MHIC NASCLA Contractors Practice Exam

What is required for a contractor to legally collect a fee from a canceled contract?

1. A written agreement

2. A verbal agreement

3. A notice of cancellation

4. No fee can be collected

The correct answer is: No fee can be collected

For a contractor to legally collect a fee after a contract has been canceled, certain legal principles apply, particularly regarding the enforceability of agreements once they are terminated. Generally, if a contract is canceled, the contractor cannot collect fees that were agreed upon under the terms of that contract. This is because the cancellation effectively nullifies the obligations outlined in the contract, including payment, unless there are specific provisions for termination included in the contract itself that allow for a fee to be collected. In most cases, contracts include stipulations regarding how both parties should proceed in the event of cancellation. If no such stipulation exists, or if the cancellation is executed according to standard legal protocols, the contractor generally has no legal ground to demand payment. Therefore, the understanding is that the contractor may not collect any fees from a canceled contract. This principle reinforces the importance of having clear and comprehensive contractual agreements that specify the rights and obligations of both parties in various scenarios, including cancellation.