Small Claims Court for breach of contract with a contractor

83 Replies

Originally posted by @Justin K. :
Originally posted by @Lynnette E.:

Even if you do not think that you can  collect, I think you should take him to small claims court.  

1.  It lets him learn that there are consequences for not following a contract.

2.  It lets others see his record and know it could happen to them if they use him.

3.  You may luck out and find an asset, maybe he has extra vehicles like work trucks.  Even if you seize one of them to sell at auction and only net $100 for your efforts, he does not have it, and you can take another asset later, and now he knows you will.  So maybe he will settle, or live in fear.

4.  BEST of all, you can get the settlement on his credit record, renew it through the courts and keep it current.  My parents did this to a renter: they had the judgement renewed for 20 years, until my dad passed away.  As the judgement was renewed his credit record updated the judgement as new and he carried that for 20 years.  New landlords knew it and he had hugh deposits.  It even followed him out of state. Ruined his credit score.   He asked once if my parents would settle for about ten percent of the debt as he wanted to buy a house.  My dad declined and said the judgement gives him interest and new court costs, its going up not down.  

And before anyone says anything, understand this was the renter from hell.  When he was evicted for non-payment of rent in a rent controlled area of CA, which took FOREVER with him getting free rent, he trashed the place on purpose.  Pulled the cabinet doors off all cabinets, ripping the frame.  Every window smashed and every screen ripped.  Threw the old couches, mattresses, dressers, general trash, diapers, etc into the swimming pool, ruining the plaster, smashed all the water turn off valves under the sinks and washing machine with a hammer, tub full of **** and urine, clogged with a towel, toilet pulled from the floor, stove and oven smashed with a hammer, etc.  And the house was inspected with new filters put on the heater just 2 weeks before the police came and all was good then.   That renter deserved what he got!

 That is dang near a situation of demolish the property and start over. How did that situation other than it going on his credit turn out?

Insurance paid for most of the repair costs since it was damage and not wear and tear, especially since there were photos from the regular inspection shortly before the eviction showing all was well.

With that on his credit he could not buy a car or truck at a decent interest rate.  His could not rent another property in the area and had to move out of state.  Even then when he wanted to buy a house he could not qualify  for a regular type of a loan unless he paid my parents off, and if he paid them off there went his down payment.  So when he could not get a house to rent that was not already a dump, his parents bought him a tiny house as that was what they could get a mortgage on and he paid his parents.  It changed his life for 20 years.  

San Bernardino County even still has it on the INTERNET as a judgement even though it is decades old, likely because it was not paid!  Its under the civil cases.

Every so often someone would write my parents and ask them about the judgement as he a few times tried to get owner financing on a new home to get a bigger one.  My dad said that when they decide to not pay for the house expect it to look like his did and he sent the inspection and post eviction photos to them.  That was when you had to get real photos developed.  He always kept a set handy to send out.

So my dad never got paid, nor did the insurance, but the renter also paid with the quality of his life.  And my dad would have had to pay the insurance company back first with anything he got out of the judgement.  

But most important, he did not get to do that to anyone else, unless they were too stupid to check his credit report.

BTW, he was an excellent carpenter!  He just liked to take long breaks from working.

Originally posted by @David K. :

You have a good case. Don't involve an attorney or even more money will be eaten up in fees ($5K minimum in my estimation). You will get a judgement in your favor but then you have to collect and you will have to go back to court to get him to pay. The court win will give you emotional satisfaction and may return some of your lost cash. It may also stop him from doing it to someone else in the future. 

The law and attorneys are notoriously poor at collecting money owed. This is why collection agencies and credit ratings exist. 

He may have expensive tools, a truck and maybe a house you can put a lien on. If he ever tries the sell the house, he can not do so without paying you off. 10 years may go by and he wants to sell the house. Not so fast! He has to pay your lien off first.

You can also sell your debt to a collection agency when you have a judgement. 

This contractor pulled a fast one on you - don't let him get away with it. 

 Sounds good in theory.  However you obviously did not read the thread nor are familiar with Texas law.  None of the items you mentioned are attachable in Texas .  The Contractor can literally own a $1million dollar house free and clear and sell it whenever he chooses and you would still collect nothing

I am not familiar with Texas law. 

If you are correct then he can still get the judgement and have a collection agency buy the debt or attempt to collect more money by sending him to a collection agency for a fee. 

This is a much more satisfying result than loosing all your money and feeling taken advantage of.  

Originally posted by @Lynnette E. :
Originally posted by @Justin K.:
Originally posted by @Lynnette E.:

Even if you do not think that you can  collect, I think you should take him to small claims court.  

