The New London Day reports the State of Connecticut Bond Commission has approved $291 million in bond allocations that will result in construction work in Southeastern Connecticut for public housing projects. This is welcome news for area contractors and workers dealing with a tight economy. Contractors should make certain they are ready to bid on projects as they are funded by having all their organizational paperwork in order including insurance and contracts. This is a good opportunity for contractors to explore and I will post more information as it becomes available.
Last month the Connecticut Supreme Court issued a decision in favor of a fencing contractor who had failed strictly to comply with the terms of the Connecticut Home Improvement Act which provides a checklist which must be followed if a home improvement contract is to be enforceable in court.
In this case, the contractor was allowed to collect the last $11.000 or so the homeowner had originally agreed to pay for construction of a fence in 2004. Almost from the beginning of the collection dispute, it had become clear that the construction contract was unenforceable because it lacked a beginning and ending date — one item on the short statutory checklist. Walpole Woodworker’s only hope was that a court would find that fairness required that it be paid under a theory of fairness known as quantum meruit.
Before anyone in the business gets comfortable with the idea that the courts can and will step in to protect contractors who have been careless about their contracts, they should consider that it took almost 8 years including a trial and two levels of appeals for the contractor finally to get the help he wanted from the courts.
Here’s what really happened: In 2004, Walpole Woodworkers, Inc. signed a contract with homewner, Sid Manning, to build a fence for $22,318. As soon as Walpole Woodworkers received a deposit of $11,000 the work was done. When collection of the balance became a problem, they first tried to appease the homeowner by modifying the fence so it would better contain his small dog. Next came the lawsuit. Now, almost 8 years from the signing of the defective contract — after the expenses of a trial in Superior Court, an appeal to the Connecticut Appellate Court and a review by the Connecticut Supreme Court — the contractor has finally been awarded the “fair value” of the work completed in 2004 and 2005. Faced with a number of tests for determining what fair value was, the Court chose a simple one — the balance that the parties had originally agreed to under the faulty contract.
The Supreme Court makes no mention of interest or costs of collection probably because collection costs must be included in the contract, and, absent an enforceable contract, cannot be charged to the losing party. We wonder whether the Plaintiff now believes that the “win” was worth the costs and efforts involved — costs and efforts that could have been avoided by simply checking his contract against the statute.
NAVIGATING THE CONNECTICUT HOME IMPROVEMENT ACT — A NEW CASE IS GOOD NEWS FOR SUBCONTRACTORS AND BAD NEWS FOR HOMEOWNERSPosted: June 5, 2012
A decision to be released this week by the Connecticut Appellate Court — Probuild East LLC vs Poffenberger — tells a cautionary tale of the perils and pitfalls of home improvement contracting for everyone involved in the process including owners, general contractors, and subcontractors.
The facts of the case were relatively simple: A homeowner hired a general contractor who failed to make sure the contract complied with the Connecticut Home Improvement Act — a statutory scheme designed to protect homeowners. Once the job — which included completed change orders — was finished, the general contractor was still owed $10,800.
Enter the plaintiff, a materials supplier who recorded a timely mechanic’s lien for $15,275 to cover materials for which he had not been paid by the general contractor. The plainiff bypassed the general contractor and instead sued the homeowner seeking foreclosure of the mechanic’s lien.
At trial, the homeowner who knew nothing of the subcontractor raised the defense that, based on flaws in the contract between the homeowner and the general contractor, the general contractor could not have collected the balance of money he was owed. Since the homeowner’s only contract was with the general contractor, it followed, he argued, the the Home Improvement Act also protected him from claims by subcontractors on the job.
The trial court rejected the owner’s defense and ordered a sale of the property to satisfy the subcontractor’s claim, or at least that portion of it that would otherwise have been owed to the general contractor.
On appeal, the Appellate Court agreed with the trial court holding that the general contractor’s failure to protect its own rights did not affect the right of the subcontractor to collect its debt as long as the homeowner had not paid for the job in full.
Here are the lessons:
FOR THE GENERAL CONTRACTOR – Take care that each and every contract you present to a homeowner complies with each and every requirement of the Home Improvement Act. If it does not, you may never be able to collect your money regardless of the quality of your work and regardless of any windfall this creates for the non-paying homeowner.
FOR THE HOMEOWNER – Pay attention to the job. Find out who your general contractor is bringing on board. Ask to see materials invoices and subcontracts. Demand lien wavers from subcontractors each time you make partial payments on the job. Remember that you may be forced to pay subcontractors with whom you had no direct dealings even if you couldn’t also be forced to pay the general contractor for the same services.
FOR THE SUBCONTRACTOR – Keep on top of collections making sure to document all dealings with the general contractor and follow the rules for filing mechanics liens when payment is late.
Especially in this difficult economy everyone is watching the bottom line closer than ever and anyone who chooses to do business on a handshake does so at his own peril. In the end — at least when the judicial system becomes involved in the process — he who exercises the greatest caution wins.
At a time when owners and contactors are watching every dollar it is more important than ever to make sure construction contracts are air-tight and that, as projects evolve, change orders are properly documented. Yet, competition for work has never been tighter and builders — everyone from the giants to one-man operations — are tempted to loosen their bidding and contract procedures, risking losses and lawsuits down the road, in exchange for landing a job.
On the labor end everyone is more willing than ever to make sacrifices. This means that laborers and sub-contractors might be willing to be squeezed more than they should in order to keep working and, at the other end, with profit margins cut to the bone, contractors may be tempted to grab any opportunity to cut costs by snapping up cheaper labor.
Yet one thing that’s worse than a measly profit is losing that profit, and more, after it has already been spent.
According to the January 30, 2012 edition Connecticut Law Tribune, there is a joint initiative underway by the Connecticut Department of Labor and the Federal Department of Labor to ramp up an ongoing crackdown on construction industry violations relating to minimum wage infractions, overtime payment infractions and faulty record-keeping by contractors and sub-contractors. This is an extension of an ongoing investigation centered in Connecticut and Rhode Island that has recovered nearly 3.3 million dollars in back wages since 2008.
The investigation is being conducted, in part, through an outreach and education initiative aimed at construction workers and independent contractors.