“I do business on a handshake – never
use a written contract. I know that’s not legal. But I do whatever my customers
want. I’ve never had a problem. But I keep my fingers crossed.”
Maybe you’ve
heard a contractor make a claim like that. Is there anything wrong with 100%
satisfied customers?
I admire
the spirit. Earning a reputation for quality work is the best way to build a career,
whether in construction contracting or the practice of law. But I can’t endorse
paperless contracting. It’s like driving on bald tires – a risk no contractor needs.
Laws in 31
states and the District of Columbia require a written contract for residential work:
AR, AZ, CA, CT, DC, DE, HI, IL, IN, KY, LA, MA, MD, ME, MI, MS, ND, NH, NJ, NV,
NY, OH, OR, PA, RI, TN, TX, VA, VT, WI, WV and WY.
Twelve states
don’t require a written agreement but do require that the contractor deliver a written
notice or disclosure before work starts: AK, AL, FL, GA, ID, KS, MN, MO, MT, OK,
SD and WA.
And the other
seven states? You still have to provide the written Federal 3-day right to cancel
on nearly all residential jobs.
And if you don’t have a written contract?
A case decided
last month in Wisconsin helps answer the question. It’s a criminal case. State v. Felski,
2013 Wisconsin App. LEXIS 7 (January 2013).
Tom Felski
remodeled a kitchen ($21,354.19) and bath ($17,496.39) for Paula and Richard Derrick
and got paid in full. Felski had a written contract on both of those jobs. The Derricks
must have liked the work Felski did because they agreed to have him do two more
projects totaling more than $50,000, a 686 square foot room addition and a garage.
But this time Felski didn’t bother getting a signed contract. That’s a problem in
31 states, including Wisconsin. Administrative Code ATCP § 110.05 requires a written
contract for home improvement work in Wisconsin. The penalty is a fine of up to
$5,000 and a year in jail.
Felski and
the Derricks had a falling out before work was done on the garage and room addition.
Felski was convicted of violating ATCP § 110.05 on the garage job – no written contract.
The Derricks asked the court for restitution of everything paid on both jobs – the
garage and room addition. Felski argued that the value of his work on those two
jobs exceeded what he had been paid. Not persuaded, the trial court ordered Felski
to make full restitution of everything paid on both jobs. A total of $47,274.81.
Lesson learned
Only contractors
get penalized for doing work without a written contract. Owners have no risk at
all. Remember that the next time an owner offers to do business on a handshake –
or insists on using a contract found on the Web. Don’t take chances. Use contracts
that comply precisely with both state and federal law. That’s easy with ConstructionContract Writer. The trial version is free.
