Wednesday, July 26, 2017

Calamity in Connecticut

Every experienced contractor has seen a job go bad – sometimes really bad. That’s what happened recently to Tankworks Removal and Replacement, LLC, a Connecticut home improvement contractor. One of their projects turned into a financial black hole nearly overnight. And it didn’t have to happen. Two good contracts would have saved the day. I’ll explain.

The home at 575 Thrall Avenue in Suffield, Connecticut had two old heating fuel tanks in the back yard, one below ground and another nearby above ground. Niagara Bank owned the home as part of an estate and was preparing the property for a sale. It’s hard to sell a home with obsolete fuel tanks. So the bank signed an agreement with Tankworks to remove both tanks and install a new tank in the basement.

Tankworks is a licensed Connecticut home improvement contractor. Part of what they do is remove and replace oil storage tanks for residential furnaces. That’s a common home improvement project in Connecticut. Tankworks and the bank signed their home improvement contract on March 3, 2014. From that point, almost nothing went as planned. I’ll list Tankworks’ mistakes.

1. The Tankworks contract didn’t comply with Connecticut’s Home Improvement Act. For example, there was no start date or completion date and no three-day notice of the right to rescind.
2. Work started without notice to the bank.
3. No one from Tankworks was on site during excavation.
4. The excavation crew didn’t have instructions on the order of work.
5. A tractor hooked the supply line from the above-ground tank, stretching the line until it broke.
6. The excavation crew left the site on Friday with the fuel line broken.
7. By Monday morning, fuel oil had puddled around the house to the front yard, flooding a swale by Thrall Avenue.

The bank paid $60,000 for cleanup and sued Tankworks for reimbursement. Last month, a Connecticut court awarded the bank $60,000 for negligence (2017 Conn. Super. LEXIS 3581) plus the bank’s attorney fees. That’s unusual. An award of attorney fees is rare in tort cases. But there was a reason.

Any violation of Connecticut’s Home Improvement Act is an “unfair or deceptive trade practice,” qualifying the plaintiff for an award of attorney fees. By using a lame home improvement contract, Tankworks opened the door to an award of plaintiff’s legal fees – perhaps several times cost of the cleanup.

A Prime Contract and a Subcontract
I’m not going to comment on the mistakes listed above. You be the judge on these. But there’s one point you shouldn’t miss: two good contracts could have saved this job.

First, a legal Connecticut home improvement contract with the bank would have insulated Tankworks against a claim for the bank’s attorney fees. Without a valid home improvement contract, Tankworks had no defense against the bank’s claim of an unfair trade practice.

Second, excavation on this job was done by Red Door Construction, a subcontractor to Tankworks. That should not be a surprise. Many residential contractors use an excavation sub. But a good subcontract could have: (1) made Red Door liable for their own negligence, (2) required Red Door to carry liability insurance and (3) indemnified Tankworks for any loss due to negligence of Red Door.

Don’t make a Tankworks mistake. Construction Contract Writer drafts letter-perfect contracts and subcontracts that comply precisely with state law and protect you when a good job goes bad.