When an Owner Wants an Oral Contract

Maurine McCarthy selected Chris Taussi of RHI Home Improvement to do work on a home she bought in Pequannock, New Jersey. Maurine wanted to add a bedroom and bathroom, renovate the kitchen and make other improvements. New Jersey’s Consumer Fraud Act (CFA) requires a written contract for home improvement projects. The contract has to cover scope of work, price, start and end dates and any right to cancel. That’s all well and good. But Maurine didn’t want to sign the contract RHI offered. Instead, she insisted on an oral agreement and nothing more. Chris Taussi started work based on the oral understanding he had with Maurine.

As you might guess, it didn’t go well. Maurine and Chris got into a dispute over scope and quality of work and payment terms. Maurine paid Chris for most of the job but filed suit to resolve items not completed to her satisfaction. In her complaint, Maurine alleged violation of New Jersey’s Consumer Fraud Act  – no written contract. The penalty for a CFA violation can include a refund of all money collected or treble damages plus legal fees.

With no written contract, RHI had a problem. They couldn’t refute Maurine’s claims or prove completion of the job. It was a case of “he said” and “she said”.

How Would You Decide This Case?

The trial court wouldn’t buy Maurine’s claim of a CFA violation. She had insisted on an oral agreement. RHI offered a written contract. On that basis, the trial court dismissed Maurine’s complaint. Maurine appealed.

The appellate court affirmed dismissal of the case. Why? Because there was no way to identify Maurine’s loss. Scope and quality of the work were uncertain. There were no start, finish or payment dates. There was no agreement on making changes or resolving disputes. Also missing: any right to cancel the job and duration of the warranty.

Why couldn’t Maurine win this case under the doctrine of “contra proferentem” as described in this space last month? True, contracts are interpreted against the drafting party. But in this case, Andrews21 LLC vs. RHI Home Improvement, the court couldn’t interpret the contract for or against anyone. Two reasons:

1.       There was no written contract. There was nothing to interpret.

2.       RHI had offered a written agreement. Maurine opted out. RHI shouldn’t be penalized for Maurine’s choice.

What should you do if an owner insists on an oral agreement? You could simply walk away. Working under an oral agreement always puts the contractor at risk. Loss of reputation, time lost and money wasted in litigation are just the start. But there’s a better way.

A Better Choice

Instead, write up a good contract. Use Construction Contract Writer to be sure you’ve covered all the important points. Send the draft to your client. Retain a copy in your file. The written agreement is your understanding of job requirements. If the owner gives an OK to begin work and starts making payments, you’ve got a written agreement, even if never signed by the owner.