Jan 7

A Home Improvement Contractor’s Peril

We were recently retained by a homeowner who had obtained an estimate for paving work on her driveway. In the weeks following the estimate, there were further discussions between the paver and the homeowner in which the paver sought to persuade the homeowner to allow him to perform the work since he had some open dates in his schedule. Although the homeowner had never expressly commissioned the paver to perform the work, the discussions were of a nature that the paver concluded that the homeowner had agreed to have him perform the work. The paver never created a written contract, however, containing the terms of any such agreement.

While the homeowner was away from her home for an extended time, the paver performed the paving work on the driveway and invoiced the homeowner. Upon receiving the paver’s invoice, the homeowner contacted the paver and complained that she had never agreed with the paver to have him perform the work. Further, upon returning home and inspecting the work, she pointed out to the paver that the work was not performed in a workmanlike manner, nor was it performed according to her expectations which she had discussed with the paver’s representative when provided with the estimate. As a result, she declined to pay the paver’s invoice.

A Lawsuit Is Filed

The paver sued the homeowner claiming that he and the homeowner had reached an agreement that authorized him to perform the work and that he was owed the invoice amount.

At trial, we contended on the homeowner’s behalf that there had never been any agreement actually reached between the parties despite the fact that the paver had proceeded to perform the paving work and, further, that the work had not been performed in a workmanlike manner. We also contended that the paver had violated Business & Professions Code Section 7159 by performing home improvement work without a signed written contract. (Note: All references are to the California Business & Professions Code.)

The Requirement Of A Written Contract

Section 7159 requires that a contractor have a written “home improvement contract”, signed by both parties, for any work of home improvement where the cost of the contractor’s labor, services, and materials will exceed $500.

Section 7151 defines “home improvement” to include “the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house.” “Home improvement” also includes the installation of home improvement goods or the furnishing of home improvement services.

The law requires that the written contract contain important disclosures to the homeowner, including the homeowner’s right to cancel the contract within three days, a warning to the homeowner that the contractor may enforce his or her rights to payment with a mechanic’s lien, and notices regarding the contractor’s general liability insurance and worker’s compensation insurance coverages. The contract also must contain a notice to the homeowner regarding how changes to the scope of work of the contract are to be handled, and a notice regarding the homeowner’s right to file a complaint against the contractor with the Contractor’s State License Board.

And, of great importance for the contractor to note, Section 7159.5 makes it a misdemeanor for a home improvement contractor to not have a signed written contract for a home improvement project.

The Written Contract Is Required To Protect The Homeowner

The Legislature adopted Section 7159 to protect homeowners from the abusive actions of unscrupulous contractors in taking advantage of homeowners. Calwood Structures, Inc. v. Herskovic (1980) 105 Cal. App.3d 519, 164 Cal. Rptr. 463. While the horror stories that one typically hears about abusive home improvement contractors seem to deal with swimming pool contractors or siding installation contractors, the scope of the statute is much broader than just these specific trades. It includes any repairs, or remodeling of a residential property.

The Exception To Every Rule

Appellate courts have carved out some limited exceptions to this rule of Section 7159 requiring a written contract, most often in those cases where the homeowner is not within the class of individuals whom the statute is designed to protect. Asdourian v. Araj (1985) 38 Cal.3d 276, 211 Cal.Rptr. 703. The courts have often considered the level of sophistication of the property owner, the scope or complexity of the project, the homeowner’s prior contracting experience, whether someone was assisting the homeowner in the negotiations with the contractor, such as an attorney or architect, the prior relationship between the contractor and owner as friends, and whether the homeowner subsequently ratified the contractor’s work.

The Decision

In our case, the court sided with our homeowner client finding that the paver had failed to comply with Section 7159 because he had failed to use a signed written contract for his home improvement services. The homeowner was not required to pay the paver’s invoice even though the paver had contributed labor, services, and materials to the paving job.

This may seem like a harsh result for the paver, who lost many thousands of dollars in the job, but the policy of Section 7159 is very strong in seeking to protect the homeowner. In adopting the statute, the Legislature concluded that the contractor, as the more sophisticated business person, should be able to easily comply with the requirement of a written contract and that, if he or she failed to use a written contract, then he or she should be the one to bear the financial loss.

Had the paver, at a minimum, have sent the homeowner an email confirming that the work had been authorized and setting forth the basic terms of the agreement (price, time for performance, payment terms, etc.), he would have been in a much better position to argue at trial that he shouldn’t have to bear the financial loss of the project. Nevertheless, the use of a written home improvement contract, containing all of the necessary disclosures required by law, is always the best approach for any contractor performing “home improvement” contracting services.