AC contractor didn't follow plans in new home construction

[smutlydog]

Texas
I am the builder and am currently involved in a cost plus contract. We are building a large home and our AC contractor for the second time didn't follow the exact plans for installing the duct. He did in the bedrooms but he modified the plans in the rest of the house a bit. The home is in the early stage of construction. This contractor has been with us for 8 homes and we never failed an inspection or had any other problems with installations. Two times in a row the contractor is half way done with the duct work and the customer will come out and inspect and say no way. This second time the customer demanded that all the duct be yanked and wanted the contractor replaced with his own. Everything else with the project is going well and I am not in total disagreement that the contractor should of done better but his work would have passed all inspections. My contractor is going to refund what I paid him and move on. My concern is what this customer might have in store for me. Can he terminate the contract and ask for the builder's fee back? Here is just another side story. When the septic system was installed it was done in accordance with the plan. The customer said no way I didn't want it in that location. We had to get several experts tell him it was the only possible location. Finally he calmed down about that.

 

[adjusterjack]

This contractor has been with us for 8 homes

After 8 homes you should be enough of a professional builder to have a lawyer handy.

My concern is what this customer might have in store for me. Can he terminate the contract and ask for the builder's fee back?

"Can" he? Sure.

"Will" he? I don't know. And I'm sure nobody else can predict what the customer might do.

You'll just have to wait and see.

 

[quincy]

Texas
I am the builder and am currently involved in a cost plus contract. We are building a large home and our AC contractor for the second time didn't follow the exact plans for installing the duct. He did in the bedrooms but he modified the plans in the rest of the house a bit. The home is in the early stage of construction. This contractor has been with us for 8 homes and we never failed an inspection or had any other problems with installations. Two times in a row the contractor is half way done with the duct work and the customer will come out and inspect and say no way. This second time the customer demanded that all the duct be yanked and wanted the contractor replaced with his own. Everything else with the project is going well and I am not in total disagreement that the contractor should of done better but his work would have passed all inspections. My contractor is going to refund what I paid him and move on. My concern is what this customer might have in store for me. Can he terminate the contract and ask for the builder's fee back? Here is just another side story. When the septic system was installed it was done in accordance with the plan. The customer said no way I didn't want it in that location. We had to get several experts tell him it was the only possible location. Finally he calmed down about that.

I think it is time you have an attorney personally review all of your contracts.

You appear to be letting your customers and your contractors run your business. None of them should be making contract-modifications without your authorization and without accompanying written modification agreements.

 

[zddoodah]

Can he terminate the contract and ask for the builder's fee back?

Anyone can ask for anything. Whether he has grounds to terminate and recover "the builder's fee" (whatever that is) depends on the terms of the contract.

If you have concerns about what your counterparty might do, you should consult with a local attorney ASAP.

 

[smutlydog]

The customer calmed down. We are going to have a written plan for the ac contractor to correct what I consider to be minor issues and I am going to pay another contractor a few hundred dollars to observe his work. In turns in the contract it states that a customer cannot demand that something be completely redone when correcting the issue is an an option. thanks for all the replies

 

[quincy]

The customer calmed down. We are going to have a written plan for the ac contractor to correct what I consider to be minor issues and I am going to pay another contractor a few hundred dollars to observe his work. In turns in the contract it states that a customer cannot demand that something be completely redone when correcting the issue is an an option. thanks for all the replies

Having everything in writing is smart. Good luck.

 

[smutlydog]

I am still having problems with the customer from my last post. We corrected all the ac duct according to the customer's spec which I don't even think we were required do so. The customer was ok with the corrections.

Now we are half way finished with the project and he comes up with this. He wants me to account for how much of the initial cash payment $100 I have left. And he want me to start paying for some of the constructions cost out of the $100. The way it has worked is I pay the contractors then I get draws from the customer for those expenses. I roughly have slightly less than half of it and I cant afford to tie up that money and longer than a few days. Can he make demands like this? Below I re typed the portion of the contract that pertains to this. I changed identifying amounts but the proportions are correct.


