The Basics of Oral Contracts
Verbal agreements, also known as oral contracts, are not uncommon in the realm of contracting work. Whether the job is too small to warrant a formal contract or the arrangement is made with a family member or close friend, hundreds of contracting jobs are arranged verbally each year. This leaves many homeowners wondering whether they will be able to sue their contractors when things go wrong. After all, an enforceable contract typically requires both parties to sign.
Concerning liability, homeowners should understand that a contractor cannot avoid liability for a verbal agreement simply because there was no written contract or because the agreement was made face to face. In Berry v. Sigler, 66 N.C. App. 593, (1983), the plaintiffs brought forward claims against the contractor, including breach of contract. The dispute concerned the construction of a house in which the parties had agreed to work on a cost-plus basis. The Court found that a verbal agreement concerning an open-ended reconstruction project of that nature was enforceable.
Although it depends on the circumstances , verbal contracts can sometimes be enforced. North Carolina courts simply ask whether there is a reasonable basis in contract law for enforcing the agreement, not whether it was reduced to writing. Other factors that might lead to enforcement of a verbal agreement include fraudulent conduct or estoppel by reliance in addition to the oral agreement.
Oral contracts can sometimes be a successful method of initiating projects without putting either party at risk. However, if future disputes lead a homeowner to consider litigation, it is always preferable to have a written contract. Even if a written contract does not survive a challenge, it at least helps clarify what the parties had originally agreed to. When a written contract does survive, it can be used to help secure damages in the event of breach.
Demonstrating a Contractor-Client Relationship
Proving a Contractor-Client Relationship Without a Written Contract
Even if a contractor/client relationship can’t be established through a written contract, it’s still possible to prove that the relationship existed. To pursue this type of claim, all you have to do is establish proof of the existence of the relationship. Witness testimony and the ability to prove that you have at least a verbal agreement with the contractor are proven examples of ways of establishing the relationship between a contractor and a client. Any messages between you and the contractor can be used for evidence in the case.
Compile any communications you have with the contractor such as phone numbers, email addresses, and service records. You also may have to provide documents such as proposals, deliverables, invoices, bills, or receipts that show the services that were provided. If you have no written documents to use as proof, then there are witness testimonies that can be used to establish the relationship. Even if you do not have any witnesses available, you can still make a claim against the contractor. These types of claims are handled in two possible ways through the legal system. The first is by a breach of written contract or through a breach of oral contract.
You may have incurred financial losses due to the contractor’s negligence. You should list these losses in a demand letter along with the total amount you are seeking from the contractor.
Obtaining Evidence of Services Provided
In the absence of a contract that lays out exactly what services were to be provided by a contractor, it is best to gather secondary pieces of evidence, which help to prove that a contractor rendered services. This may include copies of written or emailed communications with the contractor, pictures of work completed or of progress along the way, work orders or receipts, and invoices. For example, if a plumber was hired to fix a leaky sink, you might find a receipt from the parts store where the plumber bought the replacement parts, emails where you discussed the repair, photos of the completed sink, and your invoice from the plumber outlining the services promised and fees charged. Such evidence does not have to be exhaustive, as long as together it proves that services were rendered. For example, if you cannot find a work order, email, or receipt documenting a service, a photo of the finished work showing that the service was completed will often suffice.
Legal Principles for Suing a Contractor
Legal Grounds for Suing a Contractor Without a Signed Contract
If the contract was signed, it would certainly make things easier, right? A review of the law shows that you may still have several legal options.
Breach of (Implied) Contract
Even if no written contract existed between you and the contractor, New Jersey may recognize a type of implicit agreement called a quasi or implied contract. For example, you may have an implied contract with your contractor if he estimates the work to be performed by visiting your site and then charges you based on that estimate. If the contractor later tries to charge you more than his estimate, you could have a violation of an implied contract. Essentially, a contractor could face a breach of contract lawsuit even if he never signed an explicit written agreement.
Quantim Meruit
You might be able to file a claim against a contractor for quantum meruit, which means "as much as he deserves" in Latin. Basically, this claim provides that the contractor should be compensated for the benefits that his services provided. The contractor will need to show that he provided services that you that you requested and which benefit you and that you should have known that you were being charged for them. Quantum meruit is often a last-ditch attempt to recover some money when the services performed are not easily defined.
