Construction Law

Condo Association Equitably Estopped from Consumer Fraud Act Relief When Its Conduct Resulted in the Violation

After a condominium association president declined a contractor?s request to execute a written change order and directed the contractor to proceed with the additional work, the association was barred from seeking relief under the Consumer Fraud Act (?CFA?) (N.J.S.A. 56:8-1 to -167) provisions requiring that all modifications to contracts for home improvements be in writing. B & H Securities, Inc., v. CKC Condominium Ass?n, Inc., 2008 WL 508082 (App. Div., February 27, 2008).

Defendant Association hired Plaintiff contractor to complete installation of a fire alarm system in its building that had been begun, but not completed, by a prior contractor. After Plaintiff inspected the premises, its engineer, Charles Hamburger, briefly inspected a portion of the building and estimated the time and expense necessary to complete the project. The parties entered into a time-and-materials contract for completion of the fire alarm system , which was necessary for the building to pass a municipal fire inspection.

Upon beginning its work, Plaintiff discovered that the existing installation was the wrong size and violated applicable building and fire protection codes. Accordingly, Hamburger informed the Association?s president, Robert Lyon, of the existing substandard work, informed him that additional time and materials would be necessary to make the system compliant, and suggested that the parties prepare and execute a change order. Defendant?s president declined, protesting insufficient time and the pressure to complete the installation. Plaintiff then completed the work, including making the existing portions code compliant.

Defendant paid only a portion of Plaintiff?s invoices, and Plaintiff sued to collect the balance due. The trial court found Hamburger?s testimony more credible than that of Lyons, and questioned whether a change order was even necessary when the contract clearly contemplated that Plaintiff was to complete the job to allow Defendant?s building to pass municipal inspections, and did not specify a date or time certain for completion nor set the cost. The judge found that Plaintiff had performed the contract by installing a system that satisfied the municipal inspectors and that Defendant had breached by failing to pay the full amount due.

The trial court rejected Defendant?s contention that Plaintiff had violated the CFA by failing to provide a written modification to the contract. He judge concluded that Defendant was equitably estopped from seeking sanctions under the CFA, based on Lyon?s response to Plaintiff?s request for a written change order.

The Appellate Division affirmed, holding that, even if a change order were required, Defendant was equitably estopped from asserting a CFA defense where its conduct led the Plaintiff to change its position to its detriment. In reaching its opinion, the appellate court relied on Joe D?Egidio Landscaping, Inc., v. Apicella, 337 N.J. Super. 252, 256-57 (App. Div. 2001), in which the court held that a homeowner who declined a written contract for driveway paving, based on his personal relationship with the contractor, was equitably estopped from invoking the CFA to render his agreement with the contractor unenforceable. ?[O]ne who induces the alleged wrongdoing should not benefit as a result of it.? Id. at 257.

Rejecting the condominium association?s arguments, the appellate judges found no meaningful distinction between B & H Securities and Joe D?Egidio Landscaping.

Full post as published by Construction Litigation Law Blog on March 04, 2008 (boomark / email).