Answer: Yes, a homeowner who repeatedly hires contractors and does not pay them, has no apparent intent to pay contractors, or makes payment difficult to recover can be sued for Unfair and Deceptive Trade Practices (“UDTP”). A successful UDTP claim automatically triples the amount recovered in a lawsuit.
Unfair Acts, Practices, and Methods of Competition in North Carolina
Section 75-1.1 of the North Carolina General Statutes deals with unfair acts, practices and methods of competition in North Carolina. Cases involving Section 75-1.1 include false advertising, misnaming and misrepresentation, misleading trade or product names, “free” goods, deceptive non-disclosure, false disparagement of competing products, misrepresentation of business status or connections, misuse of the term “guarantee,” misuse of “seals of approval,” fraudulent sales schemes, deceptive pricing and lottery merchandising. Also known as the “Unfair and Deceptive Trade Practices Act” or “Unfair Trade Statute,” the law is generally considered a consumer protection statute, although its application is not limited to consumers, but may help businesses as well. Concrete Service Corp. v. Investors Group, Inc., 79 N.C. App. 678, 340 S.E.2d 755, cert. denied, 317 N.C. 333, 346 S.E.2d 137 (1986).
UDTP Claims Against Homeowners
Residential contractors may work for months or years without having trouble collecting payment from a customer. However, when a contractor does come upon that homeowner who refuses to pay, it may be the homeowner’s practice to refuse payment, instead of any defect in the contractor’s work. A 1987 court case in North Carolina addressed whether a UDTP claim could be levied against a homeowner who employed contractors, then refused to pay them the agreed-upon amount as a matter of course.
In Jennings Glass Co., Inc., the defendant homeowner engaged the plaintiff general contractor’s services to furnish labor and materials, principally, glass, products, and framing materials to be ordered and installed by the contractor plaintiff, to make the homeowner’s residential home waterproof and burglar resistant. 362 S.E.2d 578, 583 88 N.C. App. 44 (1987). The trial court found that:
- The homeowner and contractor entered into a contract that was both written and oral, whereby the contractor would supply and install certain glass and related material to the premises of the homeowner.
- The homeowner repeatedly enlarged the scope of the work, with promises of additional, future payment.
- Homeowner repeatedly told contractor that, although payment was unavailable for various reasons, contractor should continue working and that payment of some sort could be anticipated from the homeowner.
- The homeowner attempted to persuade one of the contractor’s employees to do additional work, outside the scope of the contract, and the homeowner said that he would not otherwise pay any amounts owed to the contractor.
- A few days prior to the contractor’s completion of the project, the homeowner informed the contractor that the work was unacceptable and the contractor would not be paid; when the homeowner was pressed for what aspects of the work were unacceptable, he refused to respond.
- The contractor had substantially completed all items called for in its contract with the homeowner, and had furnished materials and labor to complete extra work ordered by the homeowner.
- When the contractor requested payment for a second time, the homeowner told the contractor that if he filed a lawsuit, the homeowner would have his attorney draw out and delay the matter for the greatest period of time possible, and cost the contractor significant legal fees.
Additionally, the trial court judge found that the homeowner has exhibited an intent to deal with contractors, such as the contractor, deceitfully and in bad faith in examining the homeowner’s conduct in his dealings with other contractors employed by him, in conjunction with this and other construction projects, as follows:
- That a concrete supplier previously dealt with the homeowner, and at the end of the concrete project contracted for by the homeowner, the homeowner falsely accused the concrete supplier of “shorting” him in their deliveries. The homeowner, offered to pay the concrete company approximately one-half of what was due and owing to the company. The concrete supplier instituted litigation against the homeowner and obtained a default judgment for the amount owed.
- That a construction company provided grading and excavation work to the same residential property, which the homeowner unjustly and unreasonably refused to pay as he had initially agreed. That at one point, the homeowner attempted to cause the construction company to accept a post-dated check for its services. The construction company was forced to institute legal proceedings against the homeowner in order to collect the amounts due.
- That an electrician contracted with the homeowner and regularly billed the homeowner. The homeowner informed the electrician that he must finish the job completely before the homeowner would pay him. The homeowner engaged in a pattern of conduct whereby he falsely promised the electrician that he would be paid if he continued working. Then, the homeowner unjustly and unreasonably refused to pay the amounts he owed to the electrician, which caused the electrician to institute suit against the homeowner, which was settled after judgment during the homeowner’s appeal for less than the amount owed.
- That a rental and sales company rented equipment to the homeowner. The homeowner unjustly refused to pay the rental and sales company’s statements, offered to pay far less than the amount owed, and caused the rental and sales company to institute legal proceedings against the homeowner to attempt to collect the amounts justly owed it by the homeowner.
- That a contractor provided grading work at other real estate claimed to be owned by the homeowner. The contractor spent approximately ninety-six hours completing such grading and the homeowner refused to pay on any part of the account. The contractor was forced to institute suit to attempt to recover this debt.
- That a sign company designed and installed a sign at a construction project owned by the homeowner. The homeowner unjustifiably refused to pay the agreed upon price to the sign company and the sign company was forced to institute suit against the homeowner to recover this debt.
Thus, the trial court found that “the [d]efendant routinely engaged in a pattern of deceitful and misleading practices whereby he secured the services and material of various businesses and contractors to his benefit, including the [p]laintiff, without payment or just compensation by the [d]efendant and without the intent to pay such just compensation.” Although the trial court judge determined that the actions of the homeowner in Jennings Glass Co., Inc. did not, as a matter of law, fall within the scope of conduct declared unlawful by N.C. Gen. Stat. § 75-1.1 et. seq., the North Carolina Court of Appeals determined that these factual findings “lead unerringly to a Chapter 75 claim.” Jennings Glass Co., Inc., 362 S.E.2d at 584.
If a homeowner repeatedly postpones project payments; requests more work, but balks at paying more; or has a history of stiffing contractors, they may be setting themselves up for a UDTP claim.
How Can a Contractor Be Protected?
Don’t start work without a contract, signed by both parties. Determining payment obligations after the project has completed is like putting a helmet on while you’re on the way to the hospital after crashing your bike. You have already lost the preventative benefits of a contract and most of your negotiating leverage. If a husband and wife own the home, get both of their signatures on the contract.
Investigate potential clients. If a homeowner raises one or more of these red flags, stop by your county courthouse and search for previous lawsuits filed against the homeowner.
Stop working if the homeowner has failed to meet one or more of their contractual obligations. Don’t throw good money after bad in an attempt to get paid. A homeowner’s promise of full payment once work has been completed, when you’ve already agreed to progress payments, should be viewed as highly suspicious.