There are a number of ways to terminate construction contracts. Spec builders have it easy — their contracts typically allow them to terminate problem customers at their own discretion by notifying the customer and refunding what has been paid. They can then sell the house to another buyer. This isn’t an option for remodelers.
A short time ago, a remodeler hired me to solve a dispute he had with a customer. He had been building an addition, and when he began framing the walls he discovered that the foundation slab was out of square. The concrete sub owned up to the mistake, and at no charge to the customer fixed the problem by removing and replacing parts of the slab. However, the customer was extremely unhappy with the delay this caused.
Most credit applications contain a personal guaranty. In this one, it's clearly spelled out in item No. 4, but in some cases it's buried in a longer document and written in language that makes it hard for the applicant to understand just what he's agreeing to.