Many contractor documents contain language indicating that the job being presented to the consumer — and its pricing — is only an “estimate” or a “proposal.” These agreements usually go on to state that if the consumer signs the agreement, it is up to the contractor to “accept” the proposal, usually within 30 days, at which time the parties will be in a binding contract.

Many contractors say they like this type of language in their agreements as protection against an underpriced or mismeasured job or against unforeseen problems with the job that may cost them more time and money. All valid concerns, but there are three typical problems with this type of “estimate” language:

  • The contractor must communicate to the consumer that the estimate has been accepted. In many jurisdictions the contractor is required by law to countersign a copy of this type of estimate and return it to the consumer within a certain period of time.
  • This type of language often will assist your competitors in helping the consumer cancel your sale. Competitors will explain that consumers don't really have a contract, only an estimate that they can get out of when they want to.
  • There is usually no need for this type of language in an agreement in the first place. It is rare for a contractor to try and get out of a contract and find the consumer unwilling to let them out. Even then, so long as the consumer's deposit money — if any — is promptly returned, and there has not been any unusual delay in canceling the contract, the consumer usually will not have been harmed and will have no claim for damages against the contractor.

    • The better solution is to have a clause in the agreement with the consumer indicating that, in the event of “unforeseen events” (which should be defined to include incorrect pricing or the discovery of structural defects), the contractor will have 30 days to refund the consumer's deposit and cancel the contract.

    This allows the parties to enter into an actual binding contract at time of sale, and it still gives the contractor a reasonable opportunity to back out of the agreement. — D.S. Berenson is the Washington, D.C., managing partner of Johanson Berenson LLP (www.homeimprovementlaw.com), a national law firm specializing in the representation of contractors and the home improvement industry. He may be reached at [email protected]

    This article is for informational purposes only and should not be construed as legal advice.