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SA Building Contract Cancellation?

Discussion in 'Commercial Law Forum' started by serca, 12 January 2015.

  1. serca

    serca Member

    12 January 2015
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    I am the director of a building company. Recently, I have had a customer give me notification through an email that he wants to cancel the building contract as he feels he has had to wait too long for his building works. This contract was liaised through his real estate agents as it was property investment of his.

    -In mid June 2014 he signed a contract for demolition and installation of a garage and fencing. He paid $1200 deposit.
    - August 15 2014 council approval was given
    - Works where scheduled for Dec the 8th 2014 (Current work schedule and 3 weeks manufacturing)
    - Material delivered to site Dec 5th
    - Real estate agency contacts me on Dec 5th to advice that the tree removal arranged by them could no longer be removed until Jan 14th (The tree requires removal before construction begins)
    - The Real estate agency assured me they would contact the landlord/client as it is their obligation, this did not happen
    - Jan 5th one week before scheduled works I get notification from the client that he had seen the materials on his site for a month and no building works and felt I was not fulfiling my contract obligations
    - I contacted the client in person and agreed that he pay for the materials and take ownership and the engineering and council approval process
    - I sent an tax invoice which has now exceeded it's 7 day payment period and I have not heard anything else
    - The contract clearly states that before intention of contract cancellation proceeds the client must contact the builder in writing to see if the situation can be rectified.

    I appreciate without seeing the contract in full it is hard to give advice but surely the other party can not simply pull out of a contract 1 week before scheduled works without prior notification under contract law?
    To make it worse I have paid in full for the materials which far exceed the deposit given

    Any contract law advice would be greatly appreciated.
  2. Rod

    Rod Well-Known Member

    27 May 2014
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    Looks like your case is strong. Suggest mtg with your client to see if situation/relationship can be saved. If not, follow the process in your contract and if necessary go to court.
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  3. Sarah J

    Sarah J Well-Known Member

    16 July 2014
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    Hi Serca,

    I agree with Rod. It looks like there is a breakdown of communication here and it would be best to contact the client (or their solicitor) directly and negotiate a solution other than termination. As the delays are justifiable, explain to the client exactly what caused each delay, supported by documents or evidence (e.g. receipts, emails) if possible, and remind the client that terminating now only means they will need to find new builders and re-do the whole process which will only further delay building.

    In terms of whether the client may or may not terminate the contract on the basis of delay, where the delay is unjustifiable, they would most likely be able to. This is because most contracts have a "time is of the essence" clause (or reasonable time clause). If "time is of the essence" and there is no extension or delay clause, then they may be able to terminate even if the delay is justified. Look at your building contract and see what it says about terminations, delay, deposits (i.e. who keeps deposit at termination), time extensions. However, again, speak with the client first and smooth out these miscommunications.
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  4. DennisD

    DennisD Well-Known Member

    11 July 2014
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    Hi serca

    As you say, 'I appreciate without seeing the contract in full it is hard to give advice...' Yes, exactly. First port of call is always the contract. Read it closely, especially clauses related to breach and termination.

    From the sounds of it the other party has been completely unreasonable, so hopefully you can find some protection under the contract.
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