Builder won’t refund deposit

[Chessie678]

We had lined up a builder to do a large piece of work. We signed a contract with them and paid a deposit. The contract was for a fixed fee - it was very clearly fixed fee with no get out to this. They then told us that they would be increasing their price very significantly about a week before starting work and issued us a new contract with the new price to sign. We didn’t want to proceed with the new price and didn’t have the financing in place to do so anyway. They won’t refund our deposit because they have incurred some costs drawing up plans, admin etc. These plans aren’t useful to us as every other similar builder we have contacted wants to use their own.

I’m willing to take legal action to recover our deposit if it comes to it but interested in opinions on our prospects. I feel that our loss is really the difference between the original contract price and the amount we will now need to pay to get the work done (several thousand more plus long delay) plus our deposit.

What I’m not sure on is whether we would be expected to pay for the part of the contract they did do (the plans) even though we can’t use them and they cancelled the contract.

I’m a solicitor myself but this isn’t my field and it’s hard for me to be objective.

Tbh you sound daft. It's going to cost you several thousands more with someone else because the price of materials has gone up massively since brexit and covid.

You could wait longer, pay it to someone else (probably with another price rise) or just get on with the builder you already have without trying to squeeze the lemon so hard it's bitter.

What were their reasons for the hike in price? As upthread, building materials cost far more now.

What does your contract say about your deposit? If it says non refundable, and you signed up to those terms, then I'm afraid it's non refundable. Have a chat with your builder and see if he will compromise? But you're likely relying on goodwill from him.

I agree with PP re materials costs.

A quote is legally binding. If your contract with them clearly shows a fixed quote then they cannot change it. If they've changed it, then they're in breach. You should be able to recover your deposit.

Have you paid a deposit for materials or fees for the drawings? Sounds like you’ve signed up to a design and build contract.

@TheWoleb
Thanks. That was my view. The contract is clearly expressed to be fixed fee and there is no mechanism allowing a price increase.

To everyone else. Yes I realise that material costs have increased and if we could have afforded it and really needed the work doing immediately the pragmatic view might have just been to proceed at the higher cost but we were being asked to find an extra £20k in just over a week with no guarantee that would be it when we had already paid more to get a fixed fee contract. If we were willing to pay on a time and materials basis we could still get that cheaper elsewhere.

Well they drawings etc aren't any good to them either if they aren't doing the job now, so if they have spent time and money doing them then of course you will be charged for that.
Prices of materials has increased massively recently. I doubt you would get anyone else to do it much cheaper now. It's not the labour costs that have went up.

How much was your deposit?

@AgentProvocateur
Yes it’s design and build and they have done some of the design. It’s just it’s essentially useless to us as no comparable company will use their work.

I can see that if they’d built half of the extension we should pay something even if they had breached contract but it seems less clear cut when they’re trying to charge for work which we can’t use.

It’s interesting to read people’s perspectives. If we offer someone a fixed fee at work we always honour it even if the work takes far longer than we predict and therefore costs more. To me that’s just the risk you take when you offer fixed fee as a supplier. I feel that if they want to walk away from a fixed price contract they should bear the cost of that.

Deposit is around £5k - probably quite a bit higher than is justified for just the design work but hard for me to say.

There should be a payment schedules in the agreement and there’s usually a milestone payment after the detailed design drawings. I don’t know what percentage 5k is, but that doesn’t seem excessive for the drawings. It’s also too low for a deposit for materials. Yoh say they’re no use to any other builder, but regardless - they’ve done the Rowling and are due a payment.

I cant believe the majority of the responses. Yes proces went up. It isn't relevant. You signed a contract and that's that. Imagine if you decided you didn't want to oay as much as prices had fallen. That woukdnt fly so nor will this. Of course take them to small claims. It costs 70 quid and they have no case. You will only struggle if they go bust so I suggest you be quick!

So many typos. The fact they have done work is not relevant either. They can't charge you if you genuinely can't use it and they pull out

If they are the ones cancelling the contract then I don’t understand why people think you should still be liable for the deposit? It wasn’t your decision to cancel and I’d be going for a full refund at the very least

They are contractually obliged to deliver the service as per contract.
I’d infirm them of this fact and enter a coubter claim as now services are more expensive and you will be out of pocket if you need to go with another provider.

The detail is all in the contract. I too can't believe the responses you are getting particularly the first one. However I am not a solicitor like yourself.

Was there a payment schedule in the agreement? A 20k rise is quite large but I suppose it depends on what the initial cost of the contract was? What was the deposit worth, how much money will you lose? Probably amounts above small claims - you need a contract solicitor if you are talking large amounts. I have had a bad situation which I won on promissory estoppel in contract law, but very hard to find a solicitor who specialises.

The builders contracted to do the work at a fixed price. If they refuse to do the work at that price they are clearly in breach of contract (assuming there is nothing in the contract allowing them to change the price if their costs change - I presume there isn't since they want you to sign a new contract) and are liable for the difference in cost between the contracted price and whatever it costs you to get someone else to do the work.

What the contract says about the deposit is irrelevant. They are in fundamental breach of contract. They have not provided anything of value in return for the deposit. As far as I can see, you are therefore entitled to a full refund.

My next step would be to write to them pointing out they are in breach of contract, giving them a chance to fulfil the contract at the original price and making it clear that, if they don't, you will be looking for a full refund and they will be liable for the difference in cost between their quote and the cost of getting another builder to do the work.

Their costs may well have gone up but that isn't relevant. They should have built an adequate margin into the price to allow for increases or included a clause in the contract allowing them to increase the price if their costs increased.

You do, of course, need to consider whether they will actually be able to pay before taking legal action.

I’m not a legal expert but I’d hazard a guess that any fixed fee contract should have a time frame whereby the price is guaranteed and any price increases due to materials should be mentioned as part of a disclaimer.

You may be interested in contacting the op on this thread here, similar situation to yourself…good luck.

Imo builders should be returning deposits if they’re unwilling to honour the quote.

www.mumsnet.com/Talk/legal_matters/4394595-Price-has-risen-after-paying-deposit-Can-i-get-deposit-back

I agree with @prh47bridge (with the caveat that I obviously haven't seen the contract). They contracted with you to do a job for X price. They are now refusing to do the work at that price. They are therefore in breach. Standard contractual damages are intended to put you in the position you would have been in if the contract had not been breached. There are various ways of looking at this but it seems reasonable to suggest that you would not be out of pocket by the amount of the deposit. I'd write a letter before claim to that effect and proceed to small claims if you need to.

Looking at things pragmatically rather than legally, material costs are sky high now so it may be that you are unlikely to find anyone who would do the work at the original price.