Homeowner disregards our signed contract

One of my salesman have a customer who disregarded our signed agreement and goes with a cheaper contractor/idiot. The person he went with is notorious for doing the work for absolutely nothing and doesn’t know what he’s doing. Does anyone know of any literature stating the legal issues when a homeowner chooses a cheaper contractor and still sends in invoice to release depreciation and pockets the money? This isn’t the first time this jack leg has stolen some of our work. And people like him are ruining our industry because it spreads like the flu in a neighborhood that we are overcharging. When in reality he doesn’t know how to use a calculator. I typically just let things like this slide and move on but enough is enough.

This is how this guy works. Ex. The HO has a RCV of $15,000. The contractor agrees to cover the $1,000 deductible and give the homeowner $2,000 in their pocket. SO the contractor will do their job for $12,000 but sends in a final invoice to get depreciation released on the original RCV.

I’m to the point of trying to run this guys business/circus into the ground. Any advice is appreciated. I’m going to take deep breathes and sit in a dark room to meditate and calm down before I do anything I regret. :smiley:

Why don’t you get a decent contract, one that will hold up in court, and then enforce the contract when someone breaches it? Trying to get someone for insurance fraud seems bassackwards to me. The problem is, I doubt that anyone cares and you’ll simply come across as vindictive.

I’ve covered this before but I’ll do it one more time regarding contracts.

  1. Your contract needs to state contract, not contingency. It is okay to state that your contract terminates itself if the claim is denied. However, it isn’t contingent upon the claim being approved to become a contract, it is a contract from the time it is signed. In the T&C’s, you need a clause stating the right to cancel for convenience and the payment schedule involved for doing so (see number 2). The contract should never say anything about a penalty clause for cancellation, most courts won’t order a penalty payment.
  2. We have a cancellation form we have the HO sign. The top half describes the 3 day right of rescission. There is a blank there for the HO to sign and date to acknowledge they received the document. The bottom half describes the fees that apply should they terminate the contract after the claim is approved but before construction work has begun. So there’s $$$ amounts assigned to the number of trips made to the property by company personnel, so much for the inspection, taking pictures, sketches, a dollar amount for preparing the Xactimate (varies depending upon the number of trades)and then another amount for the Adjuster Meeting. What’s important here is we’ve described the work that is going to be done for the Homeowner, how much we are charging and they have acknowledged they will pay that if the claim is approved and they terminate the contract for whatever reason. They sign again at the bottom and date it. This is a two piece carbonless form, they get one copy, you keep the original.

Number 2 won’t amount to a huge amount of money but it is something. In most cases, it may be enough to discourage the Customer from going with a cheaper contractor. What’s most important is that it plugs the leak in most contracts in that it describes the work the Contractor is to get paid for and lists the amount. It is also another signature from the Homeowner which means something in court. Finally, it also plugs the leak about the 3 day right of rescission.

IMHO, the best defense for this is building a good offense. What you want is for the Customer’s Attorney to tell them, when asked, that this contract would likely hold up in court of challenged. If someone pulls that crap on you with the low balling Contractor, send them an invoice for the amount they owe you per the cancellation agreement. If they don’t pay, take them to court. Taking them to court also means you will be able to add court costs and legal fees.

AD is right… but, since you did lose the job to this clown, it could be interesting to leave a little note for the homeowner and contractor about insurance fraud…kinda freak 'em out a little.

Not that it will do too much. Chances are pretty good that he knows exactly what he is doing.

[quote=“roofnrun”]One of my salesman have a customer who disregarded our signed agreement and goes with a cheaper contractor/idiot. The person he went with is notorious for doing the work for absolutely nothing and doesn’t know what he’s doing. Does anyone know of any literature stating the legal issues when a homeowner chooses a cheaper contractor and still sends in invoice to release depreciation and pockets the money? This isn’t the first time this jack leg has stolen some of our work. And people like him are ruining our industry because it spreads like the flu in a neighborhood that we are overcharging. When in reality he doesn’t know how to use a calculator. I typically just let things like this slide and move on but enough is enough.

