Sunday, July 15, 2012

Construction Contract Law Gibberish

The law in most states puts residential contractors at a disadvantage. Omit a required notice or disclosure and your contract is probably unenforceable (at best) and could earn you a fine (or worse). That’s called consumer protection law. No use complaining. It’s not going away.


To help protect consumers, several states require that contracts be written in plain English. Among these, my favorite is Connecticut’s objective test of understandability. By law, every consumer contract in Connecticut:

(1) Has to average less than twenty-two words per sentence.
(2) Can’t have any sentence with more than fifty words.
(3) Can’t average more than seventy-five words per paragraph.
(4) Can’t average more than 1.55 syllables per word.
 
OK. So if construction contracts have to be easy to understand, shouldn’t construction contract law also be easy to understand? That makes perfect sense to me. It’s a two-way street. Contractors shouldn’t have to guess at what the law requires. Lawyers shouldn’t have to apologize to clients about gibberish in the law. If a legislature really wants contractors to comply with the law, shouldn’t they make the law easy to understand?

Case In Point
Last week a California contractor asked me a simple question: “Nearly all my jobs are for home owner associations. Do my agreements with HOAs have to include all the notices and disclosures required in California home improvement contracts?”
 
That’s easy, I thought. A HOA isn’t a consumer in the classic sense. Consumer protection law shouldn’t apply. But just to be sure, I looked up the law before answering. Here’s what I found.
 
California Business and Professions Code § 7159 prescribes the 18 notices and disclosures required in home improvement contracts. But § 7159 refers to § 7151.2 for the definition of “home improvement contract:”
 
"Home improvement contract" means an agreement, whether oral or written, or contained in one or more documents, between a contractor and an owner or between a contractor and a tenant, regardless of the number of residence or dwelling units contained in the building in which the tenant resides, if the work is to be performed in, to, or upon the residence or dwelling unit of the tenant, for the performance of a home improvement as defined in California Business & Professions Code § 7151, and includes all labor, services, and materials to be furnished and performed thereunder.”
 
Read those words any way you want. I don’t believe they answer the contractor’s question, “Is an agreement with a HOA a home improvement contract?” No California court has interpreted § 7151.2 and nothing on the State License Board web site helps define “home improvement contract”. So we’re left to guess.
 
Here’s my best guess. Insert the words “of the owner” after “upon the residence.” That would make it clear. It’s home improvement only if work is done on the residence of the owner. That makes sense. Consumer protection law protects consumers, not a business entity such as a HOA. As amended, work done for a HOA would not be home improvement.
 
Here’s My Point
As written, § 7151.2 doesn’t answer a simple question. That’s bad. Even worse, California § 7151.2 is far from plain English, at least as Connecticut sees it. No sentence can have more than 50 words. Section 7151.2 weighs in at 95.
 
My recommendation: If you want to comply with state law but aren’t eager to parse the fine points, rely on Construction ContractWriter to keep you legal. The trial version is free.

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