There’s a New Proposed Law Regarding Emergency Services That Everyone Should Support

Parties are free to enter into contracts with any terms and conditions to which they both agree — but that right is not absolute. Certain contract terms are void by statute or case law based upon public policy considerations. For example, in Connecticut, the General Statutes do not allow contractors to prospectively waive their mechanic’s lien rights and the General Statutes do not allow contracting parties to have another state’s laws govern a dispute arising out of a construction project within Connecticut. However, the most onerous example of a statute that potentially voids an otherwise enforceable contract is the Home Improvement Act.

 

As previously discussed here, the Home Improvement Act can lead to unfair results. As upheld by the Connecticut Supreme Court, any contract that does not contain certain elements required by Conn. Gen. Stat. § 20-429 is unenforceable and the contractor that enters into such an agreement with an owner may also be held liable for a violation of the Connecticut Unfair Trade Practices Act. Under the terms of the Home Improvement Act, a contract that does not include notice of cancellation rights violates the statute. Thus, the owner of any home improvement project must be allowed three business days to cancel a home improvement contract after it is executed.

A Recent Supreme Court Decision Found an Owner of a Construction Company Personally Liable to the Owners of a Project

As most people are aware, one of the benefits of doing business as a corporation or limited liability company is that, generally speaking, the owners of the company cannot be held personally liable for the company’s debts. The exception to that general rule is that a court may pierce the corporate veil and hold the company owners personally liable if the company owners are found to have improperly used the corporate form, or have used the corporate form to commit wrongful acts. Nonetheless, even a cursory of the caselaw indicates that plaintiffs do not often prevail when they are attempting to pierce the corporate veil.

The statement of the law with regard to piercing the corporate view is quite simple. In All Phase Builders, LLC v. New City Rests., 2011 Conn. Super. LEXIS 1793, *20-21, 2011 WL 3483368 (Conn. Super. Ct. July 12, 2011), the court ruled:

“In order to pierce the corporate veil, a plaintiff must plead and prove that the corporate shield can be pierced under either the instrumentality rule or the identity rule. The instrumentality rule requires… proof of three elements: (1) Control …; (2) that such control must have been used by the defendant to commit fraud or wrong …;

An Explanation of The Home Improvement Act’s Licensed Contractor Exception

Chapter 400 of the Connecticut General Statutes is known as the Home Improvement Act.  “The purpose of the Home Improvement Act is to ensure that home improvements are performed by qualified people.”  Santa Fuel, Inc. v. Varga, 77 Conn.App. 474, 495 (Conn.App.,2003).  A “[h]ome improvement contract” means an agreement between a contractor and an owner for the performance of a home improvement.”  Conn. Gen. Stat. § 20-419.  As a general rule, a home improvement contract is not enforceable against a homeowner unless the contract complies with the writing requirements of the Home Improvement Act.  Laser Contracting, LLC v. Torrance Family Ltd. Partnership, 108 Conn.App. 222, 226, (Conn.App.,2008).

The Home Improvement Act serves a valid purpose but may be heavy handed in its application.  In holding that the failure to comply with the statutory requirements for a home improvement contract bars all recovery, including claims sounding in implied contract and unjust enrichment, the Connecticut Supreme Court said the following:

We recognize that our decision may lead to a harsh result where a contractor in good faith but in ignorance of the law performs valuable home improvements without complying with § 20-429. 

The Connecticut Home Improvement Act Has Harsh Penalties With Limited Exceptions

According to the Home Improvement Act (the “Act”), a home improvement contractor has no legal right to payment if his contract is not entered into by a registered salesman or contractor and does not contain:

  • the signatures of both the homeowner and contractor;
  • notice of the homeowner’s cancellation rights; and
  • a start date and a completion date.

Even if the homeowner testifies, under oath, that he requested the work, that the work was performed in a workmanlike manner, and he didn’t pay the amount he had agreed to pay, the contractor will still lose the lawsuit if the contract does not comply with the Act.  Like most laws, however, there are exceptions to this rule.

A contractor may be able to get paid if a court finds that the homeowner was acting in “bad faith.”  The Connecticut Appellate Court recently issued a decision that explains the limits of that exception.

In Lucien v. McCormick Construction, LLC, 122 Conn.App. 295 (Conn.App. 2010), the Connecticut Appellate Court refused to invoke the bad faith exception.  The facts were that the homeowner:

  • was represented by counsel;