Hiring a Contractor
The following is excerpted from The Court TV Cradle-to-Grave Legal Survival Guide, an easy-to-read, in-depth explanation of the law as it affects all aspects of daily life. You can order the book, published by Little, Brown and Company, from our online store. It also is available in local bookstores, or you can call Little, Brown directly at (800) 333-3476.
WHAT IS A CONTRACT?
A contract is an agreement that can be formal, informal, written, oral or just plain understood. It can be between individuals, between two or more companies, or between different combinations of individuals and organizations. Basically, a contract is formed when there is an offer and an acceptance of terms in which each party benefits. (Agreeing to buy a new car for a specific amount of money is a contract.) The parties must be specific enough in their agreement for the contract to be enforceable. For example, in the sale of merchandise, the terms have to identify the goods and the price: "Tube Socks: 3 pairs for $5.00." "Sock Sale -- Everything Must Go" is not a contract.Sometimes a contract is formed by actions. When you drive into a gas station, see a sign that states the price, and then pump gas into your car, you have entered into a contract. By pumping gas into your car, you have accepted the gas station's offer to sell gas at the posted price.
Sometimes the parties do not have to spell out the essential terms in order to form a contract. Say, for instance, a man with a snowplow drives by your house after a big blizzard. "Want me to plow?" he shouts.
"Sure, go ahead!" you holler back, and he cuts a neat path up your driveway.
He has provided goods or services, and you have accepted them knowing they are not a gift, so he is entitled to receive quantum meruit -- the reasonable value. In other words, you have to pay him. If, however, he had just plowed without first asking you, no contract would be formed and you would owe him nothing.
WHO CAN ENTER INTO A CONTRACT?
For a contract to be valid, the parties must have the legal capacity to enter into it. In most states that means that anyone who has reached the age of majority (usually 18) and who is considered to be mentally competent can enter a contract. In general, minors can enter into binding, or enforceable, contracts only for necessities -- food, clothing and the like. In other words, if a 16-year-old puts $100 down and signs a contract to buy a $1000 stereo system on credit, he cannot be held to that contract. He can return the stereo and reclaim his deposit for no other reason than not being able to pay for it. The only catch is that he has to return the stereo in the same condition in which he bought it.Mentally handicapped persons can also enter into contracts, as long as they have not been declared incompetent, and they understand the nature and consequences of their actions.
DOES A CONTRACT HAVE TO BE IN WRITING?
It depends. Some, but not all, contracts must be in writing to be enforceable. Most states have laws known as statutes of fraud, which were designed to protect against false claims for payment from contracts that were not, in fact, agreed upon. The specific laws vary from state to state, but most require that the following contracts be in writing:- the sale of land
- the sale of goods valued over $500
- contracts that require more than one year to perform (such as an agreement to work for an employer for two years)
- promises to guarantee someone else's debt
The basic premise is that you should have written documentation of your transaction, but that doesn't mean you always need a lengthy agreement. For example, simply signing a check with the notation "For Car Purchase" may be sufficient to meet the "in writing" requirement. Even when you're not required by the statute of frauds to put your agreement in writing, it is still good practice for all significant transactions.
CAN A PERSON ENTER A CONTRACT AND THEN CHANGE HIS OR HER MIND?
Yes, but only in very limited circumstances. The whole purpose of a contract is to create a binding obligation for both parties. If you simply have changed your mind about the terms of the contract (for instance, you can no longer afford the services, or on the other side, you realize that the work will be more expensive, difficult or time-consuming than you anticipated), you are still bound by the agreement.There are some reasons which do justify release from a contract, however. If the contract was obtained by the fraud of the other party -- let's say the photographer had shown Blossom samples of his work that convinced her to hire him, and then she learned that the pictures were actually taken by someone else -- you can be released from the contract. If the other party fails to perform a significant part of the contract, or lets you know that part of the contract will not be performed, then you would no longer be bound by the agreement.
CAN A PERSON BACK OUT OF A DEAL BEFORE THE PAPERS ARE SIGNED?