1.  It lets him learn that there are consequences for not following a contract.

2.  It lets others see his record and know it could happen to them if they use him.

3.  You may luck out and find an asset, maybe he has extra vehicles like work trucks.  Even if you seize one of them to sell at auction and only net $100 for your efforts, he does not have it, and you can take another asset later, and now he knows you will.  So maybe he will settle, or live in fear.

4.  BEST of all, you can get the settlement on his credit record, renew it through the courts and keep it current.  My parents did this to a renter: they had the judgement renewed for 20 years, until my dad passed away.  As the judgement was renewed his credit record updated the judgement as new and he carried that for 20 years.  New landlords knew it and he had hugh deposits.  It even followed him out of state. Ruined his credit score.   He asked once if my parents would settle for about ten percent of the debt as he wanted to buy a house.  My dad declined and said the judgement gives him interest and new court costs, its going up not down.  

And before anyone says anything, understand this was the renter from hell.  When he was evicted for non-payment of rent in a rent controlled area of CA, which took FOREVER with him getting free rent, he trashed the place on purpose.  Pulled the cabinet doors off all cabinets, ripping the frame.  Every window smashed and every screen ripped.  Threw the old couches, mattresses, dressers, general trash, diapers, etc into the swimming pool, ruining the plaster, smashed all the water turn off valves under the sinks and washing machine with a hammer, tub full of **** and urine, clogged with a towel, toilet pulled from the floor, stove and oven smashed with a hammer, etc.  And the house was inspected with new filters put on the heater just 2 weeks before the police came and all was good then.   That renter deserved what he got!

 That is dang near a situation of demolish the property and start over. How did that situation other than it going on his credit turn out?

Insurance paid for most of the repair costs since it was damage and not wear and tear, especially since there were photos from the regular inspection shortly before the eviction showing all was well.

With that on his credit he could not buy a car or truck at a decent interest rate.  His could not rent another property in the area and had to move out of state.  Even then when he wanted to buy a house he could not qualify  for a regular type of a loan unless he paid my parents off, and if he paid them off there went his down payment.  So when he could not get a house to rent that was not already a dump, his parents bought him a tiny house as that was what they could get a mortgage on and he paid his parents.  It changed his life for 20 years.  

San Bernardino County even still has it on the INTERNET as a judgement even though it is decades old, likely because it was not paid!  Its under the civil cases.

Every so often someone would write my parents and ask them about the judgement as he a few times tried to get owner financing on a new home to get a bigger one.  My dad said that when they decide to not pay for the house expect it to look like his did and he sent the inspection and post eviction photos to them.  That was when you had to get real photos developed.  He always kept a set handy to send out.

So my dad never got paid, nor did the insurance, but the renter also paid with the quality of his life.  And my dad would have had to pay the insurance company back first with anything he got out of the judgement.  

But most important, he did not get to do that to anyone else, unless they were too stupid to check his credit report.

BTW, he was an excellent carpenter!  He just liked to take long breaks from working.

So how does one contact the correct people to put it on his credit. That may be the easiest and most effective means and methods to get this solved. 

Originally posted by @Guy Gimenez :

Any vendor who doesn't have the funds to start a job isn't running a business...they're running a hobby. These types of "contractors" are a dime a dozen. They make their living off their upfront payments. 

As Paul Harvey used to say, "Now you know the rest of the story."

Contractroe dont need to supply funds or use their credit to do a customers job .  Thats what a deposit is for .   Professional contractors have their funds in investments , like rentals , and flips . 

@Jonathan Greer You are in the wrong. you must not know what you're doing. 

We shouldn’t care what the hell the contractor paid to laborers. That’s on the contractor. Not on the investor. If the contractor under bid that is on him. I don’t care what yall say 15k is a lot of money for effin labor. Never have I paid that much. That’s the whole reno with materials on most of mine. Yall are paying way too much for these renovations if you all paying more than that. Where the hell is your profit then ? The damn contractors taking all the money if you think paying that much is good. And to top it all of the contractor didn’t finish. Please.. sue his ***. Even if just a judgement and burn his ***. I hate people like that. Sorry *** contractors. This guy was just trying to stiff someone.

@Matthew Paul

Perhaps in your world that works...not so much here in Texas. If I need to fund a contractor's business in advance, I better get some equity in said business. Otherwise, bring your "A" game and get the project started. If not, move on. 

Originally posted by @Guy Gimenez :

@Matthew Paul

Perhaps in your world that works...not so much here in Texas. If I need to fund a contractor's business in advance, I better get some equity in said business. Otherwise, bring your "A" game and get the project started. If not, move on. 

