Promises Made and Broken

Mike and Cheryl Ording had a leaky basement in their Milwaukee home. A salesman for Everdry Waterproofing offered to solve the problem. According to the Ordings, the salesman claimed they “would never have water in their basement again” if Everdry did the waterproofing. Reassured, the Ordings signed the contract. 

A few weeks after work was done, the Ordings noticed water in their basement. They called Everdry. Before Everdry showed up, a storm flooded the basement five feet deep. Everdry offered to lend the Ordings a pump but insisted that any damage was not their problem. The Ordings sued.

At trial, the jury awarded the Ordings $7,000 in damages. That was doubled to $14,000 under Wisconsin’s Home Improvement Practices Act. A violation of HIPA is also an unfair trade practice which allowed the Ordings to collect their attorney fees, $41,000 in this case. So the contractor was on the hook for $55,000. But that was only the beginning. Everdry’s attorney fees were $118,896. That made the salesman’s promise a very expensive mistake.

Now notice this. The award wasn’t for breach of warranty or breach of contract or negligence in doing the work. Instead, the jury found that Everdry made a false oral promise when selling the job – the Ordings “would never have water in their basement again.”

Protect Yourself

How many times have you made a promise when selling a job? There’s risk every time you forecast results such as durability, matching colors or textures, performance, a completion date – anything that raises expectations or could be misinterpreted. Let the contract, the plans and the specs describe your task. That’s step one.

Step two is known as a contract integration clause. Here’s a sample taken word-for-word from Craftsman's Construction Contract Writer:

This contract is the entire agreement and constitutes a complete integration of all understandings between Contractor and Owner on the subject of the Project. This Contract supersedes all prior negotiations, representations and agreements, whether written or oral. 

An integration clause makes good sense on two levels. First, integration voids statements made before the contract was signed. Those statements aren't part of the deal. Second, courts like integration. Interpreting any agreement is easier when there’s just one contract, not a list of oral promises and side agreements.  

Would the jury’s decision have been different if the Everdry contract had an integration clause? I think we know the answer to that question. The Everdry contract did have an integration clause. Unfortunately for Everdry, their counsel didn’t raise the issue until after the jury verdict – too late in the opinion of the appellate court (2015 Wisc. App. LEXIS 275, April 14, 2015).

A Simple Suggestion

Are your contracts as good as your work on site? It’s easy to write iron-clad contracts fully enforceable under the law of your state. Get Construction Contract Writer. The trial version is free.

Wisconsin’s Home Improvement Surprise

A fire on September 7, 2009 did serious damage to the home of David and Carol Butler. The Butlers selected Purofirst of Milwaukee to do the repair work and signed an "Authorization" form provided by Purofirst. The Butlers moved out and Purofirst went to work. 

Six months later, work was done and the Butlers moved back in. Purofirst suggested writing up a punch list of any defects the Butlers found. Purofirst fixed some items on the Butlers' punch list but insisted others were not their problem. The Butlers didn’t like that. They refused to make the final payment. Purofirst filed suit to collect.

Does this sound familiar? If you’re going to have a collection problem, it’s most likely over final payment. Until that time, the owner is eager to keep the job moving. Any delay in payment would delay completion and the owner’s use of the property. But when the job is done, the owner holds all the cards.

So the dispute over the Butler job landed on desks at two law firms. When that happens, focus will always be on the contract. What does the contract say? Does it comply with the law? This is no time for a surprise, which is exactly what Purofirst had coming.

Law in nearly all states sets standards for residential construction contracts, especially home improvement contracts. What’s required and the penalties imposed vary by state. In Wisconsin, the law is the Home Improvement Practices Act, Wisconsin Administrative Code ATCP (Agriculture Trade and Consumer Protection) § 110.01 to § 110.08. A home improvement contract has to be in writing and has to cover eight specific points, including a full description of the work. Doing work on an illegal home improvement contract in Wisconsin can earn the contractor a fine of up to $5,000 and as much as a year in jail. Violation also gives an owner the right to recover twice the amount of the loss plus reasonable attorney fees. And that’s what the Butlers wanted; twice their loss plus attorney fees.

The trial court found Purofirst had violated ATCP § 110.05 by failing to put all contract terms in writing. That opened the door for the Butlers. Purofirst didn’t collect anything in their suit. Instead, the trial court awarded the Butlers $29,407. Then the trial court doubled the award under Wisconsin Statutes § 100.20(5) and added attorney fees. That wasn’t exactly what Purofirst expected when they filed suit to collect for work completed.

Purofirst appealed the trial court judgment. Last month, a Wisconsin Court of Appeals gave Purofirst some relief (2015 Wisc. App. LEXIS 117). On technical grounds, the appellate court reversed the trial court's grant of attorney's fees and the doubling of damages. But the award of $29,407 stands.

Avoid The Purofirst Surprise

There was a time when builders could do residential work on a generic contract form -- or even on handshake. No longer. Like Purofirst, you’ve got a surprise in store if your contracts don’t comply with state and federal law. Fortunately, it’s easy to write perfectly legal construction contracts for any state. Get ConstructionContract Writer. The trial version is free.