This is how this guy works. Ex. The HO has a RCV of $15,000. The contractor agrees to cover the $1,000 deductible and give the homeowner $2,000 in their pocket. SO the contractor will do their job for $12,000 but sends in a final invoice to get depreciation released on the original RCV.

I’m to the point of trying to run this guys business/circus into the ground. Any advice is appreciated. I’m going to take deep breathes and sit in a dark room to meditate and calm down before I do anything I regret. :D[/quote]

You contact the Insurance Company, and let them know about the scheme.
Nature should take it’s course.

[quote=“CatContractor”]

[quote=“roofnrun”]One of my salesman have a customer who disregarded our signed agreement and goes with a cheaper contractor/idiot. The person he went with is notorious for doing the work for absolutely nothing and doesn’t know what he’s doing. Does anyone know of any literature stating the legal issues when a homeowner chooses a cheaper contractor and still sends in invoice to release depreciation and pockets the money? This isn’t the first time this jack leg has stolen some of our work. And people like him are ruining our industry because it spreads like the flu in a neighborhood that we are overcharging. When in reality he doesn’t know how to use a calculator. I typically just let things like this slide and move on but enough is enough.

This is how this guy works. Ex. The HO has a RCV of $15,000. The contractor agrees to cover the $1,000 deductible and give the homeowner $2,000 in their pocket. SO the contractor will do their job for $12,000 but sends in a final invoice to get depreciation released on the original RCV.

I’m to the point of trying to run this guys business/circus into the ground. Any advice is appreciated. I’m going to take deep breathes and sit in a dark room to meditate and calm down before I do anything I regret. :D[/quote]

You contact the Insurance Company, and let them know about the scheme.
Nature should take it’s course.[/quote]

Holy sh_t! I actually agree with Cat on something. The scheme is flat our insurance fraud–submitting a bogus estimate to insurer not consistent with amount charged. If it was my claim, I would absolutely report is to the Dept of Insurance.

As to the original contract, if it is at all dependent on getting insurance proceeds to do the work, which I bet it is, if you are in Texas it is illegal and therefore void and unenforceable.

I’m not a lawyer, as Dad has pointed out on another thread, so I don’t know whether his legal advice as to his contract is good advice.

[quote=“InsurerPerspective”]
Holy sh_t! I actually agree with Cat on something. The scheme is flat our insurance fraud–submitting a bogus estimate to insurer not consistent with amount charged. If it was my claim, I would absolutely report is to the Dept of Insurance.

As to the original contract, if it is at all dependent on getting insurance proceeds to do the work, which I bet it is, if you are in Texas it is illegal and therefore void and unenforceable.

I’m not a lawyer, as Dad has pointed out on another thread, so I don’t know whether his legal advice as to his contract is good advice.[/quote]

IP, please hold your breath while the insurance company acts upon information such as that. LMAO! I’ve heard of MANY, MANY Adjusters telling HO’s to find a cheap Contractor that will pay their deductible and give them a free upgrade. The Insurance Companies could easily take steps to prevent this practice but for obvious reasons, have no desire to do so. If it weren’t for illegitimate, scumbag, incompetent Contractors, the P&C Insurance Companies would have to start consistently pay what they should be paying for claims. If it weren’t for ill informed, gullible Homeowners, the P&C Insurance Companies wouldn’t be getting by with slipping in new clauses with renewal notices while reducing coverage and raising rates. If most people weren’t sheeple, you couldn’t get by with the crap you do, not by a long shot.

I didn’t write our contract. It has evolved, over time, from the hands of 4 very competent law firms. We have been using this “contract” for well over a year now and haven’t had to test its enforceability in court. I wasn’t giving legal advice at all, I was simply sharing what we do based upon sound legal advice from competent Attorneys that were very well paid to provide it. Unlike someone else who posts here, I am not trying to profit from this forum nor do I have a hidden agenda. I also don’t waste my time copy and pasting 10 year old plus Google articles but instead, offer real life, up to date practical experience that is proven to work.

