Changes in PA Law Will Affect Kitchen & Bath Companies

This post will update you as to a recent development in Pennsylvania law which will impact most kitchen and bath companies.

Last fall Gov. Ed Rendell of Pennsylvania signed into law a bill known as the Pennsylvania Home Improvement Contract act which will serve to regulate home improvement contractors and which requires that all home improvement contractors be registered with the state. All registrations must be completed by July 1, 2009 which is the date that the law goes into effect.

The bill defines "home improvement contractor" as any person who owns and operates a home-improvement business or who undertakes, offers to undertake or agrees to perform any home-improvement.

In relevant part, "Home improvement" is defined as any repair, replacement, remodeling, demolition, removal, renovation, installation, alteration, conversion, modernization, or improvement in connection with land or a portion of land that is adjacent to a private residence for which the total cash price for all work agreed upon his more than $500.

The bill excludes new construction, the sale of appliances, home improvement retailer having a net worth of more than $50 million and the sale of goods by a seller who neither arranges to nor performs directly or indirectly any work or labor in connection with the installation or application of the goods or materials.

Clearly, the bill is liberally constructed for the purpose of protecting Pennsylvania residents from unscrupulous business practices by contractors, etc. The general definition of both "home improvement contractor" and "home improvement" certainly applies to most kitchen and bath companies doing business within the state. Kitchen and bath companies will have to comply with the registration law prior to the July 1, 2009 deadline. If you do not register with the state, it will not recognize as valid or enforceable any improvement contract entered into between your company and Pennsylvania residents.

In addition to the registration requirement the bill also contains requirements about deposits on the job. For any contract exceeding $1000 in value you may never receive a deposit in excess of (A.) one third of the home-improvement contract price; or (B.) one third of the home-improvement contract price plus the cost of special order materials that have been ordered.

Finally, the law imposes new criminal penalties for home-improvement fraud.

If you have any questions or comments, or would like to discuss the impact of this bill in greater detail, or the procedure for registering your company please do not hesitate to contact me.

—Peter J. Lamont, Esq., is a commercial litigation attorney with offices in Hawthorne, NJ, as well as Massapequa, NY. His practice focuses on the representation of small- to large-size companies in the building and design industry, as well as individual designers and architects. To contact him with questions and suggestions on topics for future articles, please email him at plamont@peterlamontesq.com or call him at (973) 949-3770.

CONTRACTS: THE BACKBONE OF SUCCESSFUL BUSINESS

CONTRACTS: THE BACKBONE OF SUCCESSFUL BUSINESS
By: Peter J. Lamont, Esq.

Far too often kitchen and bath companies overlook the critical importance of utilizing comprehensive contracts as part of their routine sales practices. Many companies imprudently rely upon purchase orders, invoices as a contract, and verbal agreements. While using these agreements may initially free up time to allow you to develop leads and generate sales, it will undoubtedly cost you far more time and money when a customer decides to challenge your purchase order or worse, sue you.

A properly constructed contract can bind your customers to your terms, explain your procedures and protect you from litigation. The problem with purchase orders and the like is that they typically fail to address necessary issues such as indemnification, delays, curing a contract breach and basic information about the limits of the company’s responsibilities. Additionally, they will almost never address company specific issues such as shipping, storage and installation costs.

Proper sales and installation contracts are truly the backbone of any successful kitchen or bath company. Without a good contract, your company is exposed to a variety of claims including consumer fraud claims. While it is recommended that you obtain the advice of a competent contracts attorney, there are some software products and form contracts (ex. AIA) that can help you construct a legally enforceable contract aimed at preventing or limiting litigation. Keep in mind that form contracts will need some tweaking to make them specific to your business.

If you are preparing your own contracts you should, at the very least, include the following issues: (1) contract price; (2) payment schedule; (3) cancellation; (4) delivery; (5) warranty; (6) installation; (7) limitations of liability of seller; (8) storage; (9) remedies for breach and choice of law; and (10) duties and responsibilities of the seller.

Another critical factor in creating a legally enforceable contract is to express the terms and conditions in simple, everyday English as opposed to verbose legalese. Just because a contract contains mind-bending legal gibberish and archaic words such as heretofore, inasmuch as, and aforementioned, doesn’t make it a better contract. In fact, for most contracts, legalese is not essential or even helpful. It is a far better practice to use clear, concise and easily understood language in your contracts.

It is critical that you give your contracts the time and attention needed to provide adequate protection for your company. Any up front expenditures of time and/or money involving the formation and preparation of your contracts are dwarfed by the amount of resources that litigation consumes. Thus, if you are truly interested in maintaining a profitable business, make certain that your contracts are clear, complete and legally enforceable.

Remember, any consumer litigation filed against you will involve the Court’s analysis of your contract. A strong contract could result in the early dismissal of a frivolous lawsuit, and in some states allow you to recover your costs and fees associated with your defense. Conversely, the lack of a well written contract could result in protracted and costly litigation, which would ultimately be settled or submitted to a jury for trial.

Prepare thorough contracts, using clear and simple language and review them periodically. Doing so will ensure that your time and efforts are spent selling your products and services, instead of attending depositions and trials and coughing up thousands to settle claims.