Are Your Contracts Enforceable under the New Consumer Protection Act?

In a previous post, I described the new Pennsylvania Home Improvement Consumer Protection Act (the "Act"), which takes effect on July 1, 2009, and identified which types of contractors are required to register. If the Act applies to you, it is important that the contracts you enter into for home improvement work conform with the Act’s requirements. A failure to do so will generally prevent you from being able to enforce the contract if your client fails to pay.

In order to comply with the Act, contracts must:

• be legibly written and contain the registration number of the contractor along with the Bureau of Consumer Protection’s toll free number, which currently is (888) 520-6680;
• be signed by the contractor and the homeowner or their respective agents;
• lay out the entire agreement related to the work to be performed and include copies of all required notices and special clauses;
• include the date the contract is entered into and the approximate starting and completion dates;
• contain the name, address (no PO boxes) and telephone number of the contractor and any subcontractors known at the date of signing the contract;
• describe the work to be performed, the materials to be used, and provide specifications that cannot be changed without a written change order signed by the parties;
• include the total sales price due under the contract, along with any down payments and amounts advanced for the purchase of special order materials;
•  identify the current amount of insurance coverage maintained by contractor with minimum amounts of $50,000 each for personal injury liability and property damage; and
• provide owner with a "right of rescission" which allows the homeowner to rescind the contract within three business days of signing without penalty.

However, even if all of the above conditions are met, a contract will be generally voidable under the Act if it contains any of the following clauses:

• hold contractor or subcontractors harmless in matters of liability;
• waivers of government health, life, safety or building code requirements;
• confession of judgment;
•  waiver of right to jury trial or any rights under the Act by homeowner;
•  an assignment of or order for the payment of wages or other compensation for services;
•  any clause prohibiting homeowners from asserting any claim or defense they would otherwise have under the contracts;
• any award of attorney fees or legal costs to contractor;
• any provisions relieving contractor of liability connected to contractor’s collection of payments or repossession of goods;

Also, a contract cannot contain an automatic or recurring renewal provision unless the contract clearly and conspicuously states a procedure through which a homeowner can cancel the renewal through written notice to contractor via first class mail that is postmarked at least three business days before the renewal is to occur. In addition, the contractor must notify, via mail, the homeowner of such right to cancel the renewal no earlier than 20 days nor late than 10 days before the renewal.

Further, an arbitration clause may be attached as an addendum, but it must strictly adhere to the form required under the Act. Finally, a fully executed copy of the contract must be provided to the homeowner on the day of signing. Please let us know if we can help if you have any questions regarding your contracts or the Act in general. Also, for more information, please see the PA Attorney General’s list of related FAQs or the Building Industry Association of Lancaster County’s information page.