I have heard that we should take off the percentage of claim as a cancellation fee and have it a set dollar amount. But I increased a commercial job claim from $103,000 to $198,500 and it took me 8 months to do so. I almost got cut out of the deal after I increased the claim. I got an attorney to produce a demand letter. The attorney agreed that if they got a lawyer involved that the agreement they signed wouldn’t stand in court. But I hand delivered the demand letter, explained to them the hoops I jumped through to get the RCV to where it is now, and if they don’t use me they owe me 20%.

Now, If I had a fee of $2,000 on that contract they would have paid me $2,000 for my services of doubling the claim. But we got back in the drivers seat when they thought they were gonna pay me 20% of $198,500. I’m thinking of having two contracts. One for the standard residential job and one for large claims.

Not sure if it would work or not, but if you were consistently getting eaten by that kind of stuff, ( losing the job after increasing the RCV) would it be worth your time to write in a percentage charged for the prep work ( Consultation fee) that would be billed if you didn’t get the job, and refunded if you did?

I deal with it all the time, where a consultation fee or % is charged if the client doesn’t get the job, but it is absorbed into the cost of the overall job if they get it.

Not sure if that one would stand up in court, since I am not a lawyer. ( I don’t even use contracts as a GC, which is going to bite me in the arse someday, I am sure.)

A good way to avoid a lot of problems with contracts, cancellations, etc is to
check out your customers before agreeing to anything.

Each year, especially on our commercial side, we see more and more property owners/managers who think a storm restoration project is a profit center for them.
In a lot of cases, they got the idea from an unethical contractor who blurted it out in desperation to get a job. The property owner wont use him because they don’t trust him, yet the idea of getting some free money is stuck in their heads.

If someone is trouble from the start, can you imagine the problems as the job progresses?
For the last few years, some of my best days have been telling a prospective client that I don’t want their business and watching their reaction.

We had a Customer this week attempt to breach our contract. It was a relatively small claim, roof only, $6,300 was our estimate. Our Sales Rep informed me, I contacted the Customer to discuss it. Without going into all the details, they tried to throw out some excuses such as our Sales Reps professionalism (he apparently was 5 minutes late to one appointment) as their excuse. The husband and wife had me on a speakerphone, the wife told me her legal opinion was we would never take this to court. I asked her if she was an attorney; she wasn’t. I told her it would be in her best interest to make decisions based upon professional legal opinions as amateur legal opinions can often cause people to lose a lot of money. The husband started shouting at me so I hung up.

I then sent an email to the husband with our invoice attached. It was based upon the fee list on our cancellation document which I previously described in this thread. He had signed that document in one spot, signifying he had received a copy of it and signed it signifying he agreed with the fees listed, for work performed, prior to the cancellation. In this case, invoice was for $1,200. I allowed one week to receive payment stating failure to pay the invoice would result in this being sent to our Attorney. This HO had previously stated to our Sales Rep that he hadn’t signed any kind of cancellation form. I attached a copy of the form, with his signatures, along with the invoice.

He sent me an email the next day where he discounted several of the charges and stated he would agree to pay $250. I decided to call him to see if this thing could be settled. He tried to say he didn’t get a copy of the cancellation form. I told him that I thought the court would see that differently given I had a copy with his signature stating he had received a copy. Again, to make a long story short, we settled for $600 along with an agreement that he would sign a document from us that is essentially a “gag order” preventing he or his wife from spreading any ill will about our company under penalty of litigation.

I frankly didn’t want to settle this as I was confident we would prevail if we went to court. I was also confident they had no real issues with our Sales Rep but were fabricating crap to try to justify cancelling our contract and walking away without paying us for our time and expense. However, my pragmatic side won out. While it may have felt good emotionally, small claims court is a also a crap shoot. Further, I and my Sales Rep would have invested way more than $600 in time to take this to court. We at least recovered some of our investment and sent a clear message to this Customer that we weren’t going to be stepped all over and thrown under the bus.

Bottom line, I suspect this person did at least casually run our contract and cancellation form by an attorney. ended up being told that we had a strong case and they’d be well served to attempt to settle this and avoid litigation.