Perhaps in your world that works...not so much here in Maryland . If I need to fund a flipper/rehabber /customers  business in advance, I better get some equity in said business. Otherwise, bring your "A" game and have money to get the project started. If not, move on.

@Matthew Paul

This post was about Texas, not Maryland. I don't know the laws of Maryland nor do Maryland laws apply to Texas. In Texas, a contractor can place a lien on the subject property (with some exceptions) which clouds title. The customer can't do that to the contractor's house. That gives the contractor leverage the customer doesn't have. Again, the OP is in Texas, not Maryland. 

@Guy Gimenez It doesnt matter what state you are in . EVERYTHING should be covered in the contract . Including default of either party .  Customers are just as likely to stiff a contractor  as much as a contractor stiffs a customer .  Dealing with cheap customers for a contractor is no different than customers dealing with cheap contractors . It never works out well . Contractors are not there to finance a customers job . Contractors are not there to take risk , they are there to perform a job . 

What happens in the rehabbing industry is you get novices trying to make a profit . They just about always go with the cheapest contractors , and just about always they complain about the quality of the work , or the contractor being slow , or getting screwed .  Good contractors , Pros , generally dont want rehabber of flipper work especially since there is so much homeowner work .

When I hear a customer say " we dont pay deposits" as a contractor that translates to " I am playing games with money " . 

@Matthew Paul

Actually, the laws of each state DO matter because that is how one can assess their risk. Contractors who don't have money to start a job are usually using that customers money to pay for another of the contractor's jobs...see this all the time. Again, with a proper contract between the parties, the contractor can file a lien and encumber the chain of title on the subject property. If the contractor gets $25K in advance before materials are even dropped on the property, the customer is out of luck. Law enforcement and the AG's office don't have time or desire to process these types of theft and just see it as a contractual dispute. Customer loses...crooked contractor wins. 

@Matthew Paul

I agree with @Guy Gimenez .  A contract is only as good as the ability to enforce it.  Since Texas has no Licensing Board for contractors nor as discussed in this thread the difficulty of collecting an unsecured judgement, the customer has very little ability to enforce the contract.  However, the Contractor does with a greater ability to secure payment at some point via mechanic's lien.  With that imbalance, I would expect a contractor to assume more risk than the customer

@Guy Gimenez But getting a lien is a whole lot different than getting paid . If I start a job and drop a $25K lumber package and then another $10K in labor and the customer has nothing invested the contractor is screwed . Customers that dont have money to do the job try this , then promise to pay when they sell the house . I see this all the time .  Crooked customer wins . But in the mean time supplier has to be paid , subs have to be paid , employees , salesmen , and office staff , etc. . A customer is generally working 1 project , where a contractor will have 4 ,5 6 projects going at once . Having that amount of cash on the street unsecured is foolish . 

It is not a smart business move for a contractor to finance a customers project unless they hold the first position on a lien and charging interest on that money . Its all a matter of controlling risk .

@Greg H. Why would a contractor wish to accept any risk on a project unless they are getting a portion of the profit . Contracting is not about risk , its about providing a finished product .  Flipper pays too much for a house , underestimates how much to repair , gets contractor to work and front money . During construction sells the house to a different entity . Contractor gets screwed 

@Matthew Paul   No risk = no business. I buy 4 houses per month and assume risk with every purchase. I assume risk with every person to enters the property. I assume risk every time I sell a property. Risk if part of being in business. I'm happy people will pay you in 25% to 50% of a job upfront. Just doesn't happen in the large markets I buy in. Cheers

Originally posted by @Maugno M. :

@Jonathan Greer You are in the wrong. you must not know what you're doing. 

We shouldn’t care what the hell the contractor paid to laborers. That’s on the contractor. Not on the investor. If the contractor under bid that is on him. I don’t care what yall say 15k is a lot of money for effin labor. Never have I paid that much. That’s the whole reno with materials on most of mine. Yall are paying way too much for these renovations if you all paying more than that. Where the hell is your profit then ? The damn contractors taking all the money if you think paying that much is good. And to top it all of the contractor didn’t finish. Please.. sue his ***. Even if just a judgement and burn his ***. I hate people like that. Sorry *** contractors. This guy was just trying to stiff someone.

 What is the number one rule of the internet?