"The improvements are to be constructed by the builder on a cost plus basis. Owner agrees to pay builder a total contract price equal to the sum the construction cost plus a builder’s fee to cover the services of builder in the amount of $95

Initial cash payment prior to commencement of work owner shall pay builder $100 as a portion of the total contract price. The builder may use the initial cash payment in consideration for initial construction or pre construction expenses, and a portion of the builder’s fee. The initial cash payment may be retained by the builder as liquidated damages if the contract is terminated for any reason other than a builder’s event of default. Builder and owner agree that it is not possible to calculate the exact amount of damages that builder will suffer if this contract is terminated if for any reason other than builder’s default and this amount is reasonable approximation of damages. This amount is in no way a penalty. "

 

[quincy]

I am still having problems with the customer from my last post. We corrected all the ac duct according to the customer's spec which I don't even think we were required do so. The customer was ok with the corrections.

Now we are half way finished with the project and he comes up with this. He wants me to account for how much of the initial cash payment $100 I have left. And he want me to start paying for some of the constructions cost out of the $100. The way it has worked is I pay the contractors then I get draws from the customer for those expenses. I roughly have slightly less than half of it and I cant afford to tie up that money and longer than a few days. Can he make demands like this? Below I re typed the portion of the contract that pertains to this. I changed identifying amounts but the proportions are correct.


"The improvements are to be constructed by the builder on a cost plus basis. Owner agrees to pay builder a total contract price equal to the sum the construction cost plus a builder’s fee to cover the services of builder in the amount of $95

Initial cash payment prior to commencement of work owner shall pay builder $100 as a portion of the total contract price. The builder may use the initial cash payment in consideration for initial construction or pre construction expenses, and a portion of the builder’s fee. The initial cash payment may be retained by the builder as liquidated damages if the contract is terminated for any reason other than a builder’s event of default. Builder and owner agree that it is not possible to calculate the exact amount of damages that builder will suffer if this contract is terminated if for any reason other than builder’s default and this amount is reasonable approximation of damages. This amount is in no way a penalty. "

First, the answer to your first question is “yes.” Your customer can make all sorts of demands. Whether these demands are reasonable depends largely on the wording of your contract terms.

Unfortunately, no one on this forum can provide you with an analysis of your contract, in whole or in part, because contract analysis gets into the practice of law. For that you will need an attorney licensed to practice in your own jurisdiction. The forum members on FA, both attorney-members and educated laypersons, would be violating the terms of service of this site and, for attorney-members, potentially violating the Rules that govern their law licenses, if any of us were to address the legalities of your customer contract.

Sorry, smutlydog. It looks like it is time for you to sit down with an attorney in Texas.

 

[zddoodah]

The numbers you're referencing are a pittance that aren't worth jeopardizing anything. If you can't account for $100, then you've got big problems.

 

[Zigner]

The numbers you're referencing are a pittance that aren't worth jeopardizing anything. If you can't account for $100, then you've got big problems.

It seems mind-boggling that $95 would pay for the builder's services or that $100 would pay even "some" of the construction costs.
I'm betting that the $100 was shorthand for $100k, and the $95 was shorthand for $95k. I could be wrong...let's see what he says

 

[quincy]

The numbers you're referencing are a pittance that aren't worth jeopardizing anything. If you can't account for $100, then you've got big problems.

I thought at first that the $100 figure was a typo - but smutlydog did repeat the figure several times. I agree with Zigner that it was probably shorthand for $100,000.

 

[smutlydog]

Yes the actual numbers are much larger. My understanding is a builder's fee is completely different than for example deposit money. Deposit money can be scrutinized but a builder's fee cannot. My time is not free and I do have expenses beyond squaring up with the contractors which are the customers responsibility. Anyways I have an appointment with my attorney in a week. I am just trying to get answers now before I drive myself crazy. I have decided that the 3 contracts I am involved in right now will be the last.. Life is to short to live this way.

 

[quincy]

Yes the actual numbers are much larger. My understanding is a builder's fee is completely different than for example deposit money. Deposit money can be scrutinized but a builder's fee cannot. My time is not free and I do have expenses beyond squaring up with the contractors which are the customers responsibility. Anyways I have an appointment with my attorney in a week. I am just trying to get answers now before I drive myself crazy. I have decided that the 3 contracts I am involved in right now will be the last.. Life is to short to live this way.

I think you should wait for answers until you can speak to your attorney in a week.

With the troubles you have had with your contracts and customers recently, I can see why you want to quit.

 

[AlmostThere]

As a home owner, I would think it reasonable to ask for intermittent accounting of a large sum of money.

 

[quincy]

As a home owner, I would think it reasonable to ask for intermittent accounting of a large sum of money.

Keeping good financial records is an important part of business. You want to be able to show exactly from where your dollars are coming and to where your dollars are going.