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Who’s going to pay for this emergency water damage job?

Dear Mr. Cohen,

I did a pretty big flood at an apartment complex at 3 AM a few months ago based upon the Property Manager giving me a verbal go-ahead. (He didn’t want to get out of his nice, warm bed!) But now I find out their insurance company is denying the claim and the complex says that my agreement was with the insurance company so they can’t (won’t) pay me. (Somehow the PM was “unavailable” every time I tried to get a signature authorizing me to do the work.)

Any ideas or am I just out almost 10,000 dollars? And if so, what can I do to prevent this next time?

Drowning in Minneapolis

Dear Drowning,

When calls come in the middle of the night to perform emergency services at a property sometimes people disregard or postpone signing a written contract in favor of an oral contract, “to save time.” If your instincts didn’t tell you that this wasn’t a good idea at the time, you can probably tell by now that you want to avoid this in the future. Get it in writing from the start! That said, generally, oral contracts are enforceable, but there are limitations. There are several issues to look out for that can affect whether you get paid in this case.

The first question is if you have a valid contract. Whether written or oral, contracts have certain basic elements that must exist in order to be valid and therefore enforceable in a court of law. There must be 1) an offer and acceptance, 2) consideration (which is a bargained-for exchange of something of value between both parties), 3) key terms regarding price, payment and the time of performance and finally 4) mutual consent or a “meeting of the minds” as to the terms of the contract.

In your case, there’s an offer to perform emergency flood dry-out services at the complex, and for the sake of argument, we’ll say you do this at industry-standard prices. The acceptance of the offer was getting permission to start from the property manager. As far as mutual consideration, the apartment complex receives something of value in the form of your flood dry-out services, and in exchange, you receive payment (again for the sake of argument, we’ll say and you expect payment when the insurance company makes a determination of coverage for the flood damage, but not only if the damage is covered). The performance element of the contract was met when you completed your services. Finally, there’s the meeting of the minds, where you and the apartment complex had a “mutual understanding” of what was to take place under the contract.

There are other issues, though, with some of the essential terms of the contract. First, your contract is with the apartment complex, and not with the insurance company. The Property Manager had authority to enter into a contract with you, on behalf of the complex, for the purpose of having the complex’s flood damage remediated. While the complex may say that only the insurance company is supposed to pay you, the bottom line is the insurance company did not call you and ask for the services to be performed. That came from the complex. The complex received the benefit of your services, and the complex owes you payment. There should be no question that you would not do the work for free, or that the complex would be able to receive free services even if the insurance company did not cover the claim. Whether the complex is going to pay you from insurance proceeds or not might be an additional term to the contract, but it sounds like that wasn’t contemplated between you and the complex at the time of making the contract.

If the complex intended for the insurance company to pay you directly from insurance proceeds, that would have been a separate term to add to the contract. It is pretty unlikely that the Property Manager can say there is no contract simply because he avoided you every time you tried to have the contract signed. He knew you were providing services and even gave you authorization to do so.

An oral contract can be hard to prove because there usually is not enough physical evidence to show that the contract exist, much less prove the terms of the contract. One way to show a contract exists is by starting performance. However, an oral contract may not be valid or enforceable if there is a mutual misunderstanding as to the terms, or if there are missing essential terms, such as price, time of payment, time when services are to be rendered and what kind of services are to be rendered.

In the end, a court will look to see if your oral contract had the necessary terms to deem it valid and enforceable. Without enough evidence, it will be difficult to prove that there was a mutual understanding as to when payment was to be made and under what conditions. Make it easier on yourself next time and before you start work on a job, make sure there is a signed contract in your hand.

Sincerely,

Harvey Cohen

After graduating from Stetson, Harvey was employed by the State Attorney’s Office. Mr. Cohen is licensed to practice in Federal and State court. Mr. Cohen began as a solo practitioner and is now the managing partner of over a dozen attorneys and co-council staff. Cohen Battisti Attorneys at Law are great supporters of the Leukemia Lymphoma Society.

Mr. Cohen frequently gives informative seminars to restoration professionals throughout various locations in Florida and the nation. These seminars include: Contractor’s legal rights, Assignment of Insurance Benefits, the Attorney Fee Shifting Statute, Contract Drafting and more.

His firm has handled thousands of insurance claims. Cohen Battisti has represented the restoration industry and has recovered hundreds of thousands of dollars for their clients and the insurance industry has paid for their attorneys fees. To contact Cohen Battisti attorneys please call (407) 478-4878 or visit our website at www.CohenBattisti.com

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