Q:I operate a homebased business, and the entire operation takes place in my basement. As a direct result of a contractor's shoddy workmanship on my roof, siding and gutters, my house has sustained damage to both the exterior and interior of my house, which has prevented me from working on my clients' orders. What, if any, recourse do I have against the contractor for damages?

Answer:

The first place to look for the answer is the contract you signed with the contractor. It's important, for several reasons, to have a contract when hiring a services provider.

Most important, you want to get a warranty from the provider in writing that covers both the materials and the work. The contract should also include a detailed description of services so that it's clear to both parties what is to be done. Also include a clause that covers payment provisions. A good way to structure payments is so that they are due as each phase of the project progresses and you accept the results. This way, you do not risk paying for something you are unhappy with, and the service provider does not risk completing a whole project and not getting paid due to an unhappy client. A final important clause is a time deadline on the phases of the project and the whole project--without a deadline, you may find that contractors' completion dates tend to slide considerably. Any service provider who won't agree to at least a minimal one-page agreement with a good warranty most likely isn't one you'd want to hire.

If you did have a contract, be sure to discuss with your attorney the clauses restricting the contractor's liability, if there are any such clauses, as these can severely restrict your remedies. But whether or not you had a contract, you should still consult with an attorney in your state. There are often state consumer protection laws or implied legal warranties that can help you recover losses. Additionally, you can explore a tort claim that the contractor was negligent in performing the work (in other words, did not use reasonable care in his performance).

Actual/Direct Damages

Direct damages are a direct result of the contractor's acts. In your case, these would include the damages to the interior and exterior of your house.

To calculate direct damages (the following discussion is greatly simplified--always consult an attorney), you look at the way to compensate the injured party; these are called compensatory damages. Compensatory damages include expectancy damages and reliance damages, among others.

Expectancy damages compensate you as if the contractor had performed as you expected. For example, your agreement with the contractor was for a new roof for $5,000. Instead, you paid $5,000 and got a leaking, incomplete roof. You hired another roofer to finish the job correctly for an additional $3,000. If the agreement had been performed as you expected, you would have paid $5,000 for your new roof, but instead you paid $8,000. Therefore, your expectancy damages would be $3,000.

Reliance damages compensate you for relying on the agreed performance. For example, relying on the contractor's work to ensure the roof wouldn't leak, you purchased a new living room carpet and couch. Shortly thereafter, it rained, and both were ruined. The cost of replacing these could be calculated as reliance damages.

Consequential Damages

Another type of damages are indirect, or consequential, damages. These are secondary damages that result from the disputed acts. In order to recover consequential damages, assuming they are not validly waived in the contract, they must be foreseeable at the time of entering into the agreement and provable with reasonable certainty.

In your situation, the first question would be whether the contractor knew of your home business and that you could not conduct it without his performance being correct. In other words, was it foreseeable to the contractor that these damages could arise? The second question is whether you can show the lost profits from your business with reasonable certainty. If you had 20 orders placed which you could not fulfill, then you could show exactly how much you had lost. If you had no orders placed but could not do your marketing for that month, then you don't know exactly how many orders you would have received and would have to speculate based on your past business performance as to how much you actually lost. In this case, it would be harder to meet the second requirement for successfully claiming consequential damages.

If this best describes your problem, consult with an attorney about your situation and the state laws. Even if you don't bring suit against the contractor, sometimes a call or two from an attorney can result in a positive outcome. Alternatively, some states have small claims court, where you can bring suit for damages, usually under $5,000, without an attorney; the process is set up to help rectify situations like these. Finally, call your state licensing board and file a complaint against the contractor. Sometimes the licensing boards can help you recover losses as well.

All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.

1 Readers are cautioned not to rely on this article as legal advice as it is
no substitution for a consultation with an attorney and an accountant in your state. Based
on jurisdiction and time, the law varies and changes.