In Legis Update: Bill to benefit contractor, sort of . . . I wrote about a bill that would amend the venue requirements of a complaint filed in the Special Civil Part under the Contractor’s Registration Act. The Assembly version of the bill was reported out of the Assembly Judiciary Committee on March 8th and will be considered by the full Assembly on Monday, March 15th. I will let you know what the outcome of the vote.
Posts Tagged ‘Contracts’
Legis Update: Contractor Registration Bill to be voted on
Written by Mike Pisauro on March 11th, 2010 in Uncategorized | No Comments »Legis Update: Bill to benefit contractors, sort of . . .
Written by Mike Pisauro on February 22nd, 2010 in Contracts, Courts, Home Improvement | No Comments »S1032 sponsored by Connors would allow a contractor or a homeowner to bring a lawsuit in the county where the property is located if the lawsuit is under the Contractor’s Registration Act. While I am not sure why a contractor would be suing under the act, the act changes the where a plaintiff can file a lawsuit.
Normally, lawsuits over $15,000 are filed in the Law Division of the Superior Court of NJ. In the Law Division a plaintiff can file suit where they live, where a defendant lives, or where the action occurred. That would mean a contractor could file suit in Law Division in the county where their business is located. S1032 does not change this. S1032 is meant for cases under $15,000. For cases under $15,000 a lawsuit can be filed in the Special Civil Part. In the Special Civil Part a lawsuit can only be venued where at least one of the defendants residences. S1032 is meant to cover these kinds of cases. The bill statement provides that its intent is for:
Home improvement contractors who are located in the State’s beach communities have found it difficult to pursue lawsuits against homeowners who have defaulted on payments for services rendered because these homeowners do not live in the same counties as their vacation homes.
So under the bill when a contractor does work on a shore house where the owner does not live, they can do not have to go to the county where the owner lives, but can file suit in the county where they did work. The contractor could have always filed in law division no matter what the amount of damages, but the down side would be that a lawsuit in the law division can take several years before there is trial. In Special Civil Part the cases move much faster.
Since the bill only applies to non-commercial property, hopefully the courts will not consider purely rental properties as commercial. If so the bill would not apply and the contractor would be back to either filing in Law Division or filing the lawsuit in the county where the property owner lives. Another work around would be for the contractor’s contract to provide where a lawsuit may be filed.
Do you know when your contracts end? It may not be when you think.
Written by Mike Pisauro on November 4th, 2009 in Basics, Contracts | No Comments »We are rapidly reaching the end of the year. It is probably as good of a time as any to take some time aside from running your business to take a look at your future by taking a look at your past. What do I mean by that? Well over the last year or so, you have probably signed many contracts for your business. You may have signed a contract for janitorial services, a lease on your office space or office equipment. You may have signed a contract to supply you with widgets to be incorporated in the products you sell to your customers.
You should review these contracts and look at when the contracts will end. Are you close to the end of the contract? Even if your contract says it will end on December 31st, that does not mean it will has to or will end on that date. Many of these contracts will have a renewal clause in them. These clauses allow the contract to be extended under certain circumstances. There are at least two different kinds of renewal clause.
One type of renewal clause provides that you can extend the contract. The clause will likely provide for the length of the additional term of the contract as well as the price increase of for the new term. In order to be effective you must take an affirmative action to renew the contract. You must notify the vendor in writing that you wish to extend the contract. For these types of contracts you have to decide at some point prior to the expiration of the contract whether the price increase built into the renewal clause is more or less than what you could get a new contract with a different vendor. Obviously if the renewal clause is less than what a new contract would cost you, you would renew the contract. If the renewable price is greater it is either time for a new vendor or at least a discussion with your current vendor to renegotiate a contract.
The second type of renewal clause is the automatic renewal. This type of clause provides that the contract will automatically renew if you do not take affirmative steps to inform your vendor that you do not want the contract to renew. Again you must send a letter to your vendor and notify them that you do not want to renew the contract.
Both kinds of renewal clauses usually have a deadline by which you need to act. This deadline can be days before the end of the contract or it can be several months before the end of the contract. You need to know this date. There is nothing worse to find out that your contract renewed and you are stuck paying more for something than have to because your contract automatically renewed. Taking a few minutes today can save you lots of the money in the future.
HINDSIGHT AND FORETHOUGHTS ON CONTRACTS
Written by Mike Pisauro on April 20th, 2009 in Basics, Contracts | No Comments »There is a common misconception that most business owners seem to have regarding the collection of customer owed debts. Many times a business owner has come to me because their business is owed a couple of thousand dollars from a customer or two or more and they want to sue those customers in order to recover the money. The owner either cannot afford or is unwilling to write off the bad debt. Maybe they had to borrow money in order to meet their obligations under the contract; or perhaps, since the debtor has not paid, the business owner had to borrow money to cover expenses that would otherwise have been covered.
Sometimes there is no contract or after reviewing the contract, I have bad news for my client. Yes, the business owner has a good case. But that several thousand dollar debt will likely take several months or longer and may cost several thousand dollars in attorney fees to resolve in court – and that does not even take into account collecting on the judgment. The client is also not entitled to interest on the outstanding debt until a judgment is received. Lastly, the Court will not order the debtor pay the costs associated with the litigation.
Not surprising, we follow the American rule wherein each party pays its own costs associated with the lawsuit. Obviously, no business owner wants to hear that client is also not entitled to interest on the outstanding debt until a judgment is received. Lastly, the Court will not order the debtor pay the costs associated with the litigation.
Not surprising, we follow the American rule wherein each party pays its own costs associated with the lawsuit. Obviously, no business owner wants to hear that pursuing the debt may cost more money and that, in the end, the money collected will be reduced by attorney fees and costs. The delinquent customer may even cost the business owner more money in the form of interest they had to pay to borrow money to keep their own vendors happy and their business afloat. In essence, these interest payments reduce that judgment even more. Even if the business owner did not have to borrow money, at the very least, they would be unable get the use of the money owed until it is paid by the debtor. So while they may have won the case, at the end of the day you must really ask did they really win?
If you knew all of the above before you signed the contract, what could you have done differently? In the ideal world, you would have gotten paid up front but, as we all know, we don’t live in an ideal world, so what is the backup plan? In the real world, we must insist that all business relationships be made and conducted in writing. If you can’t afford not to get paid, make sure that the transaction is committed in writing – i.e., a contract.
Now, how can a contract be prepared that will protect you in case your customer does not fulfill their obligations? Along with the many concepts that need to be addressed in a contract, there are two that should be included to ensure that the scenario described above doesn’t happen. First, the contract should provide that, if the customer does not fulfill their obligations and you have to sue them, they must pay the costs of your attorney as part of your damages. Second, if payment is not received by you on the due date (and maybe any grace period) the outstanding debt will begin to accrue interest.
These are just two very common concepts that you should consider in any contract you enter into. There are many more concepts that should be addressed in your contracts. Which concepts and how they should be addressed are dependent upon what you are selling/buying, relative strength in negotiations between the parties, and the nature of your business. If you are unwilling or unable to write off the bad debt from a transaction, it is a transaction that is important enough to warrant consulting with an attorney so that you will be protected in the event of a disagreement or the other side’s failure to perform. To borrow from the old adage, an ounce of prevention may save you thousands of dollars later.
A little bit of forethought on constructing the appropriate contracts for your business can save you a lot of regret in hindsight.
The article above is a reprint from my first newsletter from July 2006, but a conversation over the weekend made me think it would be useful to post it in the blog.