tag:blogger.com,1999:blog-2511669746512277422024-03-18T14:11:36.039-07:00State-by-State Construction Contract LawConsumer protection law puts construction contractors at a disadvantage when drafting agreements for residential construction. This blog examines what construction contractors have to do to comply with state and federal law and suggests ways to reduce the risk when drafting residential construction contracts.Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.comBlogger187125tag:blogger.com,1999:blog-251166974651227742.post-65701121207211872342024-03-18T14:06:00.000-07:002024-03-18T14:10:53.165-07:00Painful Lesson in Pennsylvania<p><span face="Arial, sans-serif" style="font-family: times; font-size: medium;">Ty and Carissa Schott planned to add a pool in the back yard of their Allegheny
County Pennsylvania home. Country Pools bid $53,160 for the work and got the job.
The Schotts advanced $26,580 as a deposit. To get their backyard ready for the pool,
the Schotts paid separate contractors over $20,000 to install a retaining wall and
perimeter fence.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Before signing the contract, the Schotts asked Country Pools whether permits
were required from their municipality, Franklin Park Borough. Country Pools suggested
that “no permits would be necessary until installation of the swimming pool."
After completion of the retaining wall, the Schotts applied for their permits. Surprise!
Franklin Park's zoning regulations prohibit construction of their swimming pool. The
Schotts applied for a zoning variance. No luck. Application denied. The Schotts
weren’t going to get their pool.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">The Schotts demanded a full refund, including money spent on the retaining
wall, fence and permit fees. County Pools refunded $20,429 but refused to refund
the remaining $6,151. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times; font-size: medium;"><span face=""Arial",sans-serif" style="mso-bidi-font-weight: bold;">The Schotts filed suit and made three claims:</span><o:p></o:p></span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Unjust enrichment for the $6,151
Country Pools refused to refund.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Omission of contract terms required
by Pennsylvania's Home Improvement Consumer Protection Act (HICPA).<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Fraudulent or deceptive conduct
in violation of Pennsylvania’s Unfair Trade Practices & Consumer Protection
Law. UTPCPL allows the court to award three times actual damages plus attorney
fees. The Schotts claimed actual damages of $32,000.<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium;">You decide. <o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Should County Pools be responsible for the Schotts’ loss, including triple
damages and attorney fees?<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">We don’t know the answer yet. Pennsylvania’s appellate court ruled last month
that County Pools’ liability insurance doesn’t cover the loss. “"The purpose
and intent of such an insurance policy is to protect the insured from liability
for essentially accidental injury to the person or property of another rather than
coverage for disputes between parties to a contractual undertaking."<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">The case goes back to the trial court to decide how much County Pools owes
the Schotts. But this is clear. A few minutes of contract drafting could have saved
County Pools thousands in legal fees and damages. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times; font-size: medium;"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif">First</span></b><span face=""Arial",sans-serif" style="mso-bidi-font-weight: bold;">, An extra sentence in County Pools’
contract with the Schotts could have headed off this dispute:<o:p></o:p></span></span></p>
<p class="MsoNormal"><i><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">Except as provided elsewhere in this agreement, owner will secure all approvals
for the project that are required by government authority, including planning, easements,
remediation, environmental, and zoning approvals.<o:p></o:p></span></i></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-family: times; font-size: medium; mso-bidi-font-weight: bold;">This clause makes it clear. The owner is responsible for approvals that have
nothing to do with construction. Every pool contract needs a sentence like this.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times; font-size: medium;"><b style="mso-bidi-font-weight: normal;"><span face=""Arial",sans-serif">Second</span></b><span face=""Arial",sans-serif" style="mso-bidi-font-weight: bold;">, every Pennsylvania residential contractor
needs to know HICPA. Work valued at $500 or more on any existing residential property
requires a written agreement with specific notices and disclosures. The definition
of “home improvement” includes just about every type of repair, replacement or installation,
including swimming pools. The act applies to work on a single unit in a multi-family
residence (such as a rented apartment or condo) or a duplex, even if the owner doesn’t
reside on the premises. Ignoring HICPA makes the contract void and unenforceable.
Worse, violation of HICPA is automatically a violation of Pennsylvania’s UTPCPL.<o:p></o:p></span></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="mso-bidi-font-weight: bold;"><span style="font-family: times; font-size: medium;">Protect yourself. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts residential agreements
that comply perfectly with Pennsylvania law – and the law in any other state, no
matter the type of work or the site. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.</span><o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-53910580940488299402024-02-22T12:59:00.000-08:002024-02-22T12:59:24.667-08:00Collection Made Easy<p> <span style="font-family: Arial, sans-serif;">Does this sound like any job you’ve had?</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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?<o:p></o:p></span></p>
<p class="MsoNormal"><i><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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.<o:p></o:p></span></i></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">Arizona -- Courts can award "reasonable" attorney fees to the successful
party in any contract dispute. Arizona Revised Statutes § 12-341.01<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">Connecticut -- If a contractor has the right to collect attorney fees, a homeowner
is given the same right. Connecticut General Statutes § 42-150bb.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; mso-bidi-font-weight: bold;">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.<o:p></o:p></span></p>
<p class="MsoNormal"><b style="mso-bidi-font-weight: normal;"><span style="font-family: "Arial",sans-serif;">Appellate Court Decision<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Earlier this week the Indiana Appellate
Court came to Terry’s rescue. <o:p></o:p></span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Parties
to litigation pay their own attorney fees unless their contract says otherwise.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Terry’s
contract provided for an award of fees and interest on the money owed.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A
trial court judge has an obligation to rule on the award of attorney fees.
<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Judges,
not juries, decide what constitutes a reasonable attorney fee.<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">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. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Protect yourself. Write contracts as
professional as your work. No matter the state, no matter the type of job, <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts agreements that can save thousands when a job turns bad. The
<a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-20469668988133591132024-01-21T13:42:00.000-08:002024-01-22T06:19:53.724-08:00More on HomeAdvisor (ANGI)<p><span face="Arial, sans-serif" style="font-size: 12pt;">If you’re a residential contractor, you’ve
probably been solicited by HomeAdvisor, better known as Angi or Angi’s List. HomeAdvisor
was back in the news last week. A federal court certified a class of “service providers”
authorized to bring suit against HomeAdvisor. If you’ve paid HomeAdvisor for annual
membership or leads in the last 20 years, you may have skin in this game. But don’t
expect a windfall from the suit. I’ll explain.</span></p><p><span face="Arial, sans-serif" style="font-size: 12pt;">Angi’s business is connecting contractors
with owners who need home services – “selling leads” in the vernacular. Angi is
a big fish in this business – sales of over $100 million a month – with an advertising
budget to match. Call centers in 6 states cover the nation. Some home improvement
contractors get several calls a month.</span></p><p><span face="Arial, sans-serif" style="font-size: 12pt;">HomeAdvisor’s contract includes an annual
membership fee (typically several hundred dollars), a fee for each lead (up to $100),
a monthly “help desk” charge of $60 and a cancellation charge (as much as 35% of
the annual fee). According to the plaintiffs, HomeAdvisor’s “brand promise” is that
these leads are from legitimate, real homeowners serious about getting work done.
Plaintiffs claim many HomeAdvisor leads had no value: wrong or disconnected phone
numbers, wrong contact information, people who never heard of HomeAdvisor, didn’t
own a home or completed their project months or even years ago.</span></p><p><span face="Arial, sans-serif" style="font-size: 12pt;">According to plaintiffs, HomeAdvisor
knew it was deceiving subscribers:</span></p>
<p class="MsoNormal" style="margin-left: 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">(1)<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">HomeAdvisor's call tracking system could
connect with only 14% to 30% of leads.<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">(2)<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">64% of members tried to stop auto payments
to HomeAdvisor.<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">(3)<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">80% of HomeAdvisor members dropped out
annually.<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">(4)<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">HomeAdvisor's top management admitted
that many leads were “garbage.”<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 0.5in; mso-list: l0 level1 lfo1; text-indent: -0.25in;"><!--[if !supportLists]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: Arial;"><span style="mso-list: Ignore;">(5)<span style="font: 7pt "Times New Roman";">
</span></span></span><!--[endif]--><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">HomeAdvisor retained profile pages of
former members on its website and falsely represented that the member was no longer
in business or not accepting new clients.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Under the first four points (“deceptive
practices”), plaintiffs claimed money damages for fraud, presumably at least a partial
refund. For the fifth point (“misappropriation”), plaintiffs asked for an injunction
to stop the practice but no money damages.<o:p></o:p></span></p><p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The Upshot</span></b></p><p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The court refused to certify a class
for the deceptive practice claims. Fraud statutes in each member’s home-state had
to govern any decision. And fraud statutes vary too much from state to state. Claims
made about HomeAdvisor sales practice might be fraud in some states and not in others.
A class action suit was a poor way to resolve these claims.</span></p><p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The court certified a class for the misappropriation
claims. That litigation will go forward. But there won’t be a payout to former members.
That’s a big win for HomeAdvisor.</span></p><p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Still, HomeAdvisor has been under pressure
to change their sales pitch. Last April, HomeAdvisor reached an agreement with
the Federal Trade Commission to refund over $3 million to 110,372 businesses who
bought HomeAdvisor memberships. The FTC complaint charged HomeAdvisor with making
false, misleading or unsubstantiated claims about the quality and source of their
leads. If you signed a HomeAdvisor contract and have a claim number, use <a href="https://www.homeadvisorclaim.com/File-a-Claim?portalid=0" target="_blank">this link</a> to apply for a refund. The application deadline is February 24, 2024.</span></p><p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">My Advice</span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">HomeAdvisor has plenty of competition: Houzz,
Porch, Thumbtack, Yelp, Bark and Google. Before making any commitment to buy leads, consider the options. No matter the choice, you’ll have to sign the vendor’s “standard
contract”. You can’t write that agreement. But you can draft the contract for any
of your construction projects. Use <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> to draft letter perfect
agreements for any type of work in any state. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-47832239545486431462023-12-09T17:56:00.000-08:002023-12-10T02:27:13.762-08:00Every Contract Requires a Meeting of the Minds<p><span face="Arial, sans-serif" style="font-size: 12pt;">Dr. Julie Clark, a Tennessee veterinarian,
wanted to fix up her home before selling. After a meeting on site, Dr. Clark selected
Jeffrey Givens, a handyman, to do the work.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">According to Dr. Clark, she agreed
to pay Givens $9,775 for a total of four tasks:<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">$8,500 to paint the house, </span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">$400 to remove and repair kitchen
cabinets, </span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">$675 to strip, prime and paint those
cabinets, and </span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">$200 to replace the bathroom
countertops. </span></li></ul><p></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Givens didn’t remember it that way. He
remembered bidding $11,575 for the entire job, including work on the driveway
and garage floor, painting and replacing handrails on the porch. Dr. Clark admitted
asking for a quote on that extra work. But Dr. Clark insisted none of this
extra work was authorized.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Dr. Clark hoped the work would be finished
in two weeks. But she didn’t specify a deadline or completion date. Givens estimated
six-weeks would be needed just for painting the inside of the house. But his
understanding was he could take as much time as necessary to do a good job.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Dr. Clark kept detailed notes on their
conversation and the bid price. But there was no written contract. You know
what’s going to happen next. When the job ran off the rails, Dr. Clark and
Givens launched a 7-year court battle. Here’s how it happened.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Dr. Clark advanced Givens $2,500 to
start work. That was January 2016. Two weeks later, she checked on the job and
was disappointed. Not much progress. Givens assured her he would pick up the pace.
