Q: I own a small building company. What with jobs postponed due to lockdown and others delayed due to supply chain problems, we have struggled to keep going during the COVID-19 crisis. Now, just when we thought we were getting back on track we have had a big extension job cancelled at the last minute, just because the client wanted to take advantage of the stamp duty holiday and move instead! I have ordered materials, taken on extra labour, booked subcontractors, all at costs which I am liable for. And the client is saying he does not have to compensate me as he did not sign anything. Is this right?
A: Jobs can only be cancelled without liability for payment if there is no contract. Even if you have nothing in writing, it can still be argued that you and your client have a contract, just by the fact that your client verbally agreed a quote, instructed you to go ahead with the work, and presumably agreed a start date.
Whether or not it is deemed a contract exists depends on where and how arrangements for the job were made, whether work has begun and whether tailor made products have been ordered specifi cally for that job. If the client visited your place of business to ‘strike the deal’, whether that was your offi ces or your home, they may have a right to cancel if work has not already commenced. However, there are a great many other factors that could have a bearing; for example, if the client paid a deposit, or if you turned down other work in order to do his job.
You should speak with a solicitor urgently to present all the facts and see exactly where you stand. For the future, it would be advisable to have your solicitor draw up a standard contract which safeguards you and includes such as a cancellation fee.