’s the law.

2.   You write him a letter stating all the non-compliant work, together with all your reasonable costs, including any delay damages or loss of income due to delay, reworking and extra costs to employ new resources, due to his failure to fulfil his contract.  The letter should include an invoice for the full amount.  Really, you should have notified him of the non-compliant work and given him a chance to repair it, before you repaired it.  Now he could claim that your costs were exaggerated.  Not a big deal, because as soon as he fights on the amount he implicitly accepts that the work was non-compliant and that he failed to fulfil his contract.  You have to be careful of the statue of limitations as you may be time barred if you leave it too long.  Also you should repeat the invoice at monthly interval to show that the debt is still live.  If he objects then you write another letter stating that you intend to recover the outstanding debt through the courts.  By sending the invoice, you should have a case to write the loss off as a bad debt, but check the actual procedure with your accountant.  

Try to avoid actually going to court, because you may win the case, but lose the battle, because you have to pay your legal costs and he goes bankrupt so you cannot reclaim them from him.

Good luck in your business.