With the rapid growth of Texas, we have seen a lot more property owner/contractor disputes lately.
It is EXTREMELY important, therefore, to make sure your contractor agreements are in writing.
The definition of a written agreement can be very broad and encompass a lot of different types of writings.
Lately, we have been seeing a lot more disputes between property owners and contractors than we normally do. I have some theories about why this is true. Texas is basically a tinderbox for contractor/property owner disputes because –
Texas is growing at a rapid pace and, as a result, developers and property owners are working hard to try to meet the increasing demand for housing, office space, retail, etc.;
That increased demand has allowed unqualified general contractors to get hired for bigger jobs; and
The overall labor shortage has hurt contractors looking for subs.
As a result, people are calling our office on a weekly basis to ask us to help resolve their contractor disputes. Now don’t get me wrong – I always appreciate the work. Its why we are here, after all. (On a work basis – not an existential one).
But if we can help you avoid some of the frustration of fighting with contractors, we certainly would like to do so. And then you can get back to hiring us to help you buy more properties.
So that’s what this week’s blog entry is about – contractor agreements and what is important to help avoid disputes. Now, we are not going to cover everything – there’s just too much. So we will have to circle back to this issue in a few weeks to finish our discussion.
Write that Stuff Down
I have lived in Texas all but two years since 2001. So I get it. I understand how a lot of people like to do business here. A handshake was good enough for your grandfather and its good enough for you. Except its not.
I cannot stress this enough – please make sure all of your agreements are in writing. PLEASE MAKE SURE ALL OF YOUR AGREEMENTS IN WRITING.
First, its quite possible that your contractor agreements are not enforceable unless they are in writing. If you are not familiar, most states (including Texas) have a Statute of Frauds (“SoF”). Under the SoF, certain agreements HAVE to be in writing and signed by the person against whom they are to be enforced. There are two specific contracts that are covered that may affect property owners –
Contracts that will not be completed within one year; and
Sales of real estate (though not contracts that are just incidental to real estate).
So its entirely possible that your vendor agreement is not even enforceable unless it is in writing.
But, of course, even if a verbal agreement is enforceable, its still a terrible idea. Its way too easy for two sides to disagree on what is required from the contractor if the agreement is verbal. And there is no very difficult to determine a) if there was a breach of the agreement and b) if there was a breach, what is the remedy?
So once again, please make sure your contractor agreements are in writing.
But What is a Writing?
If you do not have a ten page explicit agreement with your contractor, do not panic. You may have more of a contract that you think.
Texas has adopted the Uniform Electronic Transactions Act. That means that electronic signatures are valid and enforceable. I’m sure you already knew that – you probably use something like Docusign all the time.
But it also means that there are other electronic documents that can constitute a written agreement. For example, Texas Courts have interpreted the UETA to mean that emails are sufficient to constitute an agreement. And it is certainly possible that text messages could form the basis of a written agreement. And for both emails and text messages, they do not have to be in a single place. Multiple emails or texts could theoretically make up a written agreement.
A contract only needs three things –
Offer by one party;
Acceptance by the other; and
Consideration (which is an entire separate topic that I will cover at some point).
And because electronic signatures are accepted in Texas, we can look to a lot of different areas to determine whether there was an offer, acceptance, and consideration.
Well we didn’t get very far into the details of what is important in a contractor agreement. But I hope its clear now that – at the least – they should be in writing.