Maybe. If a contract is required to be in writing by your state's statute of frauds (see above), and if the agreement has not yet been signed, either party probably can still back out. However, if a party admits that a verbal contract for the sale of goods was made, it will still be enforceable in almost all states. (Other types of contracts covered by statutes of frauds, such as for the sale of land, often can be nullified if they're not yet put in writing.)WHAT HAPPENS IF A PERSON SIGNS A CONTRACT UNDER DURESS?
Duress can be grounds for getting out of a contract. But duress is considered to be "extreme improper influence," which prevents you from asserting your own free will. Financial concerns or strong persuasion do not legally constitute duress. But if a burly guy threatens to burn your house down if you don't hire his son's band to play at your party, that would be duress.WHAT IF UNEXPECTED CIRCUMSTANCES PREVENT A PERSON FROM FULFILLING THE TERMS OF THE CONTRACT?
In some cases unexpected circumstances can excuse you from the contract. However, this is generally limited to two types of situations:- the subject of the contract is destroyed (a party hall burns down or someone dies)
- circumstances arise which make it impossible or extremely difficult to perform the contract (if you canceled the party that generally wouldn't excuse you)
WHAT CAN CONSUMERS DO IF THE SERVICES THEY CONTRACT FOR ARE DEFECTIVE?
Most states require that providers of services meet reasonable standards of competency in their field. Though workers will sometimes include provisions in their contracts to renounce any liability for their failure to perform the services properly, most state courts have frowned upon such disclaimers. If the services are totally defective, you usually have the right to refuse to pay anything at all. If the work can be corrected, you can deduct the reasonable cost of getting it fixed. Some states have specific laws governing disputes over car and home repairs and certain other services. For more information on your state's laws, you can call your state attorney general's office or your local Better Business Bureau.WHAT CAN A CONTRACTOR DO IF THE CONSUMER SAYS THAT THE SERVICES WERE INADEQUATE?
If you provided services and the other party refuses to pay, you can bring a claim in court to recover your money. In many states, if the services were performed on a car, boat, house, or other property, you can file for a lien (a claim against the person's property) to secure your payment.HOW DO YOU GET A LIEN?
You can secure a lien on someone's property by filing the appropriate papers at your local courthouse. If you have performed services on someone's house -- painted it, for example -- and they refuse to pay you for your work, you can put a lien on their house. They then will be unable to sell the house without paying you.The rules for filing a lien vary from state to state, but often it's as easy as filling out a form. You are then required to notify the homeowner that you're filing a lien, and the homeowner has the right to a hearing to contest it. If you make a request for a lien purely out of maliciousness, you could be penalized.
If you are in possession of property that you have serviced or repaired, many states allow you to keep it if the owner will not pay you for the work. This is known as a "possessory lien," and you don't have to file anything in court to do it. You just keep the property until the owner pays you.
IS A CONTRACTOR BOUND TO A WRITTEN ESTIMATE?
Not unless you can show that you were quoted an exact, fixed price or that an estimate was given in bad faith as a way to lure you into the contract. Such improper tactics aside, an owner is usually contracting to pay for needed goods and services at a price that will vary depending on the number of hours needed to get the job done. The owner will often be quoted an hourly rate, which must be honored. If no rate is set out, the owner is contracting to pay for the goods and services at the fair market value.ARE CONTRACTORS FREE TO MAKE THEMSELVES "AT HOME" WHEN DOING RENOVATIONS?
No, not unless you tell the contractor that this is okay. While it may not be possible for you to stay home while the work is being done, bear in mind that the number of problems and misunderstandings drops dramatically when someone is there to keep an eye on the situation. At the very least, be clear with the contractor what is acceptable behavior in your house.WHAT CAN A PERSON DO IF THE CONTRACTOR KEEPS NEEDING MORE TIME?
It really depends on the details of the contract:
- Was the completion date guaranteed, or was the date given as an estimate?
- Was there an agreement with the contractor about the consequences of a delay?
- If so, did you make that agreement orally or in writing?
