Articles

Case Study: Contract Disputes

By: Owen Chen

Updated: August 12, 2023

Disclaimer:

I am not a lawyer. This article is general information and not legal advice. Consult a qualified legal professional for your specific situation. No liability is assumed for any consequences resulting from using this information.

Introduction:

When embarking on home projects, disputes can be daunting. Using a San Mateo resident’s ordeal as a guide, let’s explore the intricacies of navigating such conflicts in California.

Background: 

A San Mateo homeowner hired a contractor through Home Depot’s network in 2019 for a house addition. The contract is committed to finish the project in 6 months from the date of contract signing. The comprehensive expenses associated with this project amount to $157,000, encompassing distinct components such as a $7,000 allocation for architectural and structural drawing fees and a $150,000 allotment designated for the construction of a 400 square foot house addition. 

Upon the contractor’s request, the homeowner gave an initial upfront payment of $28,000. This sum encompassed various components, notably a $1,000 deposit, a $7,000 allocation designated for architectural and structural drawing fees, and $20,000 material fees, all of which were tendered before the commencement of the project. However, the contractor demanded more money after a few months, citing material cost hikes. When the homeowner declined, the contractor halted work and vanished.

Actions taken: 

• On April 2020, the homeowner filed the complaint with the California Contractors State License Board. 

• On April 2020, the contractor contacted the homeowner and agreed to refund $20,000. 

• Until 2022, the homeowner did get the money refunded. 

• On Sept 2022, the homeowner hired an attorney to settle the case with the contractor. The attorney proposed a settlement agreement wherein the homeowner would accept a refund of $15,000 to bring closure to the matter. However, the attorney stipulated that a portion of this refund, precisely half, would be allocated as compensation for legal services rendered. The homeowner declined the settlement offer and subsequently terminated the legal representation provided by the attorney.

• Commencing October 2022, the homeowner initiated multiple direct communications with the contractor and the contractor’s legal representative. Yet, regrettably, no response or acknowledgment has been forthcoming from either party.

• In Aug 2023,  the homeowner contacted us and wanted to find out what her options were. 

Our Suggestions:

Under California law, for written contracts, a party is afforded a statutory window of four years within which to initiate a legal claim after the breach of contract. 

Nearly four years have elapsed since the said breach occurred. Homeowners should take prompt action to mitigate the risk of forfeiting valuable time.

Steps to Resolution:

Mediation First:

Before any court proceedings, mediation is a contractual requirement. Mediation is part of Appropriate Dispute Resolution (ADR), offering alternatives to traditional lawsuits. It’s often quicker and less costly. Mediation involves a neutral third party assisting both sides to reach an agreement.

Even if success seems slim, based on prior interactions, mediation is contractually obligatory before going to court. Potential mediator sources include the San Mateo Court website, San Mateo County mediation listings, personal referrals, or independent online searches.

In this specific case, given the exigency of time constraints, especially considering prior interactions and the non-cooperative attitude of the contractor, it is advised that the mediation session be allocated a duration not exceeding two hours. 

It is to be noted that the objective of this mediation is not predicated upon a presumption of achieving a settlement agreement.

For more info about ADR, please read: https://www.courts.ca.gov/3074.htm#:~:text=The%20most%20common%20types%20of,or%20watch%20a%20video%20demonstration 

Mediation Resources: 

• San Mateo Court Website: https://www.sanmateocourt.org/court_divisions/adr/map/panelist.php 

• San Mateo County Mediation: https://www.justia.com/lawyers/arbitration-mediation/california/san-mateo-county 

• Hiring an independent Mediator/Arbitrator by Google search or a friend’s reference

Initiate a lawsuit if mediation fails:

Suppose a mutually satisfactory resolution is not achieved following mediation. In that case, it becomes the homeowner should promptly initiate the lawsuit process. Per California law, when the case value falls within the range of more than $10,000 yet less than $25,000, it is classified as a limited jurisdiction case. Consequently, the party instituting the lawsuit must complete and submit the same requisite forms mandated for unlimited jurisdiction cases. 

Forms to use to file a civil lawsuit in California:

Fill out the Summons (form SUM-100) and a Complaint. The complaint papers have to be numbered at the bottom of every page.

Also, fill out a Civil Case Cover Sheet (form CM-010). The person filing the lawsuit is called the plaintiff. The person or company sued is called the defendant.

Find help with filing a civil lawsuit: 

• For self-help, please click here: https://www.sanmateocourt.org/self_help/ 

• Go to a law library to do independent studying (e.g., San Mateo County Law Library located at 710 Hamilton St, Redwood City, CA 94063)

• Hire an attorney to handle the case for you.

Submission and filing in San Mateo County:

Make an in-person appointment with the clerk’s office: https://www.sanmateocourt.org/in_person_appointment.php 

Many court filings require a filing fee. Submit 3-4 copies of your complaints to the clerk’s office. The clerk officer will stamp all documents, one for the office, one for yourself, and one for the defendant. For more info, please click here: https://www.courts.ca.gov/1089.htm?rdeLocaleAttr=en 

Serve the other party:

You must serve the other side with a copy once you file your complaint or petition and your summons. Legal delivery of the documents to the defendant is a must. It should be executed by a third party, not the plaintiff.

Please read here for details on how to serve: https://www.courts.ca.gov/selfhelp-serving.htm 

Await the response:

Depending on the delivery mode, the defendant gets 30-40 days to reply. 

The 30 or 40 days include weekend days and court holidays. (https://www.courts.ca.gov/1305.htm#:~:text=You%20have%2030%20days%20AFTER,that%20the%20court%20is%20open.)

Request a default:

No response? File a “Request for Default” and ask the court to enter a “default” against the defendant. 

Application to Enter Default (CIV-100): https://selfhelp.courts.ca.gov/jcc-form/CIV-100 

Case Management Conference:

A case management conference (CMC) usually happens between 120 and 180 days from the filing of the lawsuit. Most civil cases have a CMC before the trial. More info about CMC: https://www.courts.ca.gov/1306.htm 

Suppose the case is ready to be scheduled for a trial date. A trial date is assigned at CMC.

Get ready for the trial:

Get all the evidence, and let the court consider and approve the case. 

Ask for discovery if needed. Please remember that both parties have the right to discovery. Both sides are responsible for providing the information that the other side requests as long as the request is legal and does not ask for privileged information (information that a party does not have to reveal) and complies with the discovery rules. Please note discovery process can be costly. 

The completion of discovery must be effectuated no later than 30 days before the commencement of the trial. Given that the opposing party is afforded a 30-day window for a response, it is customary to transmit any discovery requests several months before this deadline. This approach ensures that the response deadline predates the stipulated cutoff date, allowing ample time to address any potential discovery disputes through filing a motion, if necessary.

Find more info about discovery in civil cases below:

• Discovery in civil cases: https://selfhelp.courts.ca.gov/discovery-civil?utm_source=courts-main&utm_medium=top-banner&utm_campaign=civildiscovery-content-update&utm_content=beforelimited 

• Request discovery from a party in your case: https://selfhelp.courts.ca.gov/discovery-civil/request#:~:text=You%20must%20complete%20discovery%2030%20days%20before%20your%20trial&text=Since%20the%20other%20side%20has,there%20is%20a%20discovery%20dispute

Check the ruling:

Check the judge’s ruling one day before the court date. Sometimes the judge would rule even before the court hearing. No need to attend the court hearing if the ruling is out before the trial date. This is final. 

Attend court:

If there is no ruling before the trial date, be prompt, well-prepared with evidence, and ready to address judge inquiries.

Judge ruling:

The judge may enter a ruling on the designated court date or within a few days after that, contingent upon the complexity of the case.

Considering an appeal:

Individuals dissatisfied with a Trial Court decision can appeal their case in an Appellate Court by asking a higher-level court to change what the Trial Court decided. However, the appellate court can only reverse its decision if it finds a legal mistake in the trial court proceedings that was so important that it changed at least part of the case’s outcome. Because of this heavy burden on the appellant to prove this type of mistake, it is quite difficult to win an appeal and very costly. Most attorneys are inexperienced and don’t know how to handle the appeal process appropriately. 

Here is a guide to civil appeals: https://selfhelp.courts.ca.gov/civil-appeals#:~:text=The%20appellate%20court%20can%20only,difficult%20to%20win%20an%20appeal

Additional Information:

Suppose the contract specifies that mediation must be conducted through binding arbitration. The contractor has abandoned the job and stopped responding to messages and emails. In that case, you consider taking the steps below. 

Review the contract: 

Carefully review the contract to ensure that it requires binding arbitration for dispute resolution. Ensure you understand the procedures and requirements outlined in the agreement for initiating the arbitration.

Gather documentation: 

Collect all relevant documentation related to the contract, the work performed, payments made, communication with the contractor, and any evidence of the contractor’s abandonment.

Consult an attorney: 

Seek legal counsel from an attorney specializing in contract law and dispute resolution. They can advise you on the best course of action based on the contract terms, applicable laws, and your situation.

Initiate arbitration: 

If the contract mandates binding arbitration, follow the procedures outlined in the agreement to initiate the arbitration process. This may involve filing a formal arbitration demand with a designated arbitration organization or following specific steps outlined in the contract.

Notify the contractor: 

While the contractor may have stopped responding, it’s essential to officially notify them of your intent to initiate arbitration as per the contract’s requirements. Send a written communication outlining the situation and your intention to proceed with arbitration.

Select an arbitrator:

Depending on the contract, you may need to jointly select an arbitrator with the contractor, or the contract might specify a process for appointing an arbitrator. Follow the required steps to ensure a neutral and qualified arbitrator is chosen.

Participate in arbitration: 

Once the arbitration process is initiated, both parties will present their case to the arbitrator. This may involve submitting evidence, witness testimonies, and legal arguments. The arbitrator will then render a final, legally binding decision.

Enforce the arbitration award: 

If the arbitrator rules in your favor and issues an arbitration award, you can take steps to enforce the award in a court of law if the contractor does not comply voluntarily.

Document everything: 

Throughout this process, document all communication, steps taken, and outcomes. This documentation may be vital to enforce the arbitration award or take further legal action.

Final Comments:

It’s important to note that every situation is unique, and the specific steps you should take will depend on the details of your contract, applicable laws, and the guidance of legal professionals. Consulting with an attorney experienced in contract disputes and arbitration will provide you with the best guidance for your case.

Additional Resources:

https://www.cslb.ca.gov/consumers/filing_a_complaint/Complaint_Against_Licensed_Contractors.aspx