Givens asked for and got another $2,000. <o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Dr. Clark returned to the job site a
week later. Still little progress. According to Dr. Clark, she gave Givens a
deadline. She would hire someone else if he didn’t do better in the coming
week. Two weeks later, she hired a new painter.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Now What?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Dr. Clark demanded return of $3,700,
part of the $4,500 she had paid Givens. When Givens didn’t pay, she filed suit
for breach of an oral contract. In court, Givens claimed he was actually due
more than the $4,500 he had already been paid. The trial court found there was
a “mutual mistake” in an oral contract and entered a $5,075 judgment in favor of
Givens. Both Dr. Clark and Givens appealed.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The appellate court reversed the
trial court decision and remanded the case back to the trial court for another
decision. After an attempt at mediation, the second trial court decision
awarded Givens $4,500, the amount he had already been paid. This time, the
trial court ruled there was no oral contract. Givens could collect for his time
and materials and nothing more. Every contract requires a “meeting of the minds”.
Dr. Clark and Givens had never agreed on the cost, contract terms or the work to
be done. Again, both Dr. Clark and Givens appealed the trial court decision.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Last month (November 2023) the
appellate court affirmed the second trial court decision. “The oral contract
contemplated by the parties was not sufficiently definite to be enforceable
because the parties did not agree on essential terms.”<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">After seven years, including two
trials, mediation and two appellate decisions, the case of Clark v. Givens may
finally be resolved. My advice. It’s easy to avoid legal nightmares like this.
Take a few minutes to write a good, enforceable contract, even for simple jobs.
There’s no better tool for creating a meeting of the minds than <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a>. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p><p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"></span></p><p class="MsoNormal"><span style="font-size: 12pt;"><span style="font-family: helvetica;">Note for Tennessee contractors: Anyone
can work for wages. But Tennessee is one of 31 states that requires a written
contract for home improvement work. Tennessee’s Home Improvement Contractor Act
prohibits oral contracts on home improvement jobs.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-81609462050207358792023-11-29T03:37:00.000-08:002023-11-29T03:37:24.730-08:00Working Without a Written Subcontract<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Do you write contracts for work assigned
to subs? Many prime contractors don’t. And for good reasons, as I’ll explain later.
But first, consider a Kansas case decided last month. Lux Building v. Prof’l Mech.
Contractors.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Lux, the building owner, selected Farah
Construction to turn a former Wichita office building into a mixed-use Leadership
in Energy and Environmental Design (LEED) certified property. Farha subcontracted
with PMC to install the chilled water Daikin VRV HVAC system. Unfortunately, there
were problems. After doing call-backs for several years, PMC refused to do any more
repair work. Lux and Farha had to hire another sub to keep the HVAC system working
– at a cost of over $2 million. Farah sued PMC, claiming breach of their subcontract.
But there was a problem. The PMC subcontract was in Farah’s file. But the subcontract
had never been signed! How did that happen?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Farah and PMC had drafted and re-drafted
the written agreement. It was ready for signature. And PMC started work. But PMC
never signed the final draft of the agreement. Not a problem. For commercial work,
Kansas does not require a signed written agreement. An oral contract is enough.
Except for one little issue.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Under Kansas law, the statute of limitations
on oral contracts is three years. Three years after breach, Kansas courts don’t
permit suit on oral contracts. In the Lux case, more than three years had passed
since the claimed breach. OK. But there’s a five-year statute of limitations on
written contracts. PMC would still be on the hook for contract claims if the agreement
had been signed. But a written agreement requires that all material terms be in
writing, including a signature. The trial court’s ruling: A contract which is partly
in writing and partly oral is an oral contract. The three-year statute applies.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Ted Farah explained why he didn’t always
get written subcontracts:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Depends on the sub and the scope of
work. There are subs I have worked with for 20-plus years and, you know, have relationships
and we often don't have -- we go to work without subcontracts, written subcontracts
on I would say on-not today, but used to on a regular basis. I have worked with
trusted [subcontractors] on small jobs in the past without a written subcontract.
I would never work on a job of this size [the Lux job] with a party with whom I
had not worked before without a written subcontract."<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In essence, Ted admitted it was his mistake.
He should have insisted on a signed contract before PMC started work.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The Kansas appellate court upheld the
trial court decision. Farah Construction’s unsigned agreement was no longer an enforceable
contract. PMC wasn’t liable for the extra $2,000,000 in repair work.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Word to the wise: Don’t get stuck like
Farah Construction. On larger and more complex jobs, get a written and signed agreement
with your subs. It’s easy. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> drafts letter-perfect agreements
for both prime contracts and subcontracts – no matter the state and no matter the
type of work. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-76358464724367003722023-10-30T14:21:00.000-07:002023-11-01T16:36:05.880-07:00Non-disparagement Construction Contracts<p> <span style="font-family: Arial, sans-serif; font-size: 12pt;">Owners start most residential jobs with
a Web search. Yelp and Angi and Thumbtack and a few others offer lists of local
contractors categorized by construction specialty. Some include reviews
volunteered by owners claiming to be former clients. Contractors can buy good
placement and solicit kind words on these bulletin boards. That’s not cheap or
easy and there’s plenty of competition.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Still, good reviews are like a
magnet. They attract potential clients. But one angry customer with access to
the Web can do plenty of damage to your reputation. A single one-star review carries
more weight than a half-dozen five-star reviews. And getting bad reviews
deleted, even fake bad reviews, takes time and effort – even when possible.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Unfavorable comments are called <i>disparagement</i>.
They’re perfectly legal. Defamation is different and isn’t legal. Defamation is
saying or writing something false with intent to do damage. So, what can you do
to keep negative comments off the Web?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Non-disparagement contracts are
common in many business situations. Most agreements that settle a lawsuit include
a non-disparagement clause. Major employers commonly require a
non-disparagement agreement before cutting an employee’s severance check.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In construction, disparagement wasn’t
a high-profile issue until recently. The Web has changed that. Contractors who
live off favorable Web listings recognize the importance of five-star ratings. When
a job runs off the rails, dissatisfaction can run deep. That’s when disparagement
becomes a hot topic. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Any time a business relationship
ends on other than favorable terms, it’s best to have a non-disparagement
agreement. Of course, the easiest time to get that agreement is before
work starts. In construction, that’s when the owner signs the contract. For
example:<o:p></o:p></span></p>
<p class="MsoNormal"><i><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Owner agrees not to disparage contractor
by making any statement that would impugn the character, integrity, reputation
or professionalism of contractor. Any evaluation of contractor provided by owner
for distribution on public media will give contractor a neutral or better
rating. Nothing in this agreement prevents owner from making truthful
statements reasonably necessary to comply with law or regulation.<o:p></o:p></span></i></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Notice that the sample clause above
is unilateral. Only the owner is restricted. The clause works about as well if it
were mutual. Both owner and contractor could agree not to make disparaging comments.
Little harm in that. I don’t know any contractor who tried to destroy an owner’s
business reputation.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Can You Enforce Non-disparagement?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">It depends. First, understand that
every negative comment isn’t disparagement. Suppose an owner posted on some Web
site:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Case 1. “Their work was terrible. I’ll
never call them again.”<o:p></o:p></span></p><p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Case 2: “They left the gate open and
the dog got out.”</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Both statements could be true. And
both are likely to discourage potential clients. But the first is a hatchet job
based on impressions. The second is not an attack on the contractor’s character,
integrity, reputation or professionalism. It’s a legitimate caution. Anyone with
a dog in the back yard might want to know.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Second, nothing can prevent an owner
from responding truthfully to an inquiry from government (such as a building
inspector) or legal process (such as a deposition).<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If you have a non-disparagement
contract and true disparagement (such as Case 1 above), the remedy is money
damages, the value of your lost reputation. Proving that is mostly smoke and
mirrors. But collecting money damages isn’t the purpose of non-disparagement
clauses. Instead, non-disparagement forces an owner to think twice before making
careless accusations.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><a href="https://craftsman-book.com/national-estimator-cloud-2/" target="_blank">Construction Contract Writer</a> makes
it easy to include non-disparagement in your agreements. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is
free.<o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-47779575087277744882023-09-28T10:08:00.000-07:002023-11-01T16:38:38.090-07:00Play by the Rules in Minnesota<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Warranties come in two flavors,
express (written in the contract) and implied, either by court decision or by state
law. Forty-six states and the District of Columbia enforce an “implied”
warranty on nearly every construction project. All states enforce the terms of
any express warranty in the contract.</span></p>
<p class="MsoNormal" style="text-align: left;"><span style="font-family: Arial, sans-serif; font-size: 12pt;">In Minnesota, nearly every
residential contract has to include three paragraphs of express warranty: a one
year guarantee on materials and workmanship, two years on plumbing, electrical
and HVAC and ten years on any "major construction defect". Minnesota
also implies a guarantee that work will comply with the building code. Minnesota’s
Housing Statutory Warranties Act also:</span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Prohibits waiving or disclaiming
these warranties. </span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Covers both the first owner and subsequent
owners for a period of the warranty.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Any contractor who ignores the law
can be assessed a penalty of up to $10,000.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Claims for breach of warranty must
be made in writing within six months of discovery.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Breach of warranty entitles the
owner to sue for repair or collect the cost of repair.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">On home improvement jobs, the
warranty begins running when work is completed. </span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">With that background, consider the case
of Liberte Construction v. Dustin Smith, decided last month by the Minnesota
Court of Appeals.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Wind and hail damaged Dustin Smith’s
Brooklyn Park home, including roofing, siding and gutters. Liberte bid $62,755 to make repairs. The contract included a warranty.
You decide. Does this warranty comply with Minnesota’s Housing Statutory
Warranties Act?<o:p></o:p></span></p>
<p class="MsoNormal"><i><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">LIBERTE DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT AS SPECIFICALLY EXPRESSED HEREIN.
