Can a Contractor Simply Walk Off a Job?

Originally published as an Op-Ed by the Oregon Daily Journal of Commerce on October 20, 2022.

“It depends”—two words clients hate to hear from their lawyers. “It depends” is (regretfully) also the answer to the question posed in the headline: “Can a contractor simply walk off a job?”

While this topic is often covered by others, we run across misconceptions enough that some fundamentals bear repeating.

A frequent misconception is that if the contractor has not been timely paid, the contractor has the right to immediately stop working. That is not necessarily the case. Or, at least, the issue is trickier than it may seem. Although a breach of contract (i.e., unjustified nonpayment) may justify a contractor in walking off a job, contractors should anticipate that an owner may have a very different version of events as to why payment was not timely made (and whether payment was even untimely at all).

An owner may have several reasons justifying nonpayment. For example, the owner may claim that the contractor did not complete certain work or that the work was defective. In such cases, disputes can arise that necessitate the hiring of attorneys and litigation. Such disputes are costly—often far costlier than the amount of nonpayment at issue.

Thus, in addition to the amount of money at issue, a contractor should weigh a number of considerations before walking off the job. Owners should similarly keep these considerations in mind if their contractor threatens to abandon a job.

First, check the written contract. The contract will be one of the first places lawyers and judges will look to see whether a contractor had the right to walk off a project. What does the contract say, if anything, about the contractor suspending or stopping work? Check the payment provisions. Check the scheduling and delay provisions. Check the contract termination provisions. Check the work-through-disputes clause and ask whether the contractor must continue to work despite any disputes over payment. Given the express language of the contract, evaluate the strength of your positions.

Even if the contract contains some language that indicates a contractor has the right to stop work upon untimely payment, consider whether the owner may have a counterclaim. As noted above, an owner may believe that payment was timely or that payment was not necessary because of incomplete or defective work.

Also check to see whether the contract contains a liquidated damages provision. A liquidated damages provision provides that a contractor will pay a certain amount per day that a project is delayed. If the contractor walks off a job, the contractor should anticipate that the project will be delayed. An owner may invoke this provision if it thinks the contractor is not justified in walking off the job. Thus, the contractor will want to ensure that it is justified in leaving a job and that it will not be subject to liquidated damages for doing so.

Before departing an incomplete job, a contractor should also realize that it is relinquishing control over the jobsite and work. Other contractors may be permitted to finish their work. If the work is later found to be defective, the contractor can anticipate that it (along with the new contractor) may be targeted by the owner in a lawsuit for defective work. The contractor will then be put in the unenviable position of trying to show that the new contractor caused the defective work. (Thus, at a minimum, a departing contractor should ensure that it has adequately documented its work and jobsite conditions through as-built drawings or other mechanisms.)

Also, consider whether the written contract has an attorney fees provision that awards attorney fees to the prevailing party in litigation. You may not be the winner in litigation even if you have a great case and you may be the party that ends up owing fees. Further, even if you do win, awards of attorney fees often do not reimburse the entire amount of fees expended.

Finally, consider alternatives to walking off a job. Can an informal resolution be reached without resorting to litigation? Can workforces be supplemented to provide greater workflow and meet schedule? Can deficient or objectionable subcontractors be replaced?

In sum, to make the best business decision, contractors and owners should consider all factors, including the ones identified herein, when evaluating whether contractors have the right to leave ongoing construction projects.