Unjust Enrichment
Unjust enrichment is similar to quantum meruit in that the contractor must have provided services that you were aware of and to which you would have agreed to pay him had he started the work before performing it. The theory is that he should not be allowed to keep the benefit of services he performed.
Evaluating a Case’s Chance of Success
Both the likelihood of success as well as the speed of resolution of suing an individual without a written contract will in large part depend the quality and quantity of evidence of any promises and the provision of work that such services have been made without compensation. In particular, whether the pursuit of a claim against a vendor is pursued first, before pursuing payment from the general contractor, will be substantially impacted by the credibility of any co-venturer or other witnesses and their motivation to support and cooperate in the claim being pursued. A good rule of thumb is that if there is no one to sue, pursuing a claim against a general contractor is the right choice, and vice versa.
The credibility of major players will also impact on a decision to sue a general contractor. If it appears from the available materials that there are good records supporting the vendor’s claims (e.g., invoices and accounting ledgers), that the scope of work is reasonable under the circumstances (e.g., when viewed against the description of work in the plans and specifications), and that the timing and amount of requested payments is reasonable under the circumstances (e.g . , prompt payment requests and pro-rata billing for goods and services), there are few, if any, reasons not to sue.
Finally, which jurisdiction is the right jurisdiction may impact on a decision to sue, especially when considering the potential costs of litigation. In particular, if a suit is brought where a project is located, and familiar with the mechanics of the project location, there is often an inherent advantage for one of the parties. If a suit is brought where a project is located, it is likely to be in the owner’s and a general contractor’s favor to pursue the claim from inception because the court in which a claim is litigated is already familiar with the defendant’s business practices and is far more likely to see through any attempts to intentionally obfuscate material evidence.
Where there is a combination of both reasons to bring suit against a non-signatory vendor or sub-contractor, and reasons not to, a party should consider the merits of any counterclaims, and their associated risks, assuring that the disadvantages of bringing a claim are less than the disadvantages of not bringing a claim. If so, a claim can be brought for breach of contract, breach of the duty of good faith and fair dealing, unjust enrichment, quantum meruit, and the like.
Consulting an Attorney
It is advisable that an individual consults with a legal professional if they are considering suing a contractor without an enforceable contract. This is particularly important in the construction field, given the complex and often technical relevant legal principles. Comprehensive legal advice will be crucial. A lawyer can analyze the facts of the case and structure an argument which maximizes the chances of a positive outcome.
It is also important to discuss with legal professionals whether it would be beneficial to enter into mediation or arbitration. There are many benefits to arbitration, including the fact that these matters can be resolved more quickly than lawsuits. If both parties mutually agree, a contract dispute can be resolved between the parties in a relatively short span of time via arbitration. A mutually agreeable mediator is usually faster, cheaper and more effective.
Measures to Prevent Recurrences
Much of the time, the best way to resolve a situation like this is to go through an attorney. Getting to this point could have been avoided if you had made sure to get a contract for your project in the first place. Contracts are a way to make sure that both the contractor and homeowner understand the scope of the work that needs to be done. While verbal contracts do have some standing in New Jersey, written contracts are better because they are a much easier way to outline exactly what you want for the contractor and the conditions to complete the job, should it go poorly.
Additionally, it’s a good idea to get permits from the local township office before beginning renovations to a home. Verbal agreements aren’t sufficient when it comes to things like building a deck or installing new cabinets. The contractor should be able to go file for the necessary permits and then keep them with documentation of the renovations in your home , which should be kept by the contractor and yourself.
Make sure to communicate with contractors about what work you would like them to do. This could be through text messages, emails or phone calls, but if you want installation of windows for your dining room and the contractor ends up only doing them for your bedroom, let the contractor know in advance to prevent any misunderstandings.
And lastly, documentation is key. Keep on top of records throughout the timeframe of your renovation. Take photos of the progress as the contractor works. Both you and the contractor should keep copies of all of the documentation that comes through for the project. You never know when you may need to reference this information in the future.