Bum Phillips once said “'There's two kinds of coaches, them that's fired and them that's gonna be fired.' The same can be said for spray foam contractors regarding lawsuits. If you have been in business long enough you will be sued. How you make out in the lawsuit depends a lot on how well you have protected your company’s interest during the job. The most common mistake many contractors make is to accept verbal agreements on the work to be performed, what the warranty covers and how you will be paid.
Just remember in a court of law the only evidence that is binding is what both parties have agreed to in writing. If the written agreements are not specific, you may be forced to pay for damages that you never agreed to cover when the work was performed.
Even your good buddy that has been giving your company business for years without problems can get you in trouble if the written documents fail to outline the work performed and your responsibility. What if he sells the company or is part of a Board of Directors or dies? You could be in court defending against millions of dollars of perceived damages from your good buddy’s boss, relatives or the company’s new owners
So what is important?
- Get it in writing. All agreements should be documented and signed by both parties including (but not limited to) scope of work, payments, warranties, limits of liability, exclusions, how to resolve disputes, etc.)
- Identify the work. Describe in detail what you are going to do including substrate preparation, safety and health issues, overspray protection, type and thickness of foam, time frame for application, clean up. Mention the items that you are not going to do.
- Provide a warranty. Identify your legal responsibility of the work and exclude items that you both agree are not part of the work. For example, unless you have hired a structural engineer to sign off on the project (i.e., accept responsibility) you should advise the owner to verify the soundness of the substrate and specifically state the substrate is the responsibility of the owner. In your warranty consider limiting your damages to the cost of replacing or repairing materials that you have installed and do not cover consequential damages. (I have known contractors that have been sued for thousands of dollars for a few hundred dollar leak repair.
- Be cautious with retrofits and recoating jobs. When performing a maintenance contract, retrofit or re-coating job, clearly state in your proposal and warranty that you were not the original contractor and pre-existing conditions are not covered. Many contractors have paid damages on the shoddy work of others because they failed to protect themselves. For example, if the owner rejects a recommended substrate preparation, skylight repair or edge flashing due to costs, you still could be liable for damages even if you have a signed statement that he is responsible for those items. Why? Simple, a judge or jury considers the contractor to be the expert not the building owner and will lean his direction unless the written agreement contains specific information that fully explains the consequences of failing to accept the original recommendation. If you have not identified substandard work and clearly warned the owner that the maintenance work may not fix the underlying problems, you could be liable for re-roofing or re-insulating a whole building
- Maintain good job records. Many lawsuits are won by the party having the best written documentation of the project. Document everything pertinent to the project including, change orders, job site conditions, work performed daily, payments, etc.
- Establish a written payment schedule and procedure. Identify how the work will be approved for payment (interim and final). In larger projects 3rd party inspections may prove beneficial to determine if the project is finished and payment due.
- Check out your client’s payment history. Find out if your prospective customer has a history of slow pay, law suits against contractors, poor financial situation or other negative issues regarding contractors. Many times you can draw out the prospect by asking about the work he has had in the past. If he has a long litany of contractor horror stories, you should keep this in mind. Check out the contractors that have performed work for him in the past and ask their opinion of the experience.
Finally take responsibility for mistakes and problems and take care of problems right away. Communicate with the building owner if situations occur. Don’t wait for him to discover the foam is shrinking or the coating is delaminating. Develop a plan of action that addresses the problem and gives the owner peace of mind.
In conclusion, anticipate that every job could end up in court. Use your common sense to protect your interests.