The customer signed the contract and was approved for financing. But well after draw-down, he canceled because he'd found a better price elsewhere. Roeland Enterprises took him to court. The case dragged on for three years, but the Rockaway, N.J., replacement contractor finally won a judgment for $30,000.
“He lied and stole from us,” says president Arnold Roeland. “He used us to finance.”
Normally, however, Roeland — like many other contractors — doesn't pursue customers who cancel, even if it's after the federally mandated three-day rescission period. “Why create a disagreement and potentially a claim to the Better Business Bureau?” Roeland says. “Forcing the customer to take the product breeds a whole other set of problems.” He's had three late cancellations in 20 years.
Grin and Bear It State Roofing in Mon-roe, Wash., has a similar philosophy. For products that are sitting in the warehouse or are restockable, the company won't fight a late rescission. “If customers don't want to proceed, they will be upset and cause difficulties,” sales manager Mike Farina explains. “Besides, we don't want to go through the court process.”
The exception is custom-made windows: Once the manufacturer confirms they're under way, the contractor regards the customer as committed and expects payment for the product, if not the labor.
Ray St. Clair Roofing hasn't had a problem with window contract cancellations, says sales manager Mark Schirmer. With siding, he says, the problem has been competitors who undercut pricing. When that happens, the Fairfield, Ohio, contractor cancels the order, since efforts to salvage such deals rarely work. “That saves everyone a lot of trouble,” Schirmer says. In the past 18 months, the contractor has had three late cancellations.
Tips for Controlling Cancels To keep cancellations to a minimum, savvy contractors make a point of complying with not only federal but state law. Ohio, for example, requires providing two copies of a rescission form printed in 12-point type, plus noting the rescission period in the contract.
It's also key to avoid high-pressure sales. “People sign the contract to get you out of the house, then call to cancel,” says Charlie Fiantaco, president of Fiantaco Construction in Sterling Heights, Mich.
Ray St. Clair learned another important strategy the hard way. The company used to put yard signs out as soon as a contract was signed. Competitors picked up on that and visited those customers, underselling the contractor. Now the company's signs go up only when the work begins.
Contract wording can help, too. Include a late-cancellation clause that spells out the conditions under which the job can be called off, suggests D.S. Berenson, managing partner of Johanson Berenson LLP in Washington, D.C. The clause Berenson typically inserts when drafting contracts specifies a fee that can be deducted from the deposit. “It makes things easy,” he says.