All contractors are likely to have to write a cure or termination letter at some point. Unfortunately for the contractor, this need usually arises after countless hours attempting to work with a subcontractor, when the contractor is low on time and patience. What’s even more concerning is that terminating a subcontractor often leads to expensive and drawn-out litigation, whether due to defects in the work or the subcontractor’s claim for payment, even when everyone else on the job knew that the subcontractor had to go. Therefore, termination is best avoided if possible.
Below are some tips to help contractors write cure letters that are more likely to resolve subcontractor issues, and termination letters that help a contractor minimize its legal bill in an unavoidable dispute.
CONSIDER YOUR AUDIENCE
Contractors should look at a cure or termination letter as a summary of all of the important information leading up to their decision to send that letter. The letter may be communicating information for the first time to someone in the subcontractor’s company who can get the subcontractor back on track. In addition, a well-written letter serves as a powerful and efficient educational tool for others later in the process, including a contractor’s management, sureties, attorneys, and even an arbitrator, judge, or jury.
TELL YOUR STORY
A strong cure letter includes the complete story and persuades the reader that the cure letter was necessary. A strong termination letter refers back to the cure letter and summarizes what has transpired since a cure letter was written. Getting the details down when the letter is written is important because the author likely has the best knowledge of the situation at that time.
A cure or termination letter should begin where the problems began and tell the story chronologically. Bullet points work well to sum up this information. A contractor should be specific on the important dates, or if specific dates are not available, reference relevant time frames. For instance: “The subcontract required you to turn in submittals by May 15th. We received your first submittal on June 15th, and discussed with you shortly thereafter that it failed to contain the following critical items: . . . “ A letter with this level of specificity is a lot easier to understand and respond to favorably than a letter that merely states that the subcontractor will be terminated if it fails to provide complete submittals by a certain time.
Also, the letter should contain a clear directive to the subcontractor on what to do to resolve the situation. Contractors that communicate their wishes are much more likely to get what they want.
ANTICIPATE NEEDING EVIDENCE
A good cure or termination letter lists prior warnings to the subcontractor and their outcomes. To create such a letter, contractors should reference prior communications, including the frequency of communication, attempts to use different mediums of communication, promises made and broken, and attempts to escalate the issue with the subcontractor’s management prior to writing the letter, if any. Contractors lend credibility to their complaints by referencing hard facts like contract provisions, dates, and numbers.
When drafting a cure or termination letter, a contractor should include all reasons why the letter was necessary, even if one reason overshadows the others. A contractor that clearly communicates all its complaints assures that it gives the subcontractor an opportunity to cure the issues that lead to termination, and has proof of why termination was necessary.
Also, contractors do well to address allegations the subcontractors have made against them indirectly. The termination or cure letter is not the forum to assume a defensive posture or acknowledge accusations, but a sentence or two negating the subcontractor’s allegations goes a long way toward educating your reader. For example, where a subcontractor accuses a contractor of having unrealistic submittal standards, a contractor can reference the owner’s specifications to prove that the subcontractor had notice of the standards before contracting.
SENDING THE NOTICE
Once a contractor has drafted its termination letter, a few tips on how to send the letter can help ensure that it is received and holds weight should the matter progress into a dispute.
The letter should be on the contractor’s letterhead in a formal letter style, and should be sent separately from other communications about the project. After taking the time to sum up the issues in his own words, a contractor is well-served to have his letter and any supporting documentation considered by itself.
Contractors should always check to determine whether the subcontract designates a recipient or transmittal method for notices. This is also an opportunity to verify email addresses, office addresses, and fax numbers, especially if the subcontractor has not responded to prior communications.
Finally, it’s not unusual to see cure and termination letters sent by email, fax, and overnight mail. Depending on the success a contractor has had reaching his subcontractor, all three may be necessary. The author should list the method of sending the letter and the addresses, fax numbers, or tracking numbers on the face of the letter. Contractors should keep read receipts from emails, fax confirmations, and overnight carriers’ delivery confirmations in a file with the letter, so they will have them if the need arises. ■
About The Author:
Danielle N. Senn is a construction attorney in the Dallas office of Ford Nassen (www.fordnassen.com), which is nationally recognized in the industry and is one of the largest construction law firms in Texas. Her practice involves counseling and advising all participants in the construction industry in both the public and private sectors on issues including contract creation and review, lien and bond law, dispute resolution and negotiations, and litigation. She can be reached at or 214.523.5100.
Modern Contractor Solutions, July 2013
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