Does this sound like any job you’ve had?
Tim Clancey’s Indiana home needed repairs. Clancey signed a contract with
Terry’s Discount Windows to do the work. On completion, Clancey had some complaints
and refused to make the final payment -- $13,530. When Terry’s demanded payment
in full, it got ugly. Clancy, the homeowner, filed suit, claiming fraud, negligence,
breach of contract, and non-compliance with Indiana’s Home Improvement Fraud Act,
Home Improvement Contract Act, and Indiana Consumer Protection Act.
To collect the last payment, Terry’s had no choice. He filed a counter-claim
for $13,530. At this point, Terry’s contract with Clancy took center stage.
After a jury trial, Terry's won. Clancy got nothing. But the trial court denied
Terry’s post-trial motion for attorney fees and interest. True, the signed contract
included a clause on attorney fees and interest on the delinquent account. But the
trial court judge didn’t see it that way. Terry’s counsel considered that a mistake.
And it made a big difference. Attorney fees and interest were far more than the
$13,530 awarded at trial. Terry’s appealed. And here’s where Terry’s contract saved
the day.
Most state courts won't award attorney fees if there is no written contract
-- or if the written contract doesn’t cover the subject. So, what did Terry’s contract
say?
In the event that Terry's is required to so initiate legal proceedings, Terry's
shall additionally be entitled to recover all costs and attorney fees incurred in
connection with such collection proceedings, as well as interest on the contract
balance outstanding and unpaid at the rate of 1% per month.
A clause like this raises the stakes when there’s a dispute. An owner with
frivolous claims or a weak defense has reason to pay up without a fuss. But every
state has different law on the award of attorney fees. For example:
California -- The right to collect attorney fees is reciprocal. If a contractor
can collect attorney fees after winning a contract dispute, an owner has the same
right. California Civil Code § 1717.
Arizona -- Courts can award "reasonable" attorney fees to the successful
party in any contract dispute. Arizona Revised Statutes § 12-341.01
Connecticut -- If a contractor has the right to collect attorney fees, a homeowner
is given the same right. Connecticut General Statutes § 42-150bb.
Georgia – Better to leave attorney fees out of the contract. Official Code
of Georgia Annotated § 13-11-8 gives contractors the right to collect attorney fees
if the dispute is over delinquent payment.
Appellate Court Decision
Earlier this week the Indiana Appellate
Court came to Terry’s rescue.
- Parties
to litigation pay their own attorney fees unless their contract says otherwise.
- Terry’s
contract provided for an award of fees and interest on the money owed.
- A
trial court judge has an obligation to rule on the award of attorney fees.
- Judges,
not juries, decide what constitutes a reasonable attorney fee.
The appellate court sent the case back
to the trial court to calculate attorney fees and interest due. Conclusion: Terry’s
was saved by a good contract.
Protect yourself. Write contracts as
professional as your work. No matter the state, no matter the type of job, Construction Contract Writer drafts agreements that can save thousands when a job turns bad. The
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