I am a restaurant owner in NY. I signed a design-build contract (AIA Document A141-2014) with a construction company which stated that phase 1 (out of 4) includes a non-refundable deposit of $5000 for contract execution in the event I decide not to move forward with them. I have decided against upgrading my property and am now faced the the forfeiture of $5000. I plan on hiring an attorney but before I do so want to self-study the issue. Your input would be greatly appreciated.
Depending on how the contract is set forth, this may not be a winning issue for you. Where the contract sets forth services to be provided for a fee, in stages, and further sets forth that the deposit is essentially a "fee" through the mechanism of being earned upon receipt for the purpose of securing the contractor's availability, then as long as the contractor actually remains available and willing to perform under the remainder of the contract, they have complied with their responsibilities and have possibly forgone other work in order to be available for you.
You will of course consult an attorney of your own choice, but I think this is the issue you will need to examine.
All views expressed are general opinions and do not constitute legal advice. No attorney-client relationship is established unless and until a signed retainer has been executed by the attorney and the client. You should not rely upon any opinion expressed as legal advice and should seek the advice of an attorney of your own choosing.
Under New York law, if the construction contract is a "home improvement contract" then you have an absolute right to cancel the contract before midnight of the third business day after execution. If it is not a "home improvement contract" or the time to cancel as of right has expired then whether a contractor can enforce a $5,000 non-refundable deposit depends on your contract. There are situations when it could enforced and there are situations where it might not be enforced.
The information provided herein is for informational purposes only and does not constitute legal advice. No attorney-client relationship is created by this answer. You should consult with a local attorney regarding your specific situation to obtain legal advice.
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