Calamity in Connecticut

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

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

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

1. The Tankworks contract didn’t comply with Connecticut’s Home Improvement Act. For example, there was no start date or completion date and no three-day notice of the right to rescind.

2. Work started without notice to the bank.
3. No one from Tankworks was on site during excavation.
4. The excavation crew didn’t have instructions on the order of work.
5. A tractor hooked the supply line from the above-ground tank, stretching the line until it broke.
6. The excavation crew left the site on Friday with the fuel line broken.
7. By Monday morning, fuel oil had puddled around the house to the front yard, flooding a swale by Thrall Avenue.

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

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

A Prime Contract and a Subcontract

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

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

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

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A.I.A. Contracts vs. ConsensusDOCS

In April 2009, Bennett Builders signed a contract to remodel the Stamford, CT home of Tarun Mehta. It was a cost plus job at a price not to exceed $446,900. Under the agreement, work was to be completed by October 2009. Over a year later, work still wasn’t done and Mehta terminated the agreement. Bennett filed suit for $31,754.94 still due on the contract and asked the court for a pre-judgment remedy, an attachment of $32,000 on Mehta’s home.

This should have been a good job for Bennett Builders. They stood to earn a fee of $31,500. Even if the court denied payment in full under terms of the contract, Bennett should have been able to collect for the value of materials and labor that went into the job. Unfortunately, it didn’t work out that way. Bennett had made a serious mistake, using an A.I.A. contract.

The 17-page contract Bennett and Mehta signed was essentially the American Institute of Architects ("AIA") Document A107-1997 "Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction Projects of a Limited Scope Where the Basis of Payment is a Stipulated Sum." Go to the A.I.A. site and you’ll discover that A.I.A. contracts are “accepted, reliable, fair and flexible.” Fine. But here’s what the A.I.A. doesn’t explain. A.I.A. construction contracts don’t comply with either state or federal law. In most states and for most jobs, a contractor who works under an A.I.A. contract risks serious legal trouble. That’s exactly what happened to Bennett Builders.

On September 23, 2011, the Connecticut Superior Court denied Bennett Builders any relief – nothing under the terms of the contract and nothing for the value of goods and services that went into Mehta’s home. Why? The law is clear. Connecticut’s Home Improvement Act and Connecticut’s Home Solicitation Sales Act require a notice of cancellation in at least 10 point bold type. The A.I.A. contract doesn’t comply with Connecticut law and won’t be enforced by Connecticut courts. You can read the case at 2011 Conn. Super. LEXIS 2481.

I’m often asked to make a recommendation. Which is better for builders, A.I.A. contracts or ConsensusDOCS? I can’t recommend either. Neither includes the notices and disclosures every state requires in construction contracts. These notices vary with the size of the job, type of work, materials used, who signs the agreement and even where the contract is signed. 

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