You need to have the contract reviewed and a determination made as to what provisions of the contract they have breached which would allow you to terminate the contract. Without reviewing the contract, it is really not possible to tell you how or if you can terminate the agreement.

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There is no specific way to terminate a construction contract. Terminating a construction contract is simple and complicated. You terminate it by sending a letter and throwing them off the job. Simple. The complicated part is determining whether you have legal grounds to do that without being liable for breach of contract, and then if you do have grounds, terminating the contract so as to preserve that position. There is no way to walk you through all that on the internet. The one thing you absolutely can do, however, is report them to the Contractor's State License Board for violations of the Business and Professions Code, by taking more than 10% or $1,000 deposit, whichever is LESS.