- Is the delay due to the contractor's failure to do the work, or is it due to the nature of the job?
If you made an explicit agreement about a completion time, then that agreement provides the basis for any settlement or renegotiation. In the absence of an explicit agreement, the contractor is required to meet reasonable completion times comparable to average contractors.
A written agreement carries a lot more legal weight than an oral agreement, especially when the two parties differ on what that agreement was. You may be able to sue and collect damages if a written provision explicitly states that there will be a penalty for lateness. Even without such a provision, you may still be able to recover damages if you told the contractor that the completion date was critical.
IF THE CONTRACTOR IS LATE, CAN A PERSON GET A REFUND?
Maybe. If the contractor knew the date was critical, you may be able to recover all reasonably foreseeable damages that result from the delay. You may also hire someone else to finish the work promptly, and you can deduct the cost from your payment to the first contractor. Generally, you will have to make at least a partial payment to your original contractor, except when:- that contractor's work is useless
- your damages exceed the value of the contractor's work
- the contract expressly states that you do not have to pay at all
for late work
WHAT SHOULD A PERSON DO IF A CONTRACTOR SAYS THE JOB CAN'T BE FINISHED WITHOUT ADDITIONAL PAYMENTS?
If the contractor asks for more money, be careful. It's a judgment call. You have to decide whether this request is being made in good faith, or if you should find someone else to finish the job. If you dispute this additional charge, but decide to pay it so the job will get done, note on your check that you dispute the payment. That way the contractor will not later be able to claim that your additional payment shows that you obviously agreed to a modification of the original contract.Some contractors juggle their business by using cash from one job to pay for materials on another job. If you have any doubts about how this additional money will be used, pay it only upon proof of purchase of materials for your job (and keep the receipts). Or if you have the time and inclination, you can oversee the use of your money by buying the materials yourself.
It is essential to check out a contractor and do business only with one you trust. But even if you like and trust your contractor, protect yourself: be explicit about whether the price and completion dates are commitments or merely estimates.
IS A PERSON OBLIGATED TO PAY A CATERER IF IT'S NECESSARY TO CANCEL A WEEK IN ADVANCE?
Yes, you do have to pay, but not necessarily the full price. By canceling your order with the caterer, you are breaching your contract, and the catering company is entitled to be in the same financial position as it would be were the contract fulfilled. But the caterer is obligated to limit its damages in two ways:- by not ordering or preparing any further food
- by making reasonable efforts to find substitute work
If the caterer finds another job, and could not have done both jobs, you're in luck. The profits from the new job will be subtracted from what you owe. That doesn't mean you pay nothing, but your costs are lower.
Often a contract will specify a cancellation fee. If it does, and if it's reasonable, you probably will have to pay it.
WHAT CAN A CONTRACTOR DO WHEN A CLIENT IS FICKLE?
A client's change of heart or mind does not require you to redo your work. You are entitled to refuse to do further work unless the client agrees to pay you extra, and you have the right to be paid for all of the work you have already performed. You can recover payment for your work through small claims court (if it is within the dollar limits for these courts), or through a regular court.In almost all states you also have the right to attach a lien against the client's house to secure your payment. But if you pursue this route, you should make sure that you yourself have complied with any state and local license and permit requirements for your profession. If a license is required -- for housepainting, for example -- and if you failed to obtain it, some states will not allow you to recover payment.
WHAT CAN A CLIENT DO IF THE CONTRACTOR'S WORK IS SLOPPY AND UNACCEPTABLE?
It depends on how badly the work was done. Unless you have agreed to other rules, the contractor is not entitled to payment when poor work is performed. But the client has to prove that the work has no value at all. If the work is so bad that it has to be completely redone (and especially if you have made it clear that first class work was required), then you probably can show that the work has zero value to you. At a minimum, you are entitled to require the worker to correct the defects. Or you can hire someone else to correct the defects at a reasonable price. You can then deduct that amount from the original contractor's payment.
Copyright 1995 by American Lawyer Media, L.P. and Little, Brown and Company, Inc.