Liberte warrants that for the one-year period from and after the substantial
completion of the Scope of Work, the home improvement shall be free from
defects caused by faulty workmanship or defective materials due to
noncompliance with building standards. This Agreement and warranty shall not be
assigned except by or with the written permission of Liberte.<o:p></o:p></span></i></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Smith signed the agreement and made
a $19,000 initial payment. Liberte started work.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A month into the job, Smith and the
owner of Liberte did a walk-around inspection. Smith found some problems with siding
and roof tiles. A month later, the City of Brooklyn Park did its first
inspection. Cardboard shims under siding corners had to be replaced with proper
shims. A second inspection a month later found no correction. A month later, a
third inspection found proper shims. But a section of siding was loose.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Over ten months after the contract completion
date, a city inspector returned to the property for the fourth time. This inspector
found siding had been installed with drywall screws, not siding screws. One
corner of the siding was loose. The inspector also found more cardboard shims. Again,
the job failed inspection.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Liberte agreed to start repairs that
month and asked for payment upon satisfactory completion. Smith wouldn’t agree
to let Liberte do any more work on his home. Liberte filed to foreclose on its $35,719.18
mechanic's lien and for breach of contract. Smith counterclaimed, citing breaches
of contract, statutory warranty, express warranty, and implied warranty.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">At trial, Smith's expert testified
that work Liberte did was so defective that the only proper repair was to start
over. The trial court (1) awarded $12,000 to Liberte for breach of contract; (2)
denied recovery on the express warranty because the job never got to substantial
completion; (3) awarded Smith $28,697.75 in damages for Liberte's breach of
implied warranty; (4) awarded Smith nothing for breach of an express warranty and
(5) quashed Liberte's mechanic's lien.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">What’s Wrong with this Case?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">I don’t question the result. Smith
got what he paid for. A defective roofing and siding job at a $60,000 discount.
My complaint: Neither Liberte nor Smith played by the rules. Minnesota’s Housing
Statutory Warranties Act lays out a set of procedures designed to avoid
disputes like this. From the court’s report, neither Liberte nor Smith did what
the law requires: (1) Liberte’s contract omitted the required warranty terms.
(2) Smith didn’t give written notice when he discovered defects. (3) Liberte
didn’t inspect those defects within 30 days. (4) The dispute wasn’t referred to
Minnesota’s list of qualified neutrals for resolution. (5) Smith kicked Liberte
off the job before substantial completion. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">My advice: To avoid headaches and unnecessary
expense, follow the rules. That begins with a good contract. The best resource
is <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer.</a> The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-77161611476784550262023-08-27T18:34:00.004-07:002023-11-01T16:39:40.302-07:00Mistake in the Plans<p> <span style="font-size: 12pt;">Most surprises on a construction site
fall into one of three categories:</span></p><p class="MsoNormal"></p><ul style="text-align: left;"><li><span face="Arial, sans-serif" style="font-size: 12pt;"><a href="https://garywmoselle.blogspot.com/2020/09/rock-clause.html" target="_blank">Differing site conditions</a> – hidden or
highly unusual conditions no one would have anticipated.</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"><a href="https://garywmoselle.blogspot.com/2020/08/collect-for-mandated-changes.html" target="_blank">Change in scope of the work</a> – something
discovered later, such as by the inspector.</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Mistake or omission in the plans – something
the designer got wrong or didn’t consider.</span></li></ul><p></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">I’ve covered differing site conditions
and changes in the scope of work elsewhere. Mistake in the plans is different.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Earlier this month, a perfect example
came across my desk. When it came time to connect the building sewer line to the
sewer main, the plumbing sub discovered two mistakes -- both the diameter and location
of the sewer main were wrong on the site plan. As with every surprise, the question
was, “Who pays?”</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Of course, construction contractors have
to follow the plans. But it’s not that simple. Courts usually put it this way: A
contractor has an implied duty to give notice when something in the plans either
isn’t clear or seems defective. If the plans or specs seem inconsistent or wrong,
take it up with the designer, engineer and owner before work starts.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">But that wasn’t the issue with the plumbing
contract on my desk. Nothing on the site plan was either missing or obviously wrong.
Work was nearly done when the mistake was discovered. The civil engineer either
made an error or didn’t bother to check district records.</span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">What Should the Contractor Do?</span></b></p><ol start="1" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="mso-list: l8 level1 lfo11;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Make
the connection. Settle up on costs later.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l8 level1 lfo11;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Complete
the job as shown in the plans. Leave the sewer line connected to nothing.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l8 level1 lfo11;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Stop
work until the owner and prime contractor write a change order.<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Before you answer, consider a case from
the Wyoming Supreme Court (Hogan v. Postin).</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The millwork sub, Hogan, agreed to make
and install windows for restoration of the historic <a href="https://kingfm.com/take-a-virtual-tour-of-cheyennes-historic-tivoli-building-photo-gallery/" target="_blank">Tivoli Building</a> in downtown
Cheyenne. Postin was the architect and supervised Hogan’s work. When Hogan got started,
he discovered a problem. The ceiling height on the plans wasn’t the same as the
actual ceiling height. Hogan notified Postin of the mistake in his plans. Postin
told Hogan to make the windows the size shown on the plans. To do that, the sill
height had to be raised to 39 inches, not 27 inches as shown on the plans. Hogan
built the storefront in his shop exactly as shown on the plans.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">When Hogan installed the windows, Postin
had a beef. He didn’t like the sill height. Postin wanted the sill height one foot
lower (27 inches). Hogan agreed to re-do the windows and offered to keep track of
the extra time and materials. The general contractor agreed that a 39” sill height
was wrong and told Hogan to make the change. When Hogan tried to collect for the
extra work, both the City of Cheyenne and the general contractor had a defense.
There was no written change order, as required by both the prime and subcontracts.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">So Hogan sued the architect, Postin.
His plans were wrong. The trial court found in favor of Hogan, ruling the architect
had to pay. Postin appealed. The district court reversed, ruling the architect was
not personally liable for his mistake. Hogan appealed to the Wyoming Supreme Court.
A majority of the supreme court affirmed the district court’s decision. Postin was
not personally liable for his mistake in the plans. According to the majority, Postin
was speaking for the City when he told Hogan to re-do the windows. As an agent of
the City, Postin was not personally liable for a commitment made to benefit the
City. But Hogan couldn’t collect from the City. There was no written change order.
Pure Catch 22.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">I prefer the dissent by Justices Rooney
and Cardine. In directing Hogan to do the extra work, Postin waived the requirement
for a written change order. Let Hogan collect from the City.</span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">My Point</span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Mistakes in the plans can be a minefield.
Tread carefully. The best protection is a well-written contract. In my sewer connection
case, the plumber had an agreement drafted with <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a>, including plenty
of good language covering mistakes .Problem solved.<o:p></o:p></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-83240797650423402712023-07-25T15:30:00.004-07:002023-11-01T16:41:59.255-07:00Get Reimbursed for Your Attorney Fees<p><span face="Arial, sans-serif" style="font-size: 12pt;">Dianne Lee bought a new home in Contra
Costs County, just east of San Francisco Bay. Her new house didn’t have a pool.
And she wanted some exterior improvements. Dianne selected David Cardiff of Advantage
Pools Bay Area to do the work: a pool and spa for $88,400, a pavilion with outdoor
kitchen, fireplace and landscaping for $143,000.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">It didn’t go well. After a dispute, Cardiff
stopped work and walked off the job.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Dianne filed suit, claiming Cardiff’s
work was defective. The trial court rejected most of Dianne's claims about the pool
but agreed with some of her claims about the pavilion and landscaping. The court
also agreed that Cardiff had violated state law by hiring workers as unlicensed
independent contractors and not employees. The court ordered Cardiff to refund $238,470
plus contract and tort damages of $236,634. Of that, $35,000 was for defects in
the pool.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Dianne won the case. But the court didn’t
award reimbursement of her attorney fees. That was a surprise. California Business
and Professions Code § 7168 authorizes an award of attorney fees to the “prevailing
party” on swimming pool claims. Claims on other types of construction don’t qualify
for an award of attorney fees -- absent specific language in the contract. Dianne’s
contract with Cardiff didn’t say anything about attorney fees.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Dianne appealed the trial court decision,
asking for an award of attorney fees. The appellate court had to decide:</span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Was Dianne’s suit a swimming pool claim?</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Was she the prevailing party? </span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Should the trial court have awarded Dianne
her attorney fees?</span></li></ul><p></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The decision (Lee v. Cardiff, July 13,
2023): Reimbursement of attorney fees under § 7168 applies only to pools. Not spas.
And not to Dianne’s other home improvements. Moreover, Dianne was not the “prevailing
party” on the pool claim. True, pool plaster, tile and coping were defective. The
trial court awarded Dianne $35,000 for that. But Cardiff had already offered to
fix those problems before Dianne filed suit. So, on the pool issue, Dianne wasn’t
the “prevailing party”. Her legal fees would not be reimbursed.</span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">What About Your Contracts?</span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Should your contracts include the statement:
<i>Any judgment enforcing terms of this agreement shall include an award of court
costs and reasonable attorney's fees to the successful party.</i><o:p></o:p></span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">A clause like this raises the stakes.
An owner with frivolous claims or weak defenses has an incentive to settle. But
law on awards of attorney fees is different in every state. For example:</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">California -- The right to collect attorney's
fees is reciprocal. If a contractor can collect attorney's fees after winning a
contract dispute, an owner has the same right. California Civil Code § 1717.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Arizona -- Courts can award "reasonable"
attorney's fees to the successful party in any contract dispute. Arizona Revised
Statutes </span>§ <span face="Arial, sans-serif" style="font-size: 12pt;">12-341.01</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Connecticut -- If a contractor has the
right to collect attorney’s fees, a home owner is given the same right. Connecticut
General Statutes § 42-150bb.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Georgia – Better to leave attorney’s
fees out of the contract. Official Code of Georgia Annotated § 13-11-8 gives contractors
the right to collect attorney's fees if the dispute is over delinquent payment.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Most states won't award attorney's fees if the contract omits that subject. All states will enforce a contract clause
awarding attorney’s fees to the prevailing party. But some states will enforce a one-sided
clause – an award of attorney’s fees only if suit is necessary to collect what’s
due. That always favors the contractor. </span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">To see what your state allows, have a
look at <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a>. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-75418272727470235842023-06-26T15:01:00.002-07:002023-11-01T17:07:57.452-07:00Lame Contract is Worse Than No Contract at All<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">When a job goes bad, you better have
a good contract. That’s a point emphasized many times on these pages.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">But a New York case decided last month
offers an interesting twist on this theme. When a Syracuse, NY job went south, the
contractor claimed the agreement he drafted was void and unenforceable. Let’s see
how a New York appellate court handled that. Hint: It cost the contractor plenty.
The case is White Knight Construction v. Haugh.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Holly Anne Haugh of Madison County, NY
wanted a new custom home. Kenneth Kovalewski of White Knight Construction agreed
to build the home Holly Anne wanted. Kenny drafted the agreement, including a "New
Home Cost Breakdown" listing both projected and actual expenses. The contract
price was $93,287.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> But it wasn’t that simple. According
to the court, Holly Anne and Kenny developed a “romantic relationship” before breaking
ground.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">This blog is about good and bad construction
contracts. I’ll leave other issues to your judgment.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Well before final completion, Holly Anne’s
romantic relationship with Kenny had cooled. But White Knight must have done considerably
more work for Holly Anne than the contract required – without a change order. White
Knight collected the contract price. But Kenny felt White Knight was entitled to
more, lots more. White Knight filed a mechanic's lien for an extra $317,128 and
sued to foreclose the lien.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">At trial, White Knight had a problem
– the original contract. With no contract or only an oral agreement, the $317,128
lien might be valid. With a good contract, White Knight could collect only the contract
price. To collect on the lien, counsel for White Knight had to show the written
agreement was void.</span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">No Problem</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Under New York General Business Law §
771, every home improvement contract has to include specific notices and disclosures.
