Essential Contract Terms

Don and Molly Krumwiede had a serious house fire a few years ago. Their home in Allamakeen, IA was a total loss. Fortunately, Don and Molly had full insurance, including up to a year of living expenses while their home was rebuilt.

What Don and Molly needed next was a contractor. They met with Tim Kruse of Kruse "N" Bries Construction. Kruse brought along a plan book from the building material dealer Menards. Don’s choice was a plan called The Woodsman. Kruse went back to Menards for a detailed set of plans for The Woodsman. A few days later, Kruse came back with a five-page labor and material list for the new home: excavation, footings, framing, electrical, plumbing, heating, siding and so on. At the bottom of the last page, on a line titled "Total Materials and Labor" was the price $175,000. But the $175,000 was crossed out and replaced, in handwritten numbers, with “$190,000.” Under that total, typewritten in all capital letters and heavy bold type, were the words, "This is a bid not an estimate. 50% down payment required.”

The Krumwiedes liked the proposal and agreed to have Kruse "N" Bries build their house for $190,000. Molly and Don advanced $92,000 and Kruse started work. That was November 2012. But there was a problem.

Other than the material list, down payment and total price, there was nothing in writing: No start date. No completion date. Nothing about plans or specs. No payment schedule. Not a word about changes. In fact, the 5-page material list didn’t even mention The Woodsman.

As work progressed, payments to Kruse reached $168,000 including the initial $92,000. But in August 2013, when Kruse asked for the next payment, the Krumwiedes balked. Work was far from finished and their year of living-expense reimbursement was running out. With no more money coming in, Kruse "N" Bries stopped work and sent a final bill for $69,500. When the Krumwiedes didn’t pay, Kruse "N" Bries sued for $96,815.

What Should the Court Do?

Before deciding, here are a few things you should know:

• Don and Molly hired other contractors to finish the work. Their total cost for the home, including what was paid to Kruse "N" Bries, was about $250,000.
• While suit was pending, Don Krumwiede took a job in another state. He sold the new house, about half their acreage and existing outbuildings for $330,000.
• Testifying in court, Kruse claimed to have done work beyond the original bid of $190,000: a two-car garage instead of one, more living space above the garage and a walk-out basement.

Now take a guess at how much the court awarded Kruse “N” Bries on their claim for $96,815.

The trial court awarded the contractor exactly nothing -- zero. And last month the appellate court agreed. (2019 Iowa App. LEXIS 329) Here’s why. The court couldn't be sure what the contractor had agreed to build or when the owner had agreed to pay. For example:

• Kruse “N” Bries insisted the Krumwiedes breached the oral contract when they refused to make a payment in August 2013. The court didn’t agree. Nothing in the agreement set when payments were due.
• The court couldn’t identify anything the Krumwiedes received that they were not entitled to. The 5-page bid didn’t make clear what Kruse “N” Bries promised to build. For example, the plan for The Woodsman showed a one-car garage. But the 5-page bid didn't refer to The Woodsman and the permit issued for the job specified a two-car garage.

An Expensive Lesson Learned

Construction is complex. The contract for any job is like a road map -- getting you from where you are to where you want to be. Without a good map, expect a result like what happened to Kruse "N" Bries.  Construction Contract Writer makes it easy to draft letter-perfect contracts that cover all the essentials. The trial version is free.