Can I Terminate My Building Contract?
Delays and endless promises together with increased costs lead to rash decisions. When things don’t go to plan on a new build or a renovation, a common question from our clients is “How do I terminate my building contract?”
Well, there is a right way to do it and a wrong way to do it, and in all instances you should first seek legal advice, as incorrect termination could have significant consequences.
Building contracts are typically long winded and complex in a commercial setting and, even in a residential setting, can be quite complicated for a layperson to understand. The written contract should deal with termination and set out a procedure by which a building contract can be terminated.
When Can I Terminate?
In a general sense, the correct procedure to terminate a building contract should look something like this (subject to legal advice on your specific situation, of course):
Firstly, there needs to be a serious breach of the building contract by the other party, secondly you must have given the other party the opportunity to rectify that breach by giving them notice in writing and thirdly, if the breach is not remedied (within the reasonable time allowed by the notice), then the building contract can be terminated.
Some contracts allow a builder to follow a similar procedure plus allow the builder to suspend works until the breach is remedied.
Are there consequences for incorrect termination?
There are sometimes quite significant consequences if you incorrectly terminate a building contract.
Let’s say you terminate a building contract and failed to comply with the termination procedure as you should have.
Well, the act of writing to the other party advising that you are terminating has its own consequence if you are not entitled to terminate. It is what is known as repudiation, whereby you are still bound to the contract but have evidenced “an intention to not be bound”. The other party can rely upon that repudiation and itself terminate the building contract.
If you are found to have terminated a building contract incorrectly, you could be liable to the other party for the damage (loss) they suffer as a result. For instance, if you were to incorrectly terminate a building contract with the builder and that builder expected to make a $30,000 profit and had dedicated resources to the work, it may be available to the builder to pursue you for its expected profit as well as other loss it has suffered as a result of your actions.
And of course you then still need to have the building works completed by another builder.
T Legal Lawyers are specialist Adelaide Building Lawyers who can help make sure you make the right decision, and an informed decision, first time.