Kenny’s contract didn’t cite a start date or a completion date and omitted several
other notices required by statute. Without these, White Knight could not recover
for breach of contract. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">But noncompliance with § 771 does not
necessarily render the contract void. The statute bars a contractor from collecting
under a defective agreement but doesn’t prevent a homeowner from recovery against
the contractor.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">According to the appellate court:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Given the context of the case at bar,
it is crucial to recognize that General Business Law § 771 is a consumer protection
statute designed to protect the homeowner. To allow a contractor to draft a noncompliant
contract and then use its noncompliance to invalidate the contract so as to entitle
him or her to relief that would otherwise be precluded by a valid contract would
incentivize contractors to disregard the statute, thereby thwarting the intent of
the statute.”<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">In other words, an owner may be able
to enforce a lame agreement even if the contractor can’t. The appellate court dismissed
the case and vacated the mechanic's lien. White Knight was out $317,128.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Contractor Beware<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Thirty-one states and the District of
Columbia have consumer protection statutes that require written agreements on residential
jobs: 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 a written notice or disclosure before work starts:
AK, AL, FL, GA, ID, KS, MN, MO, MT, OK, SD and WA.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">If you do work in any of these states,
don’t make White Knight’s mistake. A bad construction contract may be worse than
no contract at all. My advice: Use only contracts that comply precisely with state
law. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> drafts letter-perfect agreements no matter the
site and no matter the type of job. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-26114109202337917272023-05-11T18:14:00.001-07:002023-11-01T17:09:45.976-07:00Storm Damage Wipe-out in Nebraska<p>I<span face="Arial, sans-serif" style="font-size: 12pt;">nsurance restoration contracting
tends to be good work. No matter the season, no matter the economy, pipes break,
kitchens burn, trees fall over, roofing gets blown away. With the insurance carrier
funding repairs, payment is virtually guaranteed – or should be.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">If you agree with that statement,
keep reading. There’s more to understand.</span><span face="Arial, sans-serif" style="font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Twenty states (AL, AZ, CO, GA, IL,
IN, KY, LA, MI, MO, MS, NE, NY, OK, SC, SD, TN, TX, UT, WI, WV) now set
standards for insured repair contracts. These laws vary. But all require a very
specific notice in the contract. The owner has at least a few days to cancel after
any part of the insurance claim is denied. The contractor can not offer to
rebate the deductible. And the contractor is prohibited from acting as the
adjuster -- advocating for the owner, setting the scope of work.<o:p></o:p></span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Another difference: Property loss
jobs have many more moving parts. The homeowner, the insurance adjuster, city
and county officials if it’s a fire loss. If the site is a crime scene, law
enforcement will be involved. And everyone comes with their own lawyer: the
insurance company, the real estate company, the driver who hit the house, the
owner, the city, the building department. Any time lawyers are hovering, you
better have the best possible contract.</span><span face="Arial, sans-serif" style="font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">A case decided earlier this year makes
the point. RAD Services v. State Farm. <o:p></o:p></span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;"><b>Here’s What Happened</b></span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Storms damaged twenty Nebraska homes,
all insured by State Farm. State Farm's policy provides two payments:</span></p><p class="MsoNormal"></p><ol style="text-align: left;"><li><span face="Arial, sans-serif" style="font-size: 12pt;">Until repair or replacement is
complete, State Farm pays only Actual Cash Value of the property before it was
lost or damaged. ACV is the depreciated value based on age and condition. That’s like a tire warranty. If your 50,000 mile tires give
out at 40,000 miles, you get a 20% credit on new tires.</span></li><li><span face="Arial, sans-serif" style="font-size: 12pt;">When repair or replacement is complete, State
Farm pays the cost to remediate damage less what was already paid as ACV. Replacement cost is usually far more that ACV. The owner gets a new roof to replace a roof many years old. That’s called “betterment”
in insurance jargon. Not all home insurance policies cover betterment. </span></li></ol><p></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">State Farm made the first payment, value
at the time of loss. When work was done, the contractor filed a claim for the
second installment -- and discovered an expensive mistake.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">There were no construction contracts. Instead, each of
the 20 owners had assigned their claim rights to their contractor. Worse, the assignments
didn’t show any contract price or scope of work.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">That makes perfect sense – sort of. The
scope of work should be whatever State Farm was willing to cover. The owner had
to pay the deductible. The contractor and State Farm would settle up on the
rest. No construction contract needed.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The court didn’t like that. In the
opinion of the court, an assignment without an agreement on either scope of
work or the price isn’t an assignment at all. As a matter of law, the 20 assignments
were too vague to be enforced. Case closed. The contractor didn’t collect the
second payment. Wipe-out.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">If you do insurance repair work, you
probably don’t agree. Property loss adjusters are very good at settling claims –
both the scope of work and the price. Insurance carriers, owners and
contractors need flexibility to negotiate settlements once scope of work is
known. But until courts find a way to agree, you better have a good contract,
especially on property loss jobs.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The best tool I know for drafting
construction contracts is <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer.</a> That’s true no matter the
type of job or the site. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">If you’re new to property loss work,
I can recommend another reference, <a href="https://craftsman-book.com/insurance-restoration-contracting-startup-to-success-book-ebook-pdf" target="_blank">Insurance Restoration Contracting</a> by Paul
Bianchina. Now available as an E-book from Craftsman.</span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-23547958366472053942023-04-27T08:58:00.006-07:002023-11-01T17:11:19.977-07:00Arbitration Road Blocks and Detours<p><span face="Arial, sans-serif" style="font-size: 12pt;">When you sign a contract to buy a car
or a cellphone, or apply for a credit card, you’re probably agreeing to arbitrate
disputes. Why? Because lawyers who write these contracts agree. Arbitration saves
time and money. And sellers usually win in arbitration.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">So why doesn’t every construction contract
require arbitration? Easy question. An agreement to arbitrate is an agreement not
to litigate – sue in a court of law. That’s giving up an important right.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">There are two broad currents running
here -- in opposite directions. One limits access to arbitration. Another encourages arbitration. I’ll explain.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The current running against arbitration
flows through state legislatures. Eleven states (CA, IL, MD, MA, MO, NE, OR, PA,
SC, TX and VT) void any arbitration clause in a construction contract if the agreement
omits certain disclosures. For example, specific language has to be in a certain
location or in bold type or in caps or be initialed by the owner. Make a mistake
in the contract and your dispute is headed to court. Why all these restrictions?
Simple. It’s consumer protection law. No one should give up the right to sue by
accident.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">A second current runs in the opposite
direction. Judges favor arbitration. It reduces their workload. Any hint in the
contract that the parties agreed to arbitrate will get a sympathetic hearing in
court.</span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Case on Point</span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Here’s an example, the recent California
case of Leeor Builders, Inc. v. Forehand. You decide if the court got it right.<o:p></o:p></span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Leeor Builders agreed to improve LeRoy
and Elizabeth Forehand’s southern California home. Near the bottom of the first
page of the contract was a box with the text:</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">"ARBITRATION OWNER: Initial this
box if you agree to arbitration.” The box was large enough to fit only one set of
initials. In the box was written "EF" for Elizabeth Forehand.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The arbitration notice required by California
law (in 10-point bold type) was on another contract page:</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">WE HAVE READ AND UNDERSTAND THE FOREGOING
AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION
OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Initials of “Direct Contractor” and Elizabeth
were beside that notice. LeRoy’s initials are missing. He signed the contract but never initialed the agreement
to arbitrate.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Below the space for initials, the contract
provided, "in the event that Contractor and Owner have not each initialed the
arbitration provision above, then it shall be conclusively agreed without a subsequent
written agreement by all parties, that neither party agrees to arbitrate and the
arbitration of disputes provision shall not be deemed to be a part of this agreement."</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">No doubt about who the “Owner” is, both
LeRoy and Elizabeth Forehand. If Elizabeth agreed to arbitrate and LeRoy didn’t,
then the contract did not require arbitration.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">You can guess what came next. The Forehand
job had problems. Eventually LeRoy brought a demand for arbitration. Leeor Builders
objected, insisting the arbitration agreement was invalid. The reason: LeRoy was
an owner, just like Elizabeth. Le Roy never initialed the arbitration clause required
by California law. When the arbitrator refused to halt the proceeding, Leeor filed
a complaint in superior court, asking for an injunction to stop arbitration.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">This wasn’t a trivial issue. The arbitrator’s
award came to $902,749. Now the court had to decide, does California law require
initials of all owners. Or is one owner enough. The court’s decision: Elizabeth's
initials were enough. The arbitrator’s award was confirmed. Hard cases make bad law.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Now you see the current running two ways.
State law throws up road blocks to arbitration. State courts favor arbitration.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">This time, I think the court got it right.
But next time? Suppose one owner really didn’t want to arbitrate and refused to
initial the contract. What then? In my opinion, the California legislature wanted
to protect all owners. Any owner should be able to object to arbitration. Just don’t
initial the arbitration notice.</span></p>
<p class="MsoNormal"><b><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">If You Decide to Arbitrate</span></b></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Don’t take a chance. Get the details
right. Comply exactly with the laws of your state.<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The contract has to be clear, “owner
and contractor will submit all disputes related to this job to binding arbitration.”</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Identify the arbitrator. AAA, CDRS and
JAMS provide arbitration services nationwide. Disputes under $10,000 can usually
be settled by email or video conference.</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Identify the arbitration rules. AAA,
CDRS and JAMS rules are considered both fair and comprehensive.</span></li><li><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Make the arbitrator’s decision final.
The words are, “Judgment on the award may be entered in any court having jurisdiction.”</span></li></ul><p></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;"><a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> will help
get it right, no matter the type of work or job site. The <a href="https://craftsman-book.com/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-76210046459442246412023-03-24T10:43:00.000-07:002023-11-01T17:13:43.319-07:00Good Ways to Stay on Schedule<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Have you ever had the electrician show
up to rough-in the wiring before ceiling joists were installed? Have you ever had
to keep the plumber waiting while relocating a partition wall? Whose fault is it
when the inspector shows up for final inspection before the electricians are finished?</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Coordination and scheduling are important
tasks for every contractor. On the smallest projects, one person can keep track
of nearly everything that has to happen. On a larger project, a calendar or checklist
may be all that’s needed to remind you of important dates. As work becomes more
complex and timing becomes more critical, someone has to begin laying out work schedules
and charting progress.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Every task completed is a link in the
chain that follows some prior link and precedes a later link. Scheduling is just
making sure that each link falls neatly in sequence so work can go from start to
finish by the most direct, most profitable route possible.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A schedule is a list of tasks to be executed
in order – from top to bottom. Scheduling with pencil and paper works fine – until
something changes. Then you need a good eraser. Some contractors schedule with a
chalkboard or a grease pencil. That’s OK too. But you’ll need a big board to handle
a large project. Years ago, most construction schedules were made with bar charts
and arrow diagrams. Today, most scheduling is done with a computer. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Any scheduling tool you select has to
be flexible. Schedules change. Revising the schedule should be a simple process.
If the project lasts more than a month, you’ll want to review the schedule at least
weekly. Identify both work completed on time and work not completed as planned.
