Sunday, April 19, 2015

Promises Made and Broken


Mike and Cheryl Ording had a leaky basement in their Milwaukee home. A salesman for Everdry Waterproofing offered to solve the problem. According to the Ordings, the salesman claimed they “would never have water in their basement again” if Everdry did the waterproofing. Reassured, the Ordings signed the contract. A few weeks after work was done, the Ordings noticed water in their basement. They called Everdry. Before Everdry showed up, a storm flooded the basement five feet deep. Everdry offered to lend the Ordings a pump but insisted that any damage was not their problem. The Ordings sued.

At trial, the jury awarded the Ordings $7,000 in damages. That was doubled to $14,000 under Wisconsin’s Home Improvement Practices Act. A violation of HIPA is also an unfair trade practice which allowed the Ordings to collect their attorney fees, $41,000 in this case. So the contractor was on the hook for $55,000. But that was only the beginning. Everdry’s attorney fees were $118,896. That made the salesman’s promise a very expensive mistake.

Now notice this. The award wasn’t for breach of warranty or breach of contract or negligence in doing the work. Instead, the jury found that Everdry made a false oral promise when selling the job – the Ordings “would never have water in their basement again.”

Protect Yourself
How many times have you made a promise when selling a job? There’s risk every time you forecast results such as durability, matching colors or textures, performance, a completion date  anything that raises expectations or could be misinterpreted. Let the contract, the plans and the specs describe your task. That’s step one.

Step two is known as a contract integration clause. Here’s a sample taken word-for-word from Craftsman's Construction Contract Writer:

This contract is the entire agreement and constitutes a complete integration of all understandings between Contractor and Owner on the subject of the Project. This Contract supersedes all prior negotiations, representations and agreements, whether written or oral. 

An integration clause makes good sense on two levels. First, integration voids statements made before the contract was signed. Those statements aren't part of the deal. Second, courts like integration. Interpreting any agreement is easier when there’s just one contract, not a list of oral promises and side agreements.  

Would the jury’s decision have been different if the Everdry contract had an integration clause? I think we know the answer to that question. The Everdry contract did have an integration clause. Unfortunately for Everdry, their counsel didn’t raise the issue until after the jury verdict – too late in the opinion of the appellate court (2015 Wisc. App. LEXIS 275, April 14, 2015).

A Simple Suggestion
Are your contracts as good as your work on site? It’s easy to write iron-clad contracts fully enforceable under the law of your state. Get Construction Contract Writer. The trial version is free.