If I didn’t pay downpayment when signing a contract with a contractor, am I still obligated to pay penalty for opt out of the contract?

UPDATED: Oct 2, 2022

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If I didn’t pay downpayment when signing a contract with a contractor, am I still obligated to pay penalty for opt out of the contract?

I have signed a contract with a roof company to replace my roof and install solar panel. At the time, I am not sure about the contact, so I didn’t pay the down payment. Now after a few months after I reviewed the work done by them, I decided to go with a different company. The company said they are going to charge me for violation of the contract. At the time the contract was signed, I wasn’t aware of there are penalty. I have told them I don’t want them to do the work a month ago. Also, they didn’t tell me anything about the penalty.

Asked on September 17, 2019 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You signed the contract: you are bound to it. Not paying the downpayment does not release you from your obligations under the contract, since it was your breach to not pay the downpayment, and a party to a contract may not use his or her own violation or breach to escape his or her obligations. They may sue you for breach of contract to recover the profit they would have made had you used them, or to recover any penalty set forth in the contract. (If it was in the contract, it does not matter if you read that clause or not or were aware of it; all that matters is that it was in the contract.)

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