Consider ways to get back on schedule without increasing costs and without sacrificing
quality. Then revise the schedule based on work yet to be done and what you’ve learned
about performance of the trade contractors assigned. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A good schedule may be a contractor’s
most useful tool. It makes prompt completion more likely and reduces idle or wasted
time. A good schedule should also reduce or eliminate resource crises: essential
labor or materials not on site when needed.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><b>What’s in Your Schedule?</b><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">You’ve probably heard the terms CPM (critical
path method) and PERT (Program Evaluation and Review Technique). They’re the same
in many respects and can be referred to collectively as echeloning tools. Each identifies
when a task can begin, how long it should take and when it should end. Detailed
schedules show both a sequence of trades on the job and the sequence of tasks to
be performed by each trade. With a detailed schedule, you can set both delivery
times for materials and arrival times for trade contractors.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Every project schedule begins with a
list of work elements (trades). Assemble those elements into a logical sequence.
Excavation has to come before foundations, wall construction has to precede roof
framing, subbase and base preparation come before paving. Identify the first day
of work as Day One. Every day thereafter is assigned a number in sequence.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Of course, you don’t have to wait until
every element is complete before beginning the next element. For example, plumbing
and wiring rough-in can begin before the last roofing tile is laid.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Be especially sensitive to durations
that don’t involve construction trades. For example, it takes time to get permits.
Inspections aren’t always completed on the day scheduled. And, of course, nearly
every job gets delayed by weather at one time or another. Delay is nearly inevitable
– and can be expensive. That’s why a good schedule includes at least some float,
the time a particular task can be delayed without delaying the entire project.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Even with the best schedule, delay can
plague nearly any significant construction project. Protect yourself. Be sure your
contracts cut extra slack when you need more time. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> can resolve disputes in your favor any time there’s a schedule issue. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version </a>is free.<o:p></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-85080280217452563612023-02-25T15:06:00.000-08:002023-11-01T17:15:24.137-07:00What's this Going to Cost?<p> <span style="font-family: Arial, sans-serif; font-size: 12pt;">How do you answer when an owner
asks about cost?</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Quote a price that’s higher than
expected and the job may not happen. Quote a price that’s too low and your
casual comment could end up being quoted in a legal brief. Refuse to quote any
price and you’ll be considered devious or uncooperative. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">So, what should you say when an
owner asks about cost? <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">My advice: Welcome the question. It’s
an invitation to start asking questions yourself. For example:<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“That depends a lot on what you
decide. It’s a little too early to nail down a price. But I’m sure we can live
within your budget. What figure do you have in mind?”</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“I’ve seen jobs like this go for
between $X and $Y. Of course, the cost could be less or more, depending on
choices you make later. A lot depends on finish materials and when you want to
get started. When I know more about the job, I’ll give you a written estimate.”
</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“I don’t want to quote a number off
the top of my head. But I have some good references back at the office. I’ll
work up numbers based on those figures and get back to you tomorrow with
typical square foot costs.”</span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The cost question comes with an
obvious advantage. It’s an open invitation to come back later with an answer. But
don’t leave without qualifying your prospect. Too many on-site meetings are a
waste of time. I call it a prayer meeting when:<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The owner is undercapitalized or
isn’t a good prospect for potential lenders.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Code or zoning restrictions make the
work impractical.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The owner isn’t being realistic
about the cost or what can be built.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The perceived need is based on
assumptions that aren’t realistic.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The owner has been turned down by
several builders or lenders.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Your prospect may not have authority
to contract for the project as conceived.</span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">To be sure you’re not in a prayer
meeting, ask some questions yourself:<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Have you talked to anyone about
financing?” Obviously, financing is a key question. Every owner wants to
improve their property. Not every owner can qualify for the financing needed to
carry a project.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Do you have a budget in mind?” This
is another key question, the beginning of price negotiations.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“When would you like to see this job
finished?” Identify unrealistic expectations as soon as possible.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Have you talked to any other
builder [architect, engineer, or consultant] about this job?” If so, ask, “What
did they say?” </span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“Have you considered . . . ?” Try to
identify zoning problems, potential issues with neighbors, design review
committees, setback requirements or anything else that could halt the project.</span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If you plan to come back later with
a proposal (and contract), be sure to collect job details:<o:p></o:p></span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Name and address of each property
owner</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Construction site – either street
address or legal description (for lien purposes)</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Phone numbers –day phone and cell</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Email address</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A good concept of what the job
requires – including rough dimensions and square footage Potential access
issues, the availability of water, electric, sanitary facilities, etc.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Who will pull the permit?</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Utility companies that will be
involved.</span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">When you come back with a price,
bring a contract ready for signature. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> drafts
letter-perfect agreements for any residential or commercial project in any state.
The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-20884385321457329392023-01-19T16:40:00.000-08:002023-11-01T17:16:21.772-07:00Court Cripples Ohio’s Home Construction Act<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Ohio’s Home Construction Service
Suppliers Act ("HCSSA") has been law since 2012. Apparently the law has
never been interpreted or enforced by an appellate court -- until last month. That’s
when Ohio’s Eleventh District Court of Appeals decided the case of Beder v.
Cerha Kitchen & Bath Design Studio, LLC.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">By way of background: Ohio’s HCSSA is
a consumer protection statute. Specific acts are defined as deceptive. Changes
to the contract price have to meet reasonable standards. Owners are entitled to
notices and disclosures. Anyone injured by deceptive acts has a statutory remedy.
Last month, the Act finally got its first test in court.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">It didn’t go well.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Ilia Beder and Raimonda Beder filed
suit under HCSSA after their home remodeling project fell into acrimony. The
Beders claimed their contractor, Cerha, unreasonably delayed the work,
performed defective work, was abusive and was not registered with the city of
Mentor. At trial, both the Beders and Cerha claimed breach of contract.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Major irony: The trial court ruled
that Ohio’s HCSSA applied to the Beder job. So far, so good. And then the court
awarded the contractor damages for breach of contract. The Beders got nothing. Scratch
Ohio’s stab at protecting home owners. But keep reading. It gets worse.</span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Remodeling Isn’t Construction</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The Beder’s job was remodeling. No
doubt about that. According to Appellate Court Presiding Judge Eklund, HCSSA applies
only to new construction, not remodeling. His decision hinged on the meaning of
“construction”. Judge Eklund relied on a definition of “construction” adopted nearly
30 years ago by the Ohio Supreme Court. "Construction" is the
creation of something new, as distinguished from the repair or improvement of
something already existing.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">That’s going to be news to thousands
of Ohio home improvement specialists – men and women who considered themselves
construction contractors. Not so, according to Judge Eklund. They’re not in the
construction industry.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">I prefer the dissenting opinion by Judge
Westcott Rice. True, HCSSA does not define “construction”. But any modern understanding
of “construction” in the residential context has to include home improvement.
Moreover, part of the law is nonsense if remodeling isn’t considered
construction. Section 4722.01(B) of the act makes HCSSA applicable to work on a
single apartment even if the structure has many apartments. Work on that single
unit is almost certainly remodeling. Under HCSSA, it's also construction.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Today, most new residential
construction is managed by merchant builders or spec builders. Custom-built
homes are the exception in most communities. Judge Eklund’s ruling would apply
HCSSA exclusively to custom-built homes, a small and dwindling segment of the
housing market.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Even more persuasive: Most states
have adopted consumer protection statutes to help owners planning home improvements.
In Ohio, that was HCSSA. The Beder decision leaves Ohio in the minority of
states without a home improvement statute.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">I don’t expect this situation to
last for long. Someone in the Ohio legislature is reading the Beder decision
right now and shaking their head in disbelief. Expect the Ohio legislature to
clean up language in HCSSA at their next opportunity.</span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-28181146990383978132022-12-18T16:57:00.000-08:002023-11-01T17:17:58.684-07:00Rocket Lawyer Contract in Maryland<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Laura and Daniel Holland wanted a custom
home built on their Pocomoke City, Maryland dairy farm. They selected an architect
to draw plans for a 3,912 SF residence. After several rounds of negotiations and
changes, Don Littleton of Wicked Professional Services Inc. (WPS) agreed to build
the house for </span><span style="font-size: medium;">$700,250<span style="font-family: Arial, sans-serif;">.</span></span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span><span style="font-family: Arial, sans-serif; font-size: 12pt;">Don emailed Ms. Holland a construction contract
created from a template on RocketLawyer.com. The Hollands signed the agreement.
Work was to be completed by May 16, 2018.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If you know anything about Maryland construction
contracts, you can see trouble coming.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">To comply with Maryland’s Custom Home
Protection Act (MCHPA), the agreement needs a long list of notices and disclosures:</span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A draw schedule signed by the buyer and
builder;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A list of the primary subs;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A notice that all changes have to be
documented with change orders;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A statement in bold type disclosing whether
the builder is covered by Maryland’s home warranty program;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A notice that the builder has to disclose
the names of subs and suppliers after receiving each progress payment;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A notice that the builder is required
to provide waivers of lien from all applicable subs and suppliers after final payment
to each sub and supplier;</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A notice about buyer's risk under Maryland’s
mechanics' lien laws.</span></li></ul><p></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Omitting any of these notices in a Maryland
custom home contract is an “unfair or deceptive trade practice" and makes the
builder liable for losses due to the violation – including attorney fees. In the
words of the trial court, the WPS contract based on a Rocket Lawyer template was
"legally deficient and woefully inadequate."</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The court evaluated the agreement as
a "standard general contractor contract" as "accepted in the industry
with a management fee tacked onto the end." The agreement was "not sufficient
to establish the contract in the nature of a construction management or a cost-plus
contract as is generally recognized." The management fee was "inconsistent
with a general contractor arrangement generally and with the subject contract specifically"
and was poorly defined. The contract did not specify when the fee was earned or
how it would be paid. The court ruled Don’s addition covering the management fee
to be vague and unenforceable.</span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Now What?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If the job had gone as planned, WPS might
have earned their $58,125 fee. But the job had problems.<span style="mso-spacerun: yes;"> </span>More than a year after scheduled completion, work
still wasn’t done. Worse, the job was nearly $400,000 over budget. Project cost
had ballooned from $700,250 to $1,075,102.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">As pointed out many times in this space,
when the job goes bad, you better have a good contract. WPS didn’t. The Maryland
trial court denied WPS’ claim for $352,647 in damages. WPS would not be reimbursed
for $218,347 they had paid to subs and suppliers on the Holland job. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Instead, the trial court awarded the
Hollands $58,066 in damages, principally the cost to complete work. Last month an
appellate court affirmed the award of the trial court but remanded the case to the
trial court for a ruling on attorney fees. For any violation of the MCHPA, the Hollands
can collect reasonable attorney fees.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><b>Notice This</b></span></p><p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In the words of the trial
judge, “this was an unusual construction contract dispute because there were no
complaints about the quality of the workmanship.” The problem was the contract –
a bungled attempt to blend elements of cost-plus and fixed price agreements.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Don’t make the same mistake. Start every
job with a contract as professional as the work you plan. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> drafts letter-perfect contracts for any job and any site – whether fixed
price or cost-plus. The trial version is <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">free</a>.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-40151669710019513112022-11-30T09:34:00.000-08:002023-11-01T17:19:29.003-07:00A Warning for New York Contractors<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Write a bad contract for New York home
improvement work and you may end up with less than nothing. The case of Goodspeed
v. Aiello proves the point.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">A leaky radiator damaged Maria Goodspeed’s
New York home earlier this year. Wallboard and flooring had to be removed and replaced.
