DON’T BELIEVE EVERYTHING YOU READ IN A CONTRACT

You May Have Options, Especially With Really Restrictive Contract Language

We have all been there.  You hired a contractor for a house project – maybe you interviewed several and picked the one you liked the best. Or, more likely, you had a mini (or major) emergency that made it impossible for you to choose anybody other than the first one to show up. Either way, you read and signed the contract, paid your money, and now the job has gone awry. When you go back and re-read your contract, you realize that not only did you waive just about everything, including, possibly, your right to sue the contractor in a court of law. .  If the contract does allow you to sue,  you agreed to a ridiculously short time frame within which to do so. Is that right? Are you sunk?

Not necessarily. We have helped many clients successfully negotiate with contractors over unsatisfactory work.  And, in a recent unanimous New Jersey Supreme Court decision, Sergio Rodriguez v. Raymours Furniture Company, Inc., the Court declared that a private agreement that contradicts the public-purpose of the New Jersey Law-Against-Discrimination is unenforceable.  This case, which was tried under the New Jersey Law Against Discrimination ((N.J.S.A. 10:5-1 to -49) (“LAD”), has parallels to home contractor contracts that are more restrictive than the Consumer Fraud Act (CFA).  Thus, there is hope for consumers caught in restrictive contractor agreements.

In Rodriguez, Raymour & Flannigan’s employment application contained a provision that Rodriguez, if hired, agreed to bring any employment-related cause of action against the employer within six months, and waived any statute of limitations to the contrary.  Mr. Rodriguez was fired, and seven months later, brought a lawsuit against Raymour & Flannigan under the LAD.  The statute of limitations under the LAD (the time in which you have to sue) is two years.  The question for the Supreme Court was whether private parties can contract away the LAD’s statute of limitations.

The Court analyzed two issues.  First, the purpose of the LAD, noting that the law gives the state power (and responsibility) “for the protection of the public safety, health and morals and to promote the general welfare and in fulfillment of the provisions of the Constitution of this State guaranteeing civil rights.”  N.J.S.A. 10:5-2.  Second, the Court analyzed the basic principal that people have the freedom to enter into contracts and that courts should not lightly interfere with that freedom.  However, the right of freedom to contract is not absolute and it cannot be used to override public interests.  The Court concluded that the public purposes of the LAD and the employment agreement were in direct conflict because shortening the time to bring a claim under the LAD directly undermines the rights and remedies available to victims of discrimination.

Because the importance of the public policy behind the LAD trumped the importance of freedom of contract, the Court ruled the statute of limitations waiver contained in the employment agreement was unenforceable.  Interestingly, the Court went on to stress that the decision was rooted in the unique importance of the LAD, a sign that the holding was intended to be narrowly interpreted.  However, it leaves open the question that other contractual provisions may be held unenforceable using this same metric of public importance versus the right to private contract.

This brings us back to our home improvement contract quandary. The Court’s reasoning in Rodriguez may apply to cases brought against contractors under the CFA, where a contractor or merchant has inserted contract terms that violate protections the CFA provides consumers.

The public policy behind the CFA is clear, long-standing, and repeatedly invoked: “to prevent deception, fraud or falsity, whether by acts of commission or omission, in connection with the sale and advertisement of merchandise and real estate.” Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 376–77 (1977).  Since its enactment in 1960, in which only the Attorney General was able to enforce the law, the Consumer Fraud Act (CFA) has been amended to further protect consumer rights.    By 1972, the CFA was expanded to allow private citizens to enforce its protections.   In 1975, the CFA was expanded again to include real estate, which includes contractor/homeowner contracts.

The Rodriguez case provides persuasive basis to review consumer contracts and to perhaps set aside those provisions that deviate from the CFA’s strong public policy goals.

In our experience representing clients against shoddy contractor work, we see several take-aways: Most important, always read the contract!  Second, if you don’t feel comfortable, have an attorney review it.  Third, the Rodriguez case may provide an opening for similar relief in situations that fall under the Consumer Fraud Act.