When a homeowner breaches the contract

[Big Builder]

I would like some advice on my current situation if possible.

Our company has a contract to build a large custom cottage. From the beginning things were difficult. We experienced many delays from the Owner. They couldn't sell their old house, their finacing fell through
etc. We had turned away other projects because of our commitment
the this one. It turned out to be six months before the Owner was finally prepared to start. At that time we had to escalate our materials 2% to
cover industry wide increases ( doesn't even cover fuel increase!) The Owner refused to accept this. Our contract specifically states twice that we can only carry material prices for 10 days from the date of the bid letter. The Owner last statement was that he was walking away from the contract. Our company has invested serious time and passed on several jobs that we could have done in that timeframe. I sure that I don't have
to tell everyone that you can't just start the next house in line the next day! Permits, approvals, variances etc. So in the end my crew spent weeks working on my own house just so I could keep them busy!
Any ideas how I should pursue? $ 10 000 max.
Small claims or litigation for lost profit and time spent to date?

[Sweep]

Did the owner actually sign the contract? Did it not call for binding arbitration in case of dispute? What kind of contract did you use?

In my experience. the 10 day clause is to release you from your bid offer if the contract is not signed within 10 days. Price escallation for delays is usually a separate issue addressed elsewhere in the contract.

Only a lawyer can tell you if there is a legal case. I only know that small claims court is sometimes difficult to enforce, and lost opportunity cost can be hard to prove.

I know it's easy for me to say now, but when the delays began you should have written a letter advising the owner that you would still do the job but that you would not be able to hold your price beyond a certain date. Remaining silent on the issue for six months won't help your case although I agree that the request for an increase was reasonable however bad the timing was.

[Big Builder]

Yes both the Owner and his wife signed the contract. It does call for arbitration in the contract. I have my lawyer preparing a letter
requesting a project mediator. It isn't like I had been silent. The clause appears in our bid letter, three weeks later in our first contract draft and then 5 weeks later in our binding draft stating that work will begin immediately. We also have a letter of intent form tham as well.
Yes, the escalation clause in the bid letter is an out but that same clause
is in our contract documents as well as an attached letter (signed by Owner and wife) stating that material escalation will be incurred. I also
made the OWner aware verbally on at least five occasions.
When we did make our C.O. for escalation the OWner agreed verbally
so we went ahead and made all arrangements to start. The morning before groundbreaking he called and said he had been tlaking the the "suppliers and "other contractors" and said although material was up he expected it to go back down and didn't feel he should have to absorb this.
WHat a mix-up!

Never has happened to us before.

[Big Builder]

ALso, what is the best way to pick an impartial mediator that both parties will agree on?

[Rich]

There is a mediators council I believe that you can request someone from a pool of mediators. You can pursue a loss of revenue claim... whereas your company was relying on the executed contract and the profits from it to continue operations. Now that the homeowner has "backed" out of an executed contract - the expected profits are now not there.

[Big Builder]

I will research the mediators thing. I have to admit I have never heard of that.
I have met with my lawyer. His advice was to start with a letter
stating my intentions if they do not honour the contract.
I will start with that.