A contractor can cancel a signed contract in many states as long as they have not started work
When you hire a contractor to install new hardwood floors or upgrade your plumbing system, a legally binding contract signed by both parties is crucial. But if something comes up, it’s still possible for either you or the contractor to cancel. Cancellation will be easiest if you haven’t paid a deposit upfront and if they haven’t yet broken ground on the project.
Each state typically has its own set of rules regarding contract cancellations. If your contractor decides to cancel a contract you already signed, follow your state’s instructions to void the contract within the specified time period—usually three days.
Reasons Contractors Cancel Contracts
After combing through bids and finally selecting a contractor to help you with a home project, it’s devastating when the contractor decides to cancel. It likely means you’ll have to start your search all over again. When a contractor decides to cancel, it’s usually a misunderstanding on their part. To avoid this situation, be very clear with them from the beginning so that they know what they’re getting into.
Some common reasons a contractor may wish to rescind the contract are:
Lack of manpower
Poor work environment
What to Do After a Contractor Cancels a Contract
It’s not the end of the world if a contractor cancels. In fact, it can be a good thing—you definitely don’t want an unenthused contractor taking shortcuts to finish the project quickly and under budget.
That said, you will need to take some steps to ensure that everything is wrapped up nicely. In most cases, your state will have guidelines to help you through the process.
Review the Contract
A thorough contract should have a cancellation clause that spells out who can cancel the contract and when. This section should also explain what happens when a contract is cancelled and whether or not either party will owe money. Read this agreement carefully before signing as it will determine whether or not your contractor can back out after you sign.
If there is no cancellation clause, a judge must determine that there is a valid reason behind the cancellation in order for a contractor to rescind it. If both parties have signed and there isn’t a valid reason for cancellation, they cannot cancel and could be liable for damages if they do not complete the work they agreed to. But if you are the only party that signed, cancellation is on the table.
Void the Contract
Most states have a three-day contract cancellation deadline, meaning you have three business days to cancel a signed contract. This number can vary by state, though, so check your state’s laws for specifics.
You’ll need to mail in a signed and dated written notice of cancellation within the deadline (again, typically three days after you sign the contract).
If you wish to void the contract after the initial three days, consult a lawyer to determine how you can handle the situation.
Look for a New Contractor
If a contractor cancels on you, consider it a kindness. At least they didn’t break ground on the project only to realize they’re in over their heads and go MIA. If the contractor does sign the contract and then backs out after starting the work (which would be a contract breach), consult a lawyer to work out the details of who owes what.
After your contractor has canceled and you have voided the contract, it’s unfortunately time to go back to square one. Search for a new contractor with the qualifications you need and set up an appointment to discuss the project with them. You may have lost valuable time in your project due to the cancellation of the last contract, but you can discuss that with your new contractor to figure out a timeline that works for everyone.