When last we looked in on Pickup Pete of Pete’s Home Repair and Renovation, he had just learned the hard lesson that some customers, even ones that seem trustworthy, can take advantage of an unwary contractor who does not protect himself with enforceable written contracts. Pete had made the mistake of trusting a customer, Sam Slippery, to pay Pete at the end of a remodeling project based on a handshake agreement. Sam treated Pete unfairly, and Pete was uncompensated for his services. Pete and Sam never agreed up front on a price Pete was to be paid for the project. At the end of the project, Sam claimed Pete’s workmanship was poor, which was untrue, and refused to pay Pete’s Home Repair and Renovation.
Well, luckily for Pete, he sought help from Dave Cornerstone, a long time family friend and attorney. On Pete’s behalf, Dave wrote Sam Slippery a letter threatening to sue Sam on a legal theory of unjust enrichment. Sam knew of Dave’s reputation as a successful trial attorney and decided that he should pay Pete or face having to hire his own attorney and likely lose in court. Dave and Sam reached a negotiated settlement for Sam to pay Pete, and Pete received enough money to pay for his out of pocket job costs and a reasonable rate for his labor. While no big profit was made, Pete learned a valuable lesson: always agree upon the scope and price of a job before starting work and make sure that the agreement is put in writing and signed by the customer.
Pete was happy he avoided this near disaster and went right over to All Building Products Supply, Inc to pay his account manager, John Supersales, his outstanding supply bill for the Slippery job. John was pleased that Pete made good on his account. John told Pete that he heard St. Mary’s Church had suffered major roofing damage in last night’s wind storm and Pete may want to see if he could bid the project. Pete was excited about the possibility of getting the job and went straight over to view the damage.
Luckily for Pete, Father Donovan was at the church that day. Pete had known Father Donovan since Pete was a child when Pete helped prepare for communion. Pete asked Father Donovan if Pete could look over the storm damage and work with the church’s insurance company to reach an agreed upon scope of repair and price for the project. Father Donovan told Pete it was all right with him for Pete to do these things.
Even though Pete fully trusted Father Donovan, Pete had learned his lesson from the Slippery job and asked Father Donovan to sign a contract with Pete’s Home Repair and Renovation. Pete had a dilemma, however, because the scope of repair and price was dependent on what the insurance company would agree upon. Pete called Dave Cornerstone for advice.
Dave said that, in this circumstance, a contract may still be enforceable even though it did not contain a price and scope of repair. The agreement would provide that the contractor would perform the work for the insurance proceeds provided that the contractor and the insurance company reached an agreement on the scope of repair and price. Dave warned Pete that this approach is subject to challenge on theories of lack of consideration and indefiniteness: lack of consideration because contracts require consideration of giving up something to get something and indefiniteness because contracts are required to have necessary terms such as what will be done and for how much money. Here, Dave said that Pete’s Home Repair and Renovation has not necessarily given up anything because it could fail to reach agreement on price and scope with the insurance company and decide not to do the work, and it was still to be determined what work was to be done and for how much money. Dave advised Pete that he consider the contract a moral obligation (which would work for someone like Father Donovan but not someone like Sam Slippery) that may or may not be a legal obligation depending on the judge or jury. Dave recommended that, once scope and price were determined, Pete acquire a signed contract confirmation that included the agreed upon scope and price.
With the recommended contract in hand, Pete revisited Father Donovan and obtained his signature so Pete’s Home Repair and Renovation could negotiate with St. Mary’s insurance company for an agreed upon scope and price of repair. Pete contacted All Family American Insurance, the “helping hands” folks and St. Mary’s insurer, and informed them that Pete’s Home Repair and Renovation was the contractor of choice for St. Mary’s Church; that St. Mary’s would be submitting a written repair estimate; and asked All Family American Insurance to send out an adjuster to meet on site to go over the repair estimate and the damage. The All Family American Insurance representative then asked Pete if he was a public adjuster, and Pete said, no, he already said he was the contractor of choice for St. Mary’s. The All Family American Insurance representative then became agitated and told Pete sternly, unless Pete was a public adjuster, All Family American Insurance would not deal with Pete; that Pete’s Home Repair and Renovation had at most provided St. Mary’s with a bid proposal and was not under contract; and that All Family American Insurance was going to inform the state public adjuster regulating authority that Pete’s Home Repair and Renovation was attempting to act as a public adjuster without the proper license. The All Family American Insurance representative then hung up the telephone.
Pete was astounded. All he was trying to do was help St. Mary’s get their roof fixed. All Family American Insurance was supposed to be there for St. Mary’s to pay for the repair under the insurance policy. What had Pete done wrong? Why had this matter suddenly become so complicated? Pete knew what he had to do; he would need to have another visit with Dave Cornerstone to help sort this mess out.
Stay tuned . . .
This article continues a regular series based on a composite of real world situations faced by residential contractors from which other contractors may learn not to make the same mistakes. The series follows the education and development of a young contractor, Pickup Pete, who often learns his business the hard way, by his own mistakes.
Previous Articles in this series: