The legislature in Maine has earned a reputation for piling on law that affects construction contractors. This month's Maine Supreme Court decision, between a contractor and a homeowner, illustrates the point.
A property owner needed plumbing and HVAC work for the new home he was building in Brunswick, ME. The work went to a local contractor in two contracts totaling $56,990, plus a third oral contract for $2,478 on a vacuum system. That should have been good work - especially when the property owner agreed to pay an additional $17,464 for changes. But there was a problem. The property owner ran short of cash before work was done - promising a check "in a week or two" and later paying with a non-negotiable check. After several demands, The contractor walked off the job, leaving $3,000 in work unfinished and an invoice for $2,995 unpaid. Eventually, the contractor filed suit under Maine's Prompt Pay Act. That raised the stakes considerably.
The Prompt Pay Act, charges an owner 1% per month on any amount wrongfully withheld. But that's just the beginning. Section 1118(4) requires that a court or arbitrator award attorney fees and expenses if payment was wrongfully withheld. The property owner's attorney fees would eventually exceed $10,000.
The property owner counterclaimed for breach of contract, negligence and violation of Maine's Home Construction Contracts Act. That doubled the bet once more. Title 10 of the Home Construction Contracts Act requires 14 very specific notices and disclosures in residential construction contracts. Omission of any one of these notices is an unfair trade practice under Maine law, making the contractor liable for damages plus attorney fees and costs.
So either the property owner or the contractor was going to be liable for over $20,000 in attorney fees on a $56,990 job.
At the trial court, the contractor won an award of $6,468 for damages plus $10,000 in attorney fees. The property owner wasn't satisfied. He appealed to the Supreme Judicial Court of Maine. The Supreme Court decision wasn't good news for the contractor. The justices reversed the award of attorney fees, penalties and interest on the grounds that the contractor hadn't finished work on the first two (plumbing and heating) contracts. The final payment of $2,995 on those two contracts wasn't due yet and had not been "wrongful-withheld". Contractor was justified in walking off the job and was entitled to damages for breach of contract. He wasn't due an award under the Prompt Pay Act for those contracts. But failure to pay on the third (vacuum system) contract was a violation of Prompt Pay Act. So the property owner would have to cover some portion of the contractor's attorney fees on that issue. The Supreme Court sent the case back to the trial court to tie up the loose ends.
Maine, like many states, is trying to protect consumers (property owners). That's the Home Construction Contracts Act. Maine is also trying to redress grievances contractors have about slow payment. That's the Prompt Pay Act. But in this case, Maine law was the problem, not the solution. Here's why.
Both the contractor and the homeowner planned to recover their attorney fees under Maine law. So they could afford to litigate this $2,995 dispute for years - nearly four so far. Conceivably, both the contractor and the property owner could have been awarded attorney fees, each paying the fees of their opponent! Obviously, that's not what the Maine legislature had in mind. With the very best of intentions, Maine has created a trap for both contractors and property owners. Cases that should be settled in small claims court can now escalate to the Supreme Court.
So What's a Maine Contractor to Do?
Here's what not to do. Maine's Attorney General offers a model home contract. But read the disclaimer before adopting this agreement: The Maine Attorney General does not guarantee that this model contract satisfies all legal requirements. That's good, because the AG's model contract doesn't comply with either Maine law or Federal law.
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