Michael Aiello of A & B flooring agreed to do the work. Michael wrote up the
contract on a small sheet of notebook paper:</span></p>
<p class="MsoNormal"><i><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">I Michael Aiello agree to do all repairs
caused by the radiator leaking. Work includes sheet rock, paint, flooring, demo
& removal. A deposit of $6,200 will be recieved [sic] on 1-27-22. the balance
of 2.800 is due upon completion. Any additional cost must be disgussed [sic] and
agreed to by both parties.</span></i></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">The page was signed by both Maria and
Michael. Maria paid A & B the $6,200 on February 15, 2022.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Two weeks later, work had not started.
But Maria’s insurance carrier, Allstate, was now involved. Maria gave Allstate’s
adjuster a statement:</span></p>
<p class="MsoNormal"><i><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">On 3/1/22 an invoice was turned into
Allstate as an additional expense to original job that was being done for Maria
Goodspeed. Invoice was agreed to and approved by myself, homeowner and insurance
company. The additional invoice was for a total of $8,050.00 The total amount owed
to A & B Flooring to date is $11,000.</span></i></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">A & B scheduled work for the middle
of March. By April 1, 2022, demolition was well under way. But Mike wanted another
advance to continue work. Maria asked to see receipts for materials purchased for
her job. When Mike wouldn’t provide those receipts, Maria gave up on A & B Flooring.
She filed suit on April 7 to recover her $6,200 advance.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">You decide.</span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">What
portion of the deposit was A & B Flooring entitled to keep for work on
the Goodspeed job? They had done plenty. In Maria’s words, they ”</span> <span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">gutted our house . . . " <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Did
either of the two written documents that describe the Goodspeed job qualify
as a New York home improvement contract?<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Judge Bannister
at Little Falls (NY) City Court had no trouble with either question.</span> <span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Payment for Partial Completion?</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">“The court will not allow the Defendant
to draw the Claimant and the court into a controversy concerning the amount and
value of the benefits received when the value of those services left her with a
demolished home interior and a contractor asking for things outside the scope of
their contract. The Claimant gave the Defendant $6,200 as an initial payment. This
Court finds that she is entitled to a return of the initial payment.”<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A Valid New York Contract?</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The General Business Law section 771
requires notices and disclosures in home improvement contracts. The contract offered
by A & B included none of these:<o:p></o:p></span></p>
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Estimated
dates when the work will begin and end, any contingencies that could change
those dates, and whether a completion date is the essence of the contract.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Description
of the work to be performed, the materials to be provided to the owner . .
. and the agreed upon consideration for the work and materials.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Notice
that subcontractors and suppliers have the right to claim a lien on the property.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Notice
that the contractor is required to either deposit all advances in an escrow
account or post a bond.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Schedule
of progress payments showing the amount due at each stage of completion.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Notice
of the three-day right to cancel.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo2;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Disclosure
of the contractor’s property and casualty insurance coverage.<o:p></o:p></span></li>
</ul>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">New York law imposes a civil penalty
of up to $2,500 for writing a bad home improvement contract. Since this was a first
offense, Judge Bannister didn’t impose the civil penalty, but with a warning. “However,
if there are future sustained violations in the future, this Defendant is on notice
that a civil penalty will be considered.”</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">It’s easy to draft letter-perfect construction
contracts for any state and for any type of job. Get <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer.</a>
The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-37490661188897522812022-10-21T11:03:00.000-07:002023-11-01T17:21:05.030-07:00Bad Contract, Good Result<p><span style="font-family: inherit; font-size: medium;">Frank Salame owns a home in Pomona,
California. Eleven months out of the year, Frank works in Lebanon as an engineer
on building projects. When no one is home in Pomona, Frank has a friend, Antoinette
Auon, look after his house.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">While Frank was in Lebanon, neighbors
noticed a liquid leaking from under the garage door. Turns out, a water filter under
the kitchen sink had sprung a leak. By the time Frank got word of what had happened,
water had seeped into kitchen cabinets, flooring, down walls and into the ceiling
of the garage below. Mold was blooming everywhere.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">Because he was in Lebanon, Frank
asked his friend, Antoinette, to "take care of" the problem. She did,
signing contracts with Star Restoration to put Frank’s home back in livable condition.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">Star Restoration got to work.
A plumber removed the leaking water filter. A mold expert assessed what had to go.
When contaminated materials had been removed, restoration started: framing, sheetrock,
plaster, painting, tile floor in the kitchen, kitchen cabinets, new countertop and
sink.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">Meanwhile, Frank filed a claim
with his insurance carrier, giving Antoinette "full power of attorney to handle"
his claim. Frank collected $28,000 from the insurance company. But when Star Restoration
sent their invoice for $42,360, Frank refused to pay. Instead, he offered to settle
for $28,000. Star refused the offer and filed suit.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">You decide. Did Frank owe the
full $42,360?</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">At trial, Star Restoration had
some problems.</span></p>
<p class="MsoNormal"><b><span style="font-family: inherit; font-size: medium;">Frank Never Signed the Contract</span></b></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">But the court decided Antoinette
was acting as Frank’s agent when she signed. Remember that Frank had given Antoinette
“full power of attorney” to handle his claim with the insurance carrier. Plus, at
one point, Frank gave Star instructions to "finish the job". The court
concluded Antoinette had signed with Frank’s consent.<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family: inherit; font-size: medium;">The Star Restoration Contract
Was Lame</span></b></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">To be valid, California home improvement
contracts need 18 distinct notices and disclosures: start date, end date, the contract
price in dollars and cents, a description of the work and so on. Star Restoration’s
contract had none of that. Contracts that don’t comply with state law are presumed
void. That’s true anywhere you do business. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">If the contract was void, Frank
owed Star Renovation nothing.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">The court had a different view.
Where the contract is not otherwise illegal, courts can enforce a bad contract if:</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">(1) the owner is not in the class
the statute was enacted to protect, and <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">(2) the owner would be unjustly
enriched if the contract were voided. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">Here, both (1) and (2) apply.
Frank is an engineer with years of construction experience, not an unsophisticated
consumer likely to be swindled. Second, Frank would be unjustly enriched if he kept
the $28,000 <u>and</u> got his home renovated at zero cost.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">But Star Restoration’s contract
wasn’t a complete bust. The agreement gave Star 1.5% per month interest on
any unpaid balance plus attorney fees if suit was necessary to collect.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">The trial court entered judgment
for Star totaling $212,504.09: $35,360.62 in damages, $36,375.91 in prejudgment
interest, $5,926.49 in costs and $132,290 in attorney fees. Last month, an appellate
court affirmed the trial court judgment.</span></p>
<p class="MsoNormal"><span style="font-family: inherit; font-size: medium;">Star Restoration also got a warning
from the state license board: From now on, use only contracts that comply with state
law. The best way to do that is with <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a>. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a>
is free.</span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-69032923696496865252022-09-13T01:17:00.004-07:002023-11-01T18:05:22.795-07:00Robbing Peter to Pay Paul<p><span style="font-family: arial; font-size: medium;">Every contractor knows the temptation: use cash from job A to
cover expenses on job B. That’s called <i>diversion</i> of funds. It’s perfectly
legal in some states and a crime in others. But it’s not good business in any state.
The Massachusetts case of Damian Anketell illustrates
my point.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Damian Anketell was a licensed Massachusetts home improvement
contractor, doing business as Ground Up Construction. Not long ago, he signed a
contract to remodel the attic of a Massachusetts home – adding an office, bedroom,
bathroom and play area, replacing the roof and building a staircase. The contract
price was $111,293. Payments were (1) $38,952 as a deposit; (2) $27,823 on the first
day of demolition; (3) $27,823 on completion of rough construction and framing;
and (4) $16,695 when done. Nothing in the contract required Damian to use payments
on the attic job exclusively for that project.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Damian had a second company, Castle Hill
Properties. Castle Hill bought, renovated, and sold properties. When Castle
Hill needed cash, Damian dipped into the Ground Up account. You can guess what happened
next.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Before the third installment on the attic job was due, Damian
came up short of cash. He asked for and got another advance on the attic job, $11,130.
At that point, Damien had been paid $77,814 for the attic job, nearly 70% of the
contract price. But Ground Up had completed less than twenty-five percent of the
project. Framing wasn’t complete. The roof was off. Exposed areas were covered only
by a tarp. The HVAC system had been disconnected. But it got worse.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">About that time, one of Damien’s subs asked for a meeting with
the owners. The sub said he and other subcontractors on the job were not being paid.
He had seen Damien’s bank statements. Advances for the attic job had been diverted
to Damien personally: cash withdrawals with no explanation, checks payable to "cash"
or to Damien personally. There was no record of where most advances on the attic
job had gone. And Ground Up's checking account had a negative balance.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">When the owners refused to advance more cash, Damien walked off
the job. Now what?</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">The homeowners filed suit against Damien, Ground Up, and Castle
Hill. Two days later, Damien and Ground Up filed for bankruptcy. The bankruptcy
court ruled debts on the attic job non-dischargeable due to fraud and misrepresentation.
The homeowners were due a refund. But that wasn’t all.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">The homeowners also filed a complaint with the Massachusetts
Office of Consumer Affairs and Business Regulation. The OCABR hearing officer found
that</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l1 level1 lfo9;"><span style="font-family: arial; font-size: medium;">Damien went through close to
$50,000 from his advances on the attic job before construction started. <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo9;"><span style="font-family: arial; font-size: medium;">Some of that $50,000 was diverted
to Castle Hill. <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l1 level1 lfo9;"><span style="font-family: arial; font-size: medium;">Failure to disclose that advances
on the attic job would go into a general business fund was a material misrepresentation
under Massachusetts law. <o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><b><span style="font-family: arial; font-size: medium;">Diversion in Other States</span></b></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Fifteen states impose restrictions on use of construction funds.
Most of these states make the contractor a trustee of funds that will become due
tradespeople, suppliers and subs. The contractor is liable for diversion of construction
funds the same as any trustee would be liable for misuse of funds. California goes
one step further. Penal Code Section 484(b) imposes a fine of up to $10,000 and
jail time of up to a year for misapplication of construction funds.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Massachusetts isn’t one of the 15 states that make contractors
trustees. But last week the Massachusetts Appellate Court in Damien Anketell v.
