Short answer. Yes. Under Article 1596 of the Civil Code, when a buyer repudiates a sale or tells the seller to stop work before the contract is completed, the buyer is liable for labor performed and expenses made by the seller before receiving that notice. What was already spent is not lost.
What the law says
the buyer shall be liable to the seller for labor performed or expenses made before receiving notice of the buyer's repudiation or countermand. The profit the seller would have made if the contract or the sale had been fully performed shall be considered in awarding the damages.
Civil Code, Article 1596 — Seller's Action for Damages (Non-Acceptance). Read the full provision →
What the law says when the buyer pulls out early
Article 1596 of the Civil Code addresses non-acceptance of goods and sets out how damages are measured when a buyer wrongfully refuses or fails to accept. The provision specifically deals with a contract where the seller needs to perform significant labor or spend money before being able to fulfill the agreement. If the buyer repudiates — announces he will not go through with it — or tells the seller to stop, the seller does not lose the work already put in. The buyer owes the seller for everything done before the notice of repudiation or countermand was received.
What counts as labor and expenses
The recoverable amounts are what the seller had already invested by the time the buyer's message arrived — wages paid to workers, materials already purchased and used, subcontractors already engaged, and similar direct costs. Work done or money spent after receiving the buyer's notice of cancellation will not be recoverable, so the cut-off point matters. Document your timeline carefully: when did you receive the buyer's instruction to stop, and exactly how much had you done and spent up to that point.
Lost profit is also part of the picture
The law goes further than just sunk costs. Article 1596 states that the profit the seller would have made had the contract been fully performed must be considered when the court awards damages. This recognizes that the seller had a legitimate expectation of completing the job and earning a return on it. Lost profit is not automatic — you will need to show what the contract price was, what your costs would have been, and what margin you would have cleared. Detailed records of your pricing and cost structure are critical.
Market price as another measure
Where goods are involved and there is an available market for them, the statute also allows the seller to claim the difference between the contract price and the market or current price at the time the goods ought to have been accepted. This gives a seller who can resell the goods an alternative measure of loss. These different measures may apply depending on the nature of what was being sold. A lawyer can help you identify which combination of recoveries applies to your specific contract and how to document your claim.