What is New York General Business Law § 771? It is a statute governing home improvement contracts. This section is particularly important because it specifies items that must be included in a home improvement contract in order for it to be binding.
Failure to comply with the requirements of section 771 can render a contract void. A contractor, may however, still attempt to recover for work performed under a theory of quantum meruit. That is, assuming the contractor is licensed.
What are the requirements of GBL section 771? First, and most importantly, the contract must be in writing and signed by the parties. Additional basic information is required, such as, the name, address, telephone number and license number of the contract. For the majority of contracts, these items do not present a problem. However, the remaining requirements of § 771 are where contractors may run into trouble.
The approximate start and completion dates must be in the contract, including whether time is of the essence and what circumstance or factors may change a completion date. Additionally, the contract must include a description of the work to be performed. While that may seem simple enough, that includes a description of the materials required, including specific information as to identify the materials (such as, make and/or model).
Other considerations for the contract concern payment. The contractor must include a detailed description of the payments due, especially if they are “progress payments.” The contractor must specify when a payment is due, why, what work has been performed, and the payment must equate to the work referenced. The contract must also indicate whether the contractor is being paid on an hourly rate or “time and materials” basis. Moreover, the contractor must put the owner on notice that the contractor is required to maintain these funds (received from the owner) on deposit. If and when funds are used, the contractor is required to keep a log of the disbursements incurred. This means that the contractor is not permitted to use owner A’s funds on owner B’s job and vice versa.
The contractor must also make the owner aware of the fact that (1) any subcontractor or material-man hired, who has not been paid, is entitled to file a lien on the premises; and (2) that the owner has a right to cancel the contract within three days.
If these requirements have not been met, the owner has a strong argument that no contract, or meeting of the minds occurred. The more terms that are left out of the contract, the stronger the argument bends in the owners favor and voiding the contract.