All states tip the playing field in favor of property owners who contract for residential work. Nearly every state requires very specific notices and disclosures in residential construction contracts. Even the slightest defect in an agreement can have consequences - fines, revocation of a license, charges for attorney fees, no right to collect or even jail time. All of these penalties fall on the contractor. The property owner gets a free ride.
Penalties for a using a defective contract are different in every state. Some states, such as Hawaii, simply make the contract unenforceable. The contractor collects nothing. Other states give the contractor the right to collect some part of what's owed, though not the full contract price.
A homeowner in Plainfield, Indiana suffered storm damage to the exterior of his home in 2007. As a favor to the homeowner's brother, A local contractor signed a proposal for doing the repairs. The cost was $11,761.80. This simple act put the contractor hip deep in trouble. Here's why.
Indiana's Home Improvement Contracts Act requires ten very specific disclosures in home improvement and home repair contracts, even for small jobs like painting, fencing and landscaping. A home improvement contract that omits any of the ten disclosures isn't enforceable under Indiana law.
In this case, the contractor made a major mistake. Two of the ten required disclosures were missing from the contract: the starting date and the completion date. And there was no written agreement on changes to the work. That made the contract unenforceable.
The contractor finished the job and the homeowner refused to pay - not a dime. The contractor sued in order to collect and the court agreed with the home owner. The contractor had no right to collect under the contract and Indiana law.
But the Indiana court wasn't done. There's a legal principle called quantum meruit. That's Latin for "as much as he deserved." In this case, the Indiana court decided the contractor deserved $10,761.80, a thousand dollars less than the contract price. After all this trouble, and his legal expenses, the contractor's mistake in drafting this contract earned the homeowner a $1,000 discount.
Moral to the story: Don't leave it up to a court to decide how much you deserve to be paid. Make sure that the contracts you use are enforceable in your state. It just makes sense.
Gary W. Moselle is a California attorney specializing in state-specific construction contracts and has written a state-specific contract writing software program called Construction Contract Writer ( http://www.constructioncontractwriter.com ).
Gary maintains a blog on construction contract law at: http://garywmoselle.blogspot.com
Disclaimer: Nothing in this article should be interpreted as a substitute for professional advice from an attorney practicing in your community. Only local counsel can appreciate the business and legal environment under which a construction contract is drafted, negotiated and executed.
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