The Three Goals of a HI Contract

It is a bit ironic that the most under-considered topic for a contractor is almost always the customer contract.  The fact of the matter is that every job – every dollar earned – is based on that single document, yet many clients have “acquired” their contract from a competitor, or the company the owner used to work at, or from a law firm that either couldn’t tell you difference between a slider and a double-hung or seems to think this is construction. (It’s not – it’s home improvement, and the two are completely different.) There are three vitally important goals that any HI contract needs to handle: 

First, obviously, it needs to be compliant with federal and state law.  Any missing disclosure or any illegal terms means that if a 1-800-sue-you lawyer, the State Attorney General, or your local contractor board comes calling on a complaint, lawsuit, or investigation, every job you have sold over the past three, five, or even seven years is open to attack.  And the never-ending comment we hear is, “Well, we have been using our contract for X years and never had a problem.”  OK, good luck with that, we have a list of clients that regret that type of thinking, but it’s too late for them now.

Second, it needs to have the operational protections unique to our industry and the product lines being sold.  Sure, that means not walking the contractor into an unlicensed broker or lender position, addressing condensation for windows, color variation and mold for tub-to-shower conversions, and costs of rotten wood replacement for roofing, just to name a few of the obvious ones.  But is also means structuring a proper late cancel clause (which BLLP invented back in the 90’s for rehash), a permissive (not mandatory) class action waiver within an arbitration provision, and a substantial completion payment-due clause – again, just to name a few.

Third, it needs to be easy to read and understand.  It has to be non-threatening to the consumer and visually appealing (as best possible).  The sales representatives are going to screw it up in the home anyway, whether you are running a hard close or an e-close, so you want to make sure the contract is going to be seen by a judge, arbitrator, or investigator as “fair and easy to comprehend.”  The acknowledgments have to be clear and conspicuous, ensure any oral representations or promises are overridden, and avoid legalese as much as possible.  If your spouse or child can’t understand your contract, it’s too complex.

Oh, and if you are running an e-close, please stop taking advice from the conversion vendors.  They are good at converting documents, but legally sophisticated they are not.  They keep changing fonts and formats thinking that it’s irrelevant (it’s not) and telling clients one copy of the rescission notice is sufficient.  Sorry, that is wrong – electronic or not, you darn well still better have two copies of the rescission notice for each customer.

Berenson LLP serves as counsel to the remodeling and home improvement industry, providing legal compliance solutions, quality control counseling, litigation defense, and agency representation to industry clients throughout the United States. This client alert is intended to provide general information regarding industry legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact an attorney at the firm. For more information on the legal solutions provided by Berenson LLP, please contact us by phone at 561.429.4496 or by email at info@berensonLLP.com.