Office of Consumer Affairs found another way to discourage diversion of construction
funds. Massachusetts General Laws 142A, § 17(2) requires a list of disclosures in
home improvement contracts. Damien never mentioned that advances on the attic job
would be deposited in an account used to bankroll Castle Hill jobs. The court considered
that omission a material misrepresentation under Massachusetts law. Damien got hit
with a $4,700 administrative penalty and had his contractor registration suspended
for ten months.</span></p><p class="MsoNormal"><span style="font-family: arial; font-size: medium;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">What should your contracts say about diversion of construction
funds? No need to guess. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts letter-perfect contracts
for any job and for any state. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p><p class="MsoNormal"><o:p></o:p></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-86913290208470100402022-08-28T17:34:00.000-07:002023-11-01T18:06:20.560-07:00Collect Interest on Past Due Accounts<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">What does your standard contract say
about interest on late payments? If little or nothing, you may be making an expensive
mistake. Here’s an example.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">In fall of 2016, a hailstorm damaged
Alex Bixby’s Iowa home. JL Construction Services gave Bixby a written bid for repairs,
$8,050 for the roofing and $1,735 for new window wraps. Bixby authorized JL to start
work. There was no written contract.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">By August 2017, JL had completed their
work on the roof. JL gave Bixby a bill for that portion of the job, $8,050. Bixby
didn’t pay. His understanding was that payment was due when both roof repair and
window wrap was complete. The window part of the job hadn’t started yet.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">By December 2017, Bixby had a complaint.
His roof was leaking, probably due to a torn rubber boot JL had installed around
a vent pipe.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">By January 2018, JL still had not been
paid. JL offered to complete the job – the window wraps. Bixby explained that another
company was finishing the job. Plus, Bixby claimed a credit for damage from the
leaking rubber boot. And that’s where the job stood for nearly a year.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">On November 28, 2018, JL’s attorney sent
a demand for $8,933.83, including interest at 1.5% a month (18% per annum) from
the date of completion. Bixby still refused to pay.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">On July 1, 2020, JL sued Bixby, claiming
$8,050 for the roofing work plus $3,800 in interest.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Nothing in the oral contract required
payment of interest on any amount due. Nothing in JL’s statements complied with
Iowa law on interest. That left the court no grounds to award interest as part of
JL's damages.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Earlier this month, the Court of Appeals
of Iowa affirmed the trial court decision.</span> <span style="font-family: Arial, sans-serif; font-size: 12pt;">Too bad.
JL waited nearly three years to get paid and lost their claim for $3,800 in interest.</span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">How to Collect Interest</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">First, understand that your contracts
should set an interest rate for late payments. That lays the foundation for an award
of interest if you have to sue. This late payment fee is <u>not</u> a finance charge.
You expect to be paid in full when each phase of the work is complete. Interest
is due only if payment is delayed.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Second, understand another advantage
of setting an interest rate in the contract. It’s just common sense. If you’re not
paid on time, remind the owner that interest is accruing at the agreed rate. Worst
case, you’ll waive the interest charge in exchange for prompt payment.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Third, understand that the law on interest
rates is different in every state. Many states have prompt payment statutes for
construction. Some of these laws apply only to subcontracts or only to public works
construction or only to commercial (non-residential) projects. Others apply on all
projects, including residential work. Some prompt payment statutes set a maximum
(or minimum) interest charge for late payments. Others allow higher or lower rates
if specified in the contract. Usury laws in some states set a maximum interest rate
for delinquent accounts.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">So what should you do? The answer is
simple. Let Construction Contract Writer be your guide – no matter the state and
no matter the type of project. With <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer,</a> you see the interest
rate options that apply on your job. That makes setting the interest rate an easy
choice – and could save or make your thousands. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-16492000912672809282022-07-30T18:05:00.000-07:002023-11-01T18:08:06.525-07:00Insurance Work in Indiana<p><span style="font-family: arial; font-size: medium;">Storm damage repair can be good business
for home improvement contractors. Two reasons: (1) It’s easy to find homes that
need repair after a storm. (2) Owners with insurance coverage are a good credit
risk. That makes the industry ripe for abuse. If you do work in Tornado Alley, you’ve
heard the stories.</span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">In response, twenty states have enacted
laws that regulate casualty loss repair. AL, AZ, GA, IL, IN, KY, LA,
MI, MO, MS, NE, NY, OK, SC, SD, TN, TX, UT, WI, WV. All of these storm damage repair
laws are similar: Any contract for an insured loss must include specific disclosures,
including a statement that the owner can cancel if the insurance claim is denied,
either in whole or in part.</span></p>
<p class="MsoNormal"><span style="font-family: arial; font-size: medium;">Fine. Laws like that put an end to the worst abuses. Storm damage specialists
have to write bullet-proof contracts and be especially careful when developing the
scope of loss. But contractors aren’t the only problem. This street runs two ways.
The Indiana case of Hoosier Contractors v. Sean Gardner offers an example.</span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">Damage to Gardner’s Indianapolis home was covered by a Cincinnati Insurance
Company policy. Gardner had Hoosier Contractors inspect the roof and write an estimate
for repairs. Before doing the inspection, Hoosier required Gardner to sign a contract
titled "Replacement Work Agreement." The contract included the language
required by Indiana storm repair law. If Gardner’s insurance company didn’t agree
to pay, the contract would be "null and void." Hoosier inspected the roof
and wrote an estimate of loss – $50,619.46 (later adjusted to $59,489.78).</span></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">Gardner submitted his claim to Cincinnati Insurance. Cincinnati issued
a "Scope of Work" to both Hoosier and Gardner, listing the work Hoosier
would perform and the estimated cost for each item. Cincinnati settled the claim,
paying Gardner in several installments. So far, so good. But this is where traffic
started to run in the other direction.</span></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">With proceeds of the claim in hand, Gardner paid another company approximately
$18,000 to repair his roof. Hoosier was left out in the cold. They had estimated
the job, advanced several thousand dollars to a claim service to negotiate with
the insurance carrier – and had nothing to show for it – except a signed contract.
Hoosier did the only thing they could, file suit for breach of contract.</span></span></p>
<p class="MsoNormal"><span style="font-size: medium;"><span style="font-family: arial;">Gardner’s attorney insisted the contract violated Indiana’s Home Improvement
Contractors Act and was a "scheme, artifice, or device . . intended to mislead
Indiana residents into executing home improvement contracts.” That would be a violation
of Indiana’s Deceptive Consumer's Sales Act (DCSA) and entitle Gardner to three
times actual damages plus attorney fees.</span><span style="font-family: arial;">
</span><span style="font-family: arial;">Gardner’s attorney moved to certify a class action on behalf of:</span></span></p>
<p class="MsoNormal"><i><span style="font-family: arial; font-size: medium;">All persons who entered into a Home Improvement Contract
with Hoosier Contractors, LLC from February 12, 2014 until such time that Hoosier
stopped utilizing said Contract(s) and began utilizing a Home Improvement Contract
that was in compliance with the [HICA].</span></i></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">Obviously, the fat was in the fire.</span></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">By any account, Hoosier’s contract with Gardner had problems. There
was no price and no description of the work. Both are required under Indiana’s Home
Improvement Contracts Act (HICA).</span></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">This case is still in the courts. Issues yet to be decided:</span></span></p><ul style="text-align: left;"><li><span style="font-family: arial; font-size: medium;">Does Hoosier’s
contract violate Indiana’s HICA?</span></li><li class="MsoNormal" style="color: black; mso-list: l0 level1 lfo1;"><span style="font-family: arial; font-size: medium;">If so, is
that violation an incurable deceptive act under the DCSA?<o:p></o:p></span></li>
<li class="MsoNormal" style="color: black; mso-list: l0 level1 lfo1;"><span style="font-family: arial; font-size: medium;">Is the Gardner
contract null and void because Cincinnati didn’t approve the full scope of
work?<o:p></o:p></span></li>
<li class="MsoNormal" style="color: black; mso-list: l0 level1 lfo1;"><span style="font-family: arial; font-size: medium;">Did Gardner
breach the contract when he gave the work to another contractor?<o:p></o:p></span></li></ul>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">For Hoosier Contractors, the Gardner job was a financial black hole.
But it’s easy to imagine another result. Suppose the Gardner contract had complied
in every respect with Indiana law. Hoosier Contracting would have escaped years
of litigation and mounting legal bills.</span></span></p>
<p class="MsoNormal"><span style="font-family: arial;"><span style="font-size: medium;">Don’t make Hoosier’s mistake. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts letter-perfect
construction contracts for any type of construction and for any job site. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/">trial version</a> is free.</span></span></p>
<p class="MsoNormal"><span style="color: black;"><o:p><span style="font-family: arial; font-size: medium;"> </span></o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-41544825926956353362022-06-05T08:10:00.002-07:002023-11-01T18:12:21.770-07:00Making a Mountain Out of a Molehill<p><span style="font-size: 12pt;">Most of my blog posts are about missed
opportunities -- how a good contract could have avoided a costly mistake. But occasionally,
a contractor does it right – and saves thousands. Consider a case decided last week
by a Ventura, CA court. Plyley v. Renovating Specialist, Inc. (RSI). Here’s a summary.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The job was simple. Replace two oak doors
with two sliding glass doors. Plyley agreed to pay $3,885. RSI wrote the contract, got
it signed and did the work. The new doors passed inspection. Plyley rated the
work as “Excellent” on RSI’s job completion certificate. But satisfaction didn’t
last. A dispute followed. Eventually, Plyley filed a 42-page complaint, insisting
the new doors didn’t meet contract specs and didn’t comply with the building code.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Essence of the dispute was height of
the door sill. The sill on the old doors was nearly flush with the interior floor
level. The new doors slid in the old frame, making the height of the new sill almost
two inches above the interior floor level. Even worse, the drop from the new sill
to the exterior patio was now 9 inches. The building code limits step height to
7-3/4 inches.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Sliding a replacement door into an existing
frame is called retrofit construction. As anyone doing window and door replacement
knows, there’s another choice. Remove and replace the entire frame: demo existing
siding around the door perimeter, remove the old sill and frame, install a new door
and frame, waterproof the opening and restore the siding. That’s like new construction.
It’s also more work and more expense. But doing it that way would leave the height
of the new door sill nearly the same as the old sill.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">When Plyley sued, RSI was forced to defend
both their work and their contract. The trial ran for 6 days. The trial court found
no problem with either RSI’s work or their contract, awarding RSI costs of $1,223
plus </span><span face="Arial, sans-serif" style="font-size: 16px;">$95,531</span><span face="Arial, sans-serif" style="font-size: 12pt;"> in attorney fees. Plyley appealed. Key
points in that appeal:</span><span face="Arial, sans-serif" style="font-size: 12pt;"> </span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The
contract violated California Business and Professions Code § 7159 which requires
written contracts and written change orders. <br />
The appellate court found no violation of § 7159 in the RSI contract. A contract
doesn’t have to list all job specs.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">RSI
had agreed to perform new construction, not retrofit construction. <br />
The appellate court allowed RSI’s salesman to testify about what he told Plyley.
Retrofit replacement and new construction are different. In retrofit, the
sill was going to be higher. Plyley insisted on retrofit.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The
contract was unconscionable, allowing RSI to install the unsafe doors in violation
of the building code. <br />
The appellate court didn’t agree. “Appellant cites no authority to the effect
that building codes are implied terms of all home improvement contracts and
that the contractor must comply with them at his own expense despite the homeowner's
insistence that he not comply.”<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">RSI
violated Business and Professions Code §7160. Their contract included 'false
or fraudulent representation or false statements knowingly made'. <br />
The trial court found no false or misleading statements in the contract. The
appellate court agreed.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">Because
RSI’s contract required the losing party to pay attorney fees of the winning
party, the appellate court affirmed an award of $95,531 to RSI.<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">The appellate court’s conclusion:
Plyley's complaint was “making a mountain out of a molehill”. Chalk one up for good contracts.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">If you want to draft nothing but good
contracts, regardless of the type of project or the state where you work, have a
look at <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a>. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/">trial version</a> is free.</span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-31123798577180061522022-05-12T15:51:00.000-07:002023-11-01T16:56:07.885-07:00Powerful Words in Any Contract<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Disputes are common on construction sites.
Every contractor knows that. And any dispute can derail a project – turn a potential
money-maker into a money pit. Many disputes profiled on these pages became epic
legal struggles lasting years. A few of those cases ran up legal fees more than
the cost of construction.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">My advice: Stick to building. Don’t get
stuck in a legal quagmire.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">The best way I know to stay out of court:
Write contracts that require arbitration – alternative dispute resolution (ADR).
Courts won’t touch a contract dispute that requires arbitration. Require ADR and
there’s no right to sue. That’s a game changer when an owner or owner’s attorney
threatens legal action.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Statistics show that sellers are more
likely to win in arbitration. That makes arbitration a good choice for construction
contractors.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">If you write the contract, you decide
how disputes will be settled. Your contract should:</span></p>
<p class="MsoNormal"></p><ul style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Make it clear, “owner and contractor
will submit all disputes related to this job to binding arbitration.”</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Identify the arbitrator. AAA, CDRS and
JAMS are common choices. But a Web search will turn up qualified independent arbitrators
in your community. Consider a “mobile” neutral – someone willing to meet on the
construction site. </span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Identify the arbitration rules. The arbitrator
you select will suggest rules he or she prefers.</span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Make the arbitrator’s decision final.
The words are, “Judgment on the award may be entered in any court having jurisdiction.”</span></li></ul><p></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">On Residential Jobs</span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Eleven states (CA, IL, MD, MA, MO, NE,
OR, PA, SC, TX, VT) void any residential arbitration agreement that omits disclosures
required by state law. Requirements are different in each state. Sometimes specific
words are required, or all upper case, or underlined, or initialed or placed above
the signature line, etc. Without the precise disclosure required by state law, your
agreement to arbitrate isn’t going to hold water – or worse, will require a court
to decide if ADR is required. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">A Louisiana case (S. LA Contractors v.
Kraus Construction, May 5, 2022) illustrates what’s likely to happen with a broken
ADR clause.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Kraus Construction was the general contractor
on a school job in Longville, Louisiana. South LA was the site work subcontractor.
When site work was finished, South LA claimed a balance due of $135,660 and filed
suit to collect. Citing the ADR clause in their contract, Kraus asked the Louisiana
court to delay action on the suit until arbitration was complete. South LA insisted
their contract’s arbitration clause was defective. The agreement required ADR under
"Arbitration Rules of Better Business Bureau". The BBB doesn’t have arbitration
rules. Now what?</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">The trial court ruled that arbitration
was required. South LA appealed. The appellate court affirmed the trail court’s
decision. The ruling by Judge Perret: Louisiana law favors arbitration as a speedy
way to resolve contract disputes. Any agreement to arbitrate is irrevocable and
enforceable, assuming:</span></p>
<p class="MsoNormal" style="margin-left: .25in;"></p><ol style="text-align: left;"><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The contract
is valid, and, </span></li><li><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The dispute
falls within the scope of the arbitration agreement.</span></li></ol><p></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">OK. Kraus Construction got their arbitration
hearing – after decisions by both a trial court and an appellate court. But isn’t
this obvious? A few more seconds spent drafting the ADR clause would have saved
hours (days?) in court.</span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Don’t make the same mistake. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts letter-perfect contracts (and arbitration clauses) no matter
the state and no matter the type of project. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-55137632496804455382022-04-26T14:49:00.000-07:002023-11-01T16:54:42.493-07:00A Busted NY Home Improvement Contract<p><span style="font-family: Arial, sans-serif; font-size: 12pt;">Last month I explored what Pennsylvania
courts allow contractors who use a bum contract. The rules in New York are different
– and the difference is major. I’ll explain.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Like Pennsylvania (and 30 other states),
New York requires a written contract for residential construction work. Like Pennsylvania,
New York contracts have to include a long list of notices and disclosures. But unlike
Pennsylvania, New York courts are split on what happens when a contractor uses a
defective agreement. Pennsylvania allows the contractor to sue for <i>quantum meruit</i>, Latin for "as much as deserved". That’s a clumsy tool, as explained last month. But at least the contractor collects
something. New York may or may not allow as much. The New York case of Chapman v.
Davis (decided March 22, 2022) illustrates the point.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">Cheryl Davis wanted to convert the basement
of her Pleasant Valley, NY, home into bedrooms for her two daughters. Chapman Construction
offered to do the work and wrote up the agreement.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">When it came time to make the final payment,
Chapman Construction got hung out to dry. Cheryl claimed egress windows in the basement
didn’t comply with the code and had to be re-done. Cheryl refused to pay. Chapman
sued.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">As I’ve explained before, when the job
goes bad, you better have a good contract. Chapman didn’t:<o:p></o:p></span></p>
<ul style="margin-top: 0in;" type="disc"><li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The
contract was signed by a friend, not Cheryl, the homeowner.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Chapman
Construction forgot to put their address on the contract.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The
estimated starting and ending date was nowhere to be found.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A
state notice warning about mechanics liens was omitted.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The
state notice on deposit of progress payments was absent.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The
required notice of 3-day right to cancel didn’t appear anywhere.<o:p></o:p></span></li>
</ul>
<p class="MsoNormal"><span style="font-family: Arial, sans-serif; font-size: 12pt;">In short, Chapman Construction’s contract
didn’t even come close to meeting requirements in New York General Business Law
§ 771.</span><span style="font-family: Arial, sans-serif; font-size: 12pt;"> </span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Now What?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">What does a New York contractor recover
on a bad home improvement contract? New York courts are split on the issue.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Appellate divisions in the Third and
Fourth Judicial Departments rule that failure to comply with GBL § 771 renders the
home improvement contract unenforceable and bars recovery for breach of contract.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In the Second Judicial Department, some
courts have ruled that failure to comply with GBL § 771 does <u>not</u> make the
contract unenforceable. Other courts in the same Judicial Department have come to
the opposite conclusion: Failure to comply with GBL § 771 leaves the contract void
and unenforceable.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Eventually, the New York State Court
of Appeals will wade in with a decision that’s binding on all New York courts. Absent
that decision, Judge Fairlie elected to treat the Davis contract as void and unenforceable.
Chapman Construction got nothing for breach of contract.</span></p>
<p class="MsoNormal"><b><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">But What About <i>Quantum Meruit</i>?<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Couldn’t Chapman Construction at least
recover part of what they were owed, "as much as deserved”? That’s what Pennsylvania
courts allow.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Sorry. That doesn’t work in New York
Justice Courts. Quantum meruit is an equitable remedy, New York Justice Courts lack
equity jurisdiction. The result: Chapman’s claim was denied and dismissed.</span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Don’t make the same mistake. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer </a>drafts legally enforceable contracts and subcontracts for any state
and for any type of project. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p> </o:p></span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0tag:blogger.com,1999:blog-251166974651227742.post-21996720358759336722022-03-13T16:13:00.001-07:002023-11-01T16:52:13.175-07:00Five Hundred Pages Later<p><span face="Arial, sans-serif" style="font-size: 12pt;">As pointed out last month, 31 states
require a written contract for residential construction. The question I didn’t answer
last month: What can the contractor collect if there is no valid contract?</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Last month, a Pennsylvania court framed
a very precise answer to that question. First, the facts:</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">So Young Jang wanted to renovate the
kitchen of her home in Berwyn, PA. She selected Artisan Builders Inc. (ABI) of East
Norton, PA to do the work. ABI got a signed contract. That was February of 2016.
When the kitchen was done, Jang had more work for ABI: new flooring, renewing the
master bathroom, baseboards, lighting, crawlspace insulation, replacing joists,
multiple doors and frames. In all, ABI wrote five contracts and got eighteen signed
change orders.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">That was all before June 2016. After
working together for over five months, Jang fired ABI and refused to pay any more.
ABI was stuck. They filed a lien claim for work completed and not paid. At the close
of trial on the lien claim, Judge Tunnell granted Jang’s motion for a non-suit.
The 23 contracts and change orders omitted notices and disclosures required by Pennsylvania’s
Home Improvement and Consumer Protection Act ("HICPA"). The contracts
were invalid under PA law.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Now what? ABI claimed they were still
due $35,371. Judge Tunnell gave ABI leave to file an amended complaint for </span><i style="font-family: Arial, sans-serif; font-size: 12pt;">quantum
meruit</i><span face="Arial, sans-serif" style="font-size: 12pt;">. That’s the reasonable value of services requested by Jang.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Six months later, trial resumed. This
time ABI had their paperwork ready, over five hundred pages of receipts, time sheets,
and invoices -- including costs and expenses, estimates and invoices all kept by
QuickBooks. ABI claimed damages of $43,525 as quantum meruit (the value of services
requested). Counsel for ABI added an unjust enrichment claim (value Jang received). Work done by ABI had increased the value of Jang’s home by over $100,000.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Once again, the trial court ruled in
favor of Jang. “[ABI] cannot merely submit its own loss, i.e., the value of labor
and materials expended, as the measure of recovery, but must instead demonstrate
that the defendant has in fact been benefitted . . .” So ABI got nothing.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">ABI wanted another try, this time at
the appellate court. Last month the Pennsylvania Superior Court reversed the trial
court. A busted contract leaves the contractor with:</span></p>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">No
lien rights.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">No
right to recover for benefits received (unjust enrichment). <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1;"><span face=""Arial",sans-serif" style="font-size: 12pt; mso-fareast-font-family: "Times New Roman";">But
with a suit for the reasonable value of services (quantum meruit).<o:p></o:p></span></li>
</ol>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Fine. ABI was going to get something.
But the court wasn’t willing to accept ABI’s invoices as the reasonable value of
services. “Therefore, we remand to the trial court to determine the reasonable value
of the services based on the evidence presented at the January and June 2020 proceedings,
and to convene an additional hearing if it deems it necessary to do so.” And that’s
where the case of ABI vs. Jang stands now, six years after work started. ABI has
to show that every expense on the job, both labor and materials, was “reasonable”.</span></p>
<p class="MsoNormal"><span face="Arial, sans-serif" style="font-size: 12pt;">Don’t go down that road. Working under
a void contract is foolish, like building what can’t possibly pass inspection. <a href="https://craftsman-book.com/books-and-software/shop-by-type/shop-contracts" target="_blank">Construction Contract Writer</a> drafts perfectly legal contracts for every type of work and for
any state. The <a href="https://craftsman-book.com/downloads/construction-contract-writer/" target="_blank">trial version</a> is free.</span></p>Gary W. Mosellehttp://www.blogger.com/profile/17009609522933917075noreply@blogger.com0