MAKE A LIST AND MAKE THE CLIENT CHECK IT TWICE

It is that time of year again when Santa is busy checking his list in preparation for the big day.  Design professionals in the kitchen and bath industry can learn a valuable lesson from Santa - when dealing with your clients, make a list and make the client check it twice. Checklists are one of the most important tools that all designers and sales personnel should utilize every time they make a sale, issue a change order or prepare for an installation.  To some extent everyone uses a checklist system to help them remember appointments and client's requests.  But those in the industry need to expand the use of the checklist and make client checklists a functional component of the sales and installation agreements with the client.

Far too often issues arise when customers claim they are entitled to massive refunds because their cabinets were not delivered in accordance with the time frame set forth in the contract.  Even though the contract may say "approximate delivery date" customers always come up with stories of oral promises made by sales staff and designers.  Another area of concern is with installation.  Frequently, clients refuse installation by your company and instead opt for installation by their general contractor. However, many general contractors are not familiar with the installation of your products. This is especially true when dealing with European cabinets which require specialized installation. Most times when these complaints arise you issue refunds or provide other price cuts in order to keep the customer happy. This translates directly into lost profits for your company.   

            You can prevent this type of issue from occurring if you use checklists as part of your contract and have the client sign off on each line item.  Here is a real world example.  Recently a cabinet company sold a large kitchen to a client.  The client signed the contract and declined to purchase installation from the company.  Instead she chose to have her general contractor install the cabinets.  The sales person verbally explained to her that the cabinets were manufactured in Europe and were tricky to install.  She again refused.  The cabinets were manufactured and delivered without issue.  However, during installation her general contractor, who was not familiar with this type of installation, damaged cabinets and improperly installed others.  Of course, the customer blamed the cabinet company for the problems.  She claimed that they measured her kitchen incorrectly and provided her with improper panels. 

 In general, judges and juries are not familiar with the cabinet and design industry. Additionally, lawsuits arising out of cabinet and design contracts lack the flair of personal injury trials and thus, juries are not interested and typically decide to "split the baby" on these type cases.  The bottom line  is that your company losses money even when you did everything right.  So how can a checklist help you avoid this scenario?

Even the most basic contract can be confusing to both the designer/sales person and the client.  They all contain at least some legal jargon which requires at least a glance at Black's Law Dictionary.  You can eliminate any grey contract areas by supplementing your contract with a checklist.  In the scenario above, here is how a checklist could have prevented the loss of profits.  After signing the contract the customer should have been required to review and initial a checklist concerning the installation.  

            The checklist should have stated (at the very least) the following:

            The customer understands that "X" company offers installation services.    _____ (initial)

            The customer understands that "X" specializes in the installation of specialty European       cabinets.                                                                                                          _____ (initial)

            The customer understands that "X" company highly recommends that client utilize the        installation services of "X" company.

            The customer has declined installation services from "X" company.              _____ (initial)

            The customer understands that his/her contractor may not be proficient in the installation   of "X" companies' products.                                                                                _____ (initial)

            The customer agrees that "X" company will not be responsible for any damage to   cabinets during installation or issues arising out of improper installation.             _____ (initial)

Once the client signs off on the checklist you have a written record that you advised the client about the potential dangers of using her general contractor to install the cabinets. You have also cleared up any confusing legalese contained in the contract.  Now if you are sued as a result of installation issues you have clear cut, admissible evidence that should get you out of the case without any loss of profit.

Checklists can be used for more than just installation.  You can prepare a separate checklist for delivery issues, appliances, countertops and for any other issues that you wish to clarify or wish to limit your liability.  So while you might not have Santa's helpers to assist you in the creation of checklists, the benefits to your company are  well worth the time and effort that  you will put into their creation. 

—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.

The ABCs of Subcontractor Agreements

Are you and your business sufficiently protected?

By Peter J. Lamont

October 13, 2010

The importance of an effective contract with your subcontractors cannot be overstated. In the kitchen and bath industry, you utilize the services of subcontractors on a regular basis to assist with numerous tasks, including installation and delivery. An effective contract with your subcontractor can save you and your company a tremendous amount of time, money and frustration. Unfortunately, far too often dealings with subcontractors are handled informally and, as a result, may even end up costing your company your client.

First, understand that when you hire a subcontractor, you are essentially hiring a company or individual who is not employed by you, and over whom you have very little control, to act on your behalf. Thus, it is imperative that you have a written contract with each and every subcontractor you use regardless of how small the services the subcontractor is providing to you.

Next, certain critical elements must be contained in the contract in order to provide your company with maximum protection. The main issues that should be in your subcontractor agreements are licensing, job and payment, timing and defense and indemnification.


LICENSING

Let’s assume that you are going to hire a subcontractor to install kitchen cabinets for your client. You need to make sure that your subcontractor is properly licensed and registered pursuant to state and local laws. The easiest way to do that is to insert a provision into your subcontractor agreement that essentially states that the subcontractor is properly licensed in accordance with all state and local laws and that the subcontractor agrees to defend and indemnify your company for any damages or legal action arising out of licensing issues.

In today’s litigious society it simply is not enough to ask your subcontractor if he’s properly licensed. He must acknowledge that he is in writing in order to protect your company. In the event that he is not properly licensed, a signed contract wherein he states that he is will protect you.


JOB AND PAYMENT

The job you are hiring the subcontractor to perform should be explicitly stated in the contract. For example, you should include the address of the client’s residence and the specific tasks the subcontractor is to perform (for example, “subcontractor is to remove old cabinets, prepare the walls for installation of new cabinets and confirm measurements of the installation area.”) The more specific you are the better.

The same holds true for payment options. The contract should explicitly state when the subcontractor will get paid. For example, “subcontractor will receive payment once all cabinets are installed and the punch list is completed and signed off on by client.” Make certain to include in the contract any prepayments already me to the contractor. If you're payment agreement consists of multiple payments throughout the course of the job you may want to include a payment table in the subcontractor.


TIMING

It is very important that your subcontract set forth all deadlines for the project. Be as explicit as possible. Verify the subcontract contains language stating that the subcontractor understands and acknowledges that time is of the essence. Also include in the subcontract a provision stating that the subcontractor must inform you immediately upon his awareness of any anticipated delay with the project.


DEFENSE AND INDEMNIFICATION

Finally, and most importantly, your subcontract must include a section addressing defense and indemnification of your company by the subcontractor. Essentially, your paragraph should state at the very least, “subcontractor, agrees to defend and indemnify your company against any claims, lawsuits and damages arising out of the subcontractor's negligence or intentional acts.” You should also include language concerning the subcontractors agreement to defend and indemnify you for any misrepresentations, whether made knowingly or unknowingly, including misrepresentations of licensing, corporate status and other relevant issues.

The simple fact is if you do not have a well-thought-out subcontractor agreement, you will eventually get burned. If you choose to use software or a generic form agreement as your subcontract, make certain to review it and conform it, if necessary, to include the provisions addressed in this article. Remember, it is completely appropriate to include an addendum to a form subcontract so long as the form contract states that the addendum is made part of the subcontract. You should also note that while the example in this article involves a subcontractor installation company these recommendations hold true for any subcontractor. Finally, don’t be afraid to tell a subcontractor who refuses to sign your subcontract that you will not be utilizing his services. Your goal is to find a subcontractor who will represent you in a positive light and perform as directed.

—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.