What remedies are available when a contractor fails to complete the works?

The legal position

Payment for incomplete work. The position depends on the nature of the contractor's obligation:

• An entire obligation. Where a single price is payable only upon completion of the whole of the works, a contractor who performs only part of the obligation can recover nothing for the work done.
• Substantial performance. Where the works have been substantially completed, but with defects or omissions, the employer must pay the contract price, less the cost of remedying the defects.
• Acceptance of partial performance. Where the works have been left incomplete, the contractor is entitled to payment for the part performed only if the employer had a genuine choice whether to accept the partial performance, and elected to do so. An employer who completes works on its own land because it has no practical alternative is not taken to have accepted the partial performance.
• Stage payments. Building contracts commonly provide for payment by stages. The same principles are then applied to each stage.

Prevention of performance. Where the employer has prevented the contractor from completing the works, for example by excluding the contractor from the site while the contract subsists, the rules set out above do not protect the employer. The contractor may claim damages, or payment on a quantum meruit, that is, the reasonable value of the work done.

The employer's remedies. The abandonment of the works, or their performance so defectively as to defeat the purpose of the contract, is a repudiatory breach. The construction of a dwelling house unfit for habitation is an example. The employer may accept the repudiation, thereby terminating the contract, and claim damages. Those damages ordinarily comprise the amount by which the total cost of completing and correcting the works, including sums already paid, exceeds the original contract price, together with losses caused by the delay. The employer must take reasonable steps to mitigate those losses. Work performed under a contract for services must be carried out with reasonable care and skill. Where a dwelling house is left uninhabitable, damages may also be awarded for the distress resulting from the physical inconvenience.

Practical implications

Where a contractor completes only a portion of the works and then abandons them, that will ordinarily constitute partial rather than substantial performance. If the price was payable only on completion of the whole, the contractor may be entitled to nothing for the work done. In that event, the employer pays only the replacement contractor. It has a claim against the original contractor only if the total cost of completion exceeds the original contract price. An employer who elects to use materials left on the site by the original contractor must pay for them.

Where the employer paid an advance and the contractor failed to perform the corresponding work, the sum paid for work not done forms part of the employer's claim.

Where a contractor declines to complete the works unless additional payment is made, the employer's agreement to pay may be liable to be set aside for economic duress. See Can a contract be varied after it has been signed?

Where the works are complete but defective, the employer must pay the price, less the cost of remedying the defects.

Recommended steps

Before any other contractor enters the site, the employer should record the state of the works fully. The record should include dated photographs and video recordings, a schedule of the work completed and outstanding, and, preferably, an independent report from an engineer or quantity surveyor. That record will be the principal evidence in support of any claim.

The employer should serve written notice on the contractor, identifying the outstanding work and requiring its completion within a reasonable time. Where the contract prescribes a notice procedure or a period within which the breach may be remedied, that procedure should be followed.

If the contractor fails to return, the employer should notify the contractor in writing that it accepts the repudiation and treats the contract as terminated. That acceptance must be clear and communicated.

The employer should obtain competitive quotations from other contractors, act reasonably in selecting one, and retain all receipts.

The employer should not exclude the contractor from the site, or withhold payment for a properly completed stage, while the contract subsists. To do so may place the employer in breach.

Claims not exceeding TT$50,000 may be brought in the Petty Civil Court. In most cases proceedings must be commenced within four years of the breach, which in cases of abandonment ordinarily means the date on which the contractor abandoned the works.

In future contracts, stage payments should be linked to defined milestones. A retention should be held until defects have been remedied, and the basis on which variations will be valued should be agreed in writing.