Our contractor agreed to a time and material job. Three months into the work he said he'll need 15% on top of time and material or he won't be paid for the job only his crew will be paid. We have signed no agreements with him and he is gaslighting us saying we forgot about that percentage, even though for sure it was never discussed. We have taken on the work of hiring and communicating with all subcontractors and arranging for them be on the project. Furthermore, he asked for that 15% in cash, so " I can pay my guys a tax free Christmas bonus." Is this a fair practice?
Most contractors that do time and materials do a "Cost-Plus" contract. The "cost" is time and materials. The "plus" is overhead and profit. So is it fair to add 15%? In short, yes. However, if this is a residential project, then your contractor should have given you a GMP (guaranteed maximum price). He also should have given you a Home Improvement Contract that is compliant with Business and Professions code section 7159. If it's T&M and now he wants to add 15%, he probably didn't give you a compliant contract. In which case you may want to consult with a Construction Law Attorney.