What constitutes a legal, binding agreement between a contractor and a homeowner?

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What constitutes a legal, binding agreement between a contractor and a homeowner?

I am a contractor with a signed contract between my company and the home owner. A 3-day right of rescission was explained to the home owner and signed off on by the home owner. It has now been 3 weeks and materials have been ordered. Now the homeowner is telling me that he has received a lower bid from another contractor and wants out of his contract. I have fulfilled all of my obligations up to this point. What are my options?

Asked on May 7, 2012 under Business Law, Indiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you have a signed contract or agreement and the three-day rescission period has passed, you have an enforceable contract. The homeowner has no right to get out of the contract unless you consent to it, so long as you have been fulfilling (and/or are ready, willing, and able) to fulfill your obligations (e.g. to do the work when scheduled). If the homeowner breaches his obligations by not using you to do the work, you may sue him for damages under the contract. Your damages are your lost profit or benefit. For example, say it is a $20,000 project. Of that $20,000, $5,000 are materials which you either have not purchased or can reuse; $1,000 are licenses and like fees which you have not paid; and $10,000 would be wages and subcontractor costs which you will not have to pay. Your profit or benefit would be $4,000, so that's how much you could sue for. To the extent you have incurred costs you cannot recover, you could sue for those costs plus the profit you expected to make.


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