Originally posted by @Greg H. :

@Matthew Paul

I agree with @Guy Gimenez .  A contract is only as good as the ability to enforce it.  Since Texas has no Licensing Board for contractors nor as discussed in this thread the difficulty of collecting an unsecured judgement, the customer has very little ability to enforce the contract.  However, the Contractor does with a greater ability to secure payment at some point via mechanic's lien.  With that imbalance, I would expect a contractor to assume more risk than the customer

 So the mechanisms for this is taking it to a collection agency and have this put on his credit score which will have a lasting impact on his poor decisions in life.

Originally posted by @Matthew Paul :

@Guy Gimenez But getting a lien is a whole lot different than getting paid . If I start a job and drop a $25K lumber package and then another $10K in labor and the customer has nothing invested the contractor is screwed . Customers that dont have money to do the job try this , then promise to pay when they sell the house . I see this all the time .  Crooked customer wins . But in the mean time supplier has to be paid , subs have to be paid , employees , salesmen , and office staff , etc. . A customer is generally working 1 project , where a contractor will have 4 ,5 6 projects going at once . Having that amount of cash on the street unsecured is foolish . 

It is not a smart business move for a contractor to finance a customers project unless they hold the first position on a lien and charging interest on that money . Its all a matter of controlling risk .

As a former contractor in Texas for years I can attest it is messed up on both sides. I used to ask for 25-33% down when the materials showed up. They didnt come off the truck unless I had a check in hand. This was the small jobs. I never did a job where I didnt buy the materials though. These contractors are usually not pro or maybe not  legal. They cant even get a 30 day charge account. 

On the big jobs I was on the note at the bank. I finished a certain specified amount and the bank inspected and cut me a check. Win-win for me and the owner. 

I saw commercial mentioned earlier too by a few people and these jobs are totally different than residential. You as a contractor have to pay liquidated damages if you dont complete the job (on time). It cost you way more to not perform than it does to lose money on a mistake. Apples to oranges. 

Originally posted by @Mike Reynolds :
Originally posted by @Matthew Paul:

@Guy Gimenez But getting a lien is a whole lot different than getting paid . If I start a job and drop a $25K lumber package and then another $10K in labor and the customer has nothing invested the contractor is screwed . Customers that dont have money to do the job try this , then promise to pay when they sell the house . I see this all the time .  Crooked customer wins . But in the mean time supplier has to be paid , subs have to be paid , employees , salesmen , and office staff , etc. . A customer is generally working 1 project , where a contractor will have 4 ,5 6 projects going at once . Having that amount of cash on the street unsecured is foolish . 

It is not a smart business move for a contractor to finance a customers project unless they hold the first position on a lien and charging interest on that money . Its all a matter of controlling risk .

As a former contractor in Texas for years I can attest it is messed up on both sides. I used to ask for 25-33% down when the materials showed up. They didnt come off the truck unless I had a check in hand. This was the small jobs. I never did a job where I didnt buy the materials though. These contractors are usually not pro or maybe not  legal. They cant even get a 30 day charge account. 

On the big jobs I was on the note at the bank. I finished a certain specified amount and the bank inspected and cut me a check. Win-win for me and the owner. 

I saw commercial mentioned earlier too by a few people and these jobs are totally different than residential. You as a contractor have to pay liquidated damages if you dont complete the job (on time). It cost you way more to not perform than it does to lose money on a mistake. Apples to oranges. 

 This is the exact draw schedule I gave him on another project that he bid for me. This is when my ''something ain't right here'' feeling started going off. This was in the first few weeks of him being on my first project and was rocking and rolling. After this email exchange things started going downhill.

10% upon contract signing to get on schedule

15% upon completion of the first week's work with significant changes

25% at half of project completion

25% when big tickets are completed

25% at the final walk through and sign off of the project as complete

His response;

Sorry bud I’m firm on my deposit and the way I run my business . I have no problem doing the project but if that is how the pay schedule will work I’ll have to decline the job . I’ve ran mine for along time this way and I’ll have to stick to that .

Thank you !  

The total timeline on the project was two weeks with a draw every three days if things went smoothly. He couldn't agree to a draw on those terms.

Bottom line @Justin K. , you now know why the #1 Rule should be...NEVER. PAY. IN. ADVANCE.  I'm confident you won't violate this rule again. It's served me and all my investor friends well over the last 20 years. 

Originally posted by @Guy Gimenez :

Bottom line @Justin K., you now know why the #1 Rule should be...NEVER. PAY. IN. ADVANCE.  I'm confident you won't violate this rule again. It's served me and all my investor friends well over the last 20 years. 

This was my second property ever and it was all snowballing before I found BP. Let's just say I've educated myself a lot since then and it's not going to happen again.

