Best Defense: Signed, Sealed, Delivered – Your Contract
By Kris Thompson, Esq.
Having a signature from a customer on your home inspection contract can greatly increase your ability to defend yourself if you are sued.
In question and answer sessions, at round table discussions, and during consultations with home inspector clients, inspectors bring up the same problem about their inability to get a signature on a contract. Usually the comment goes something like this: “It’s just impossible to get a signed contract back from the customer before I do an inspection. None of the agents I work with will get it back to me in time and they always demand I get the inspection done on short notice.”
Let’s talk first about the consequences of not getting a signed contract if a buyer sues you for negligence. Consider the scenario where a buyer claims you failed to discover mold concealed behind dry wall.
With no signed contract, you would have to argue that you had an oral contract with the buyer. The buyer (after talking to a plaintiff’s lawyer) would probably deny ever agreeing to the terms in the written contract. If you were unable to persuade a jury that the buyer did see and specifically agree verbally to the written terms of your contract, you would lose all the protections available in your contract. The buyer, after some “wood shedding” by his or her lawyer, will come up with all sorts of distortions about what you said. By the time the buyer is finished recounting their recollection of your statements, it will sound like you guaranteed the quality of the home inside and out. This will make defending your case much more difficult. They may claim that you promised to report mold, or promised to “check the walls for mold.” This kind of ambiguity will create risk in front of a jury. Worse, it is a sad but true fact that sometimes witnesses in trial tell outright lies. In a “he said, she said” scenario, it’s more difficult to prove the buyer is lying.
As a practical matter, it also may make it difficult to collect your fee if the agent or buyer changes their mind about the property after you did your work. In a small claims court hearing the buyer may deny ever hiring you.
If you do have a contract signed by the buyer, the court may not even allow the jury to hear the buyer’s testimony about what you said you would do. (This is called the “parole evidence rule”). There is no longer any doubt about the terms of the contract. And most contracts in the field today – like the standard CREIA (Calif. Real Estate Inspectors Ass.) contract – contain a number of protective provisions that your lawyer can use to defend you. This may result in (1) a shorter statute of limitations, (2) arbitration of the claim, (3) clear exclusions from the inspection (such as mold), and (4) no liability for concealed defects. These are powerful tools to use in litigation.
If you are new to the profession, talk with seasoned professionals in the industry and leaders in CREIA. They can provide you tips on how to get your contracts signed without losing business. And if the agents are the problem, remind them that they don’t go to work without getting a signed contract first.
Reprinted with permission from The Inspector, published by CREIA (Calif. Real Estate Inspector Association).
About the Author
Mr. Thompson is an accomplished litigator and consultant with significant experience in real estate law, including inspector negligence, mold, fraud, real estate agent negligence and breach of contract, employment law and all facets of business law. He can reached at kthompson@thompsonalessio.com or 619-233-9100.