Originally posted by @Justin K. :
Originally posted by @Mike Reynolds:
Originally posted by @Matthew Paul:

@Guy Gimenez But getting a lien is a whole lot different than getting paid . If I start a job and drop a $25K lumber package and then another $10K in labor and the customer has nothing invested the contractor is screwed . Customers that dont have money to do the job try this , then promise to pay when they sell the house . I see this all the time .  Crooked customer wins . But in the mean time supplier has to be paid , subs have to be paid , employees , salesmen , and office staff , etc. . A customer is generally working 1 project , where a contractor will have 4 ,5 6 projects going at once . Having that amount of cash on the street unsecured is foolish . 

It is not a smart business move for a contractor to finance a customers project unless they hold the first position on a lien and charging interest on that money . Its all a matter of controlling risk .

As a former contractor in Texas for years I can attest it is messed up on both sides. I used to ask for 25-33% down when the materials showed up. They didnt come off the truck unless I had a check in hand. This was the small jobs. I never did a job where I didnt buy the materials though. These contractors are usually not pro or maybe not  legal. They cant even get a 30 day charge account. 

On the big jobs I was on the note at the bank. I finished a certain specified amount and the bank inspected and cut me a check. Win-win for me and the owner. 

I saw commercial mentioned earlier too by a few people and these jobs are totally different than residential. You as a contractor have to pay liquidated damages if you dont complete the job (on time). It cost you way more to not perform than it does to lose money on a mistake. Apples to oranges. 

 This is the exact draw schedule I gave him on another project that he bid for me. This is when my ''something ain't right here'' feeling started going off. This was in the first few weeks of him being on my first project and was rocking and rolling. After this email exchange things started going downhill.

10% upon contract signing to get on schedule

15% upon completion of the first week's work with significant changes

25% at half of project completion

25% when big tickets are completed

25% at the final walk through and sign off of the project as complete

His response;

Sorry bud I’m firm on my deposit and the way I run my business . I have no problem doing the project but if that is how the pay schedule will work I’ll have to decline the job . I’ve ran mine for along time this way and I’ll have to stick to that .

Thank you !  

The total timeline on the project was two weeks with a draw every three days if things went smoothly. He couldn't agree to a draw on those terms.

Yeah, on a job that size, the contractor should usually buy the material. You can do it with you buying the material but the best way is for you to hire out all the trades instead on one person to do it all. To me, if someone is going to be responsible for the whole job. he needs the whole job with materials included. If you want to do it the way where you are the responsible party look up all trades and find the best ones. If you find one good contractor, ie plumber, ask them about the other trades they recommend. Good attracts good and bad attracts bad. A painter will like to follow certain drywall people and cabinet makers will like to follow certain framers. They know who is good and who isnt. 

Your draw schedule isnt bad. If you were my regular customer I would do it if we had a working relationship. Assuming it wasnt a bank loan then the bank would dictate the draws.

@Guy Gimenez Wife and i were thinking about retiring in Corpus. 5-10 years off as I am a workaholic. If you are still around I may pm you for ideas if that's ok.

@Mike Reynolds   I'm in Austin about 10% of the time but we're closing on the sale of our house here and then will do some RV'ing until we find out exactly where we want to end up. Most everything I'm buying is along the Texas coast so that's where we'll end up permanently I'm sure. 

@Justin K.  Remember a contract is binding on 2 parties , terms have to be agreeable , and consideration given ($$$) for the contract to be valid .   As far as suing him , read your contract , everything should have been covered in it . 

From a contractors perspective .... We dont bid jobs to get work , we bid jobs to make a profit . If you get 5 bids , I would be in the top 2 .  Bidding to get work both parties lose , the contractor gets no profit , and to negate loses the customer gets inferior work . If a contractor is making money , there is no reason to stop work . The only  reason for a contractor to stop working is the customer hasnt paid .  Twice in 30 years did I stop work when monies were not paid as required . One we did not finish because the customer  couldnt come up with funds . But since we had a deposit and our second draw when I stopped I was still in the black . We went to court for the balance since the customer was in breach of contract , and we won , and got a judgement . Woopie we were 4 th in line and the first lein holder was foreclosing so we got nothing .  BUT we didnt lose money due to our draw schedule .  The second one came up with the money after 3 weeks but this also set his project back 3 months since we moved to another job and had to fit the job back in . ( that cost extra all in itself ) 

When dealing with contracting companies , paying a bit more will cost you less in the end . Contracting businesses will ALWAYS require a deposit . But do your research on their company .   You can always require them to post a bond ( they add it into your bid) But if they dont perform you have something to go after 

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