By Attorney Edward Jesson
It happens more often than we would like to see, but sometimes work is complete, a dispute arises, and suddenly it is discovered that the contract that everyone assumed to be in place was not signed. This happens frequently in construction cases (most often seen with contracts between General Contractors and Subcontractors) but the issue can also rear its ugly head in any other contractual setting, especially where independent contractors are involved.
In legal terms, in order for an agreement between two parties to be binding and valid, there needs to be a “meeting of the minds”. Put simply, it needs to be clear that the parties to the contract intended that contract to govern the relationship between them. Most frequently, a signature on a contract signifies each party’s intent to be governed by that contract.
So what happens when, sticking with the construction industry example, a subcontractor performs all work under its subcontract agreement with the general contractor and then a dispute arises and it turns out the contract wasn’t signed?
Generally, when courts are confronted with an unsigned agreement, their default opinion will be that the parties never reached that “meeting of the minds” and therefore they did not intend to be bound by the terms of that contract.
However, this doesn’t mean that no contract between the parties existed and that the party seeking to enforce its rights under the agreement has no recourse. The court will next look to all other evidence which indicates what the agreement was between the parties. For example, if there were multiple drafts of a contract with different terms included, the court may decide that the earlier draft contracts that had parts removed from them at a later date is evidence that those removed contractual terms were not a part of the parties’ agreement.
Courts may also look to whether there was a “contract implied in fact” between the parties. In the general contractor subcontractor example, evidence that the general contractor asked the subcontractor to perform work and the subcontractor did perform that work would certainly be evidence of a “contract implied in fact”. It would be unreasonable for a court to decide that the subcontractor did that work and did not expect to receive any payment for that work. Oral agreements are oftentimes valid. There is no requirement that many types of contracts be in writing. Therefore, if you’re on the other side (someone completed work for you but you didn’t sign the contract), you don’t get a free pass! If you do not pay, you may find yourself on the receiving end of a lawsuit.
In any event, it is important to have a written contract signed by the parties. It sets the expectations of both parties – what they’re supposed to do in exchange for compensation. When it is reduced to writing, there are less evidentiary issues in court. When it is reduced to writing, it is less likely that there will ever be a lawsuit about the terms because a signed contract shows that all parties agreed to the terms.
The attorneys at Jesson & Rains are ready to assist with drafting and review of contracts, and, importantly, assist clients who find themselves in disputes arising from unsigned contracts. Just because you do not have a signed contract, it does not mean you have no rights.
By Attorney Edward Jesson
In 2012, North Carolina’s mechanic’s lien statutes were overhauled. One of the biggest changes was the requirement for a lien agent to be appointed on certain jobs. We still frequently receive questions about lien agent requirements and what the consequences of a contractor’s failure to file a “Notice to Lien Agent” actually are.
Lien agents are only required on projects involving improvements to real property valued at over $30,000.00, except that a lien agent does not have to be designated for projects where improvements are being done to an existing single-family residential building, occupied by the owner, even if those improvements are valued over $30,000.00. That exception also applies if the contract is for the construction of accessory buildings where “the use of which is incidental to that residence.” Generally speaking, the appointment of lien agents is more prevalent in commercial construction projects but it is also sometimes necessary to designate a lien agent for residential projects. While designating a lien agent is generally the owner’s responsibility, there is a limited ability for “custom contractors” (as defined by the statute) to designate the lien agent on residential new construction projects as, presumably, custom contractors should be more familiar with these laws than the average home owner.
In order to fully protect its rights as a contractor to pursue a claim of lien on real property, a contractor must file a Notice to Lien Agent within 15 days after it first “furnishes labor or materials to the project.” While failing to file a notice to lien agent within 15 days is not necessarily fatal to any future lien claims, it may limit the contractor’s lien rights should it be necessary to file a lien at a later date. If a contractor fails to file a notice to lien agent and, prior to filing the notice or to filing a claim of lien on real property, the property is sold or otherwise encumbered, the contractor seeking to enforce its lien rights at a later date may have issues doing so. On the other hand, if a contractor fails to file a notice to lien agent and it then becomes necessary to file a lien, the contractor will likely be able to do so if the property has not been sold or otherwise encumbered.
It is important to note that the lien agent does not take place of the owner or upper tier contractor for purposes of service. Any claims of lien on real property or claims of lien on funds should be filed (where necessary) and served on the owner and any necessary contractors and/or suppliers.
It is best practice, in projects where lien agents are appointed, to file the notice of lien agent as soon as possible—even prior to beginning work. There is a portal to provide Notices to Lien Agents on LiensNC.com, but if you have any further questions, the attorneys at Jesson & Rains would be happy to help.
By Attorney Edward Jesson
People and businesses get sued every day, and while no one enjoys being on the receiving end of a lawsuit, there are certain things that should be done to try and make the experience as painless as possible. In North Carolina, a lawsuit is generally started when an individual or a business (also called the “plaintiff”) files a complaint. The clerk of court issues a summons, which must be served on the defendant (the party being sued). This can generally be done by mailing it certified mail, return receipt requested, sending via FedEx or UPS, or having the county sheriff personally deliver a copy of the summons and complaint.
Once the summons and complaint have been served, the defendant has 30 days to respond to the complaint in district and superior courts. In small claims court, when a defendant is served (in some instances this can be achieved by the sheriff leaving a copy of the complaint taped to the front door), they will usually receive a notice of hearing along with the complaint.
Here is the first point that I would like to make clear: if you are served with a lawsuit, please do not wait until day 29 to contact an attorney. Evaluating your position as a defendant in a lawsuit and preparing the correct response takes time. While you can usually get a 30-day extension of time to respond, doing so at the last minute is not always possible, and the extension likely won’t be granted if it is after day 30. If you fail to respond to the complaint in time, the plaintiff may be entitled to a default judgment. It is exactly what it sounds like— they will automatically win “by default”! A default judgment can be hard to overcome once it is entered, and the excuse that you simply “forgot” to respond is usually not enough.
Point number two: Do not answer the complaint without first consulting with an attorney. In an answer, you will generally just admit or deny the allegations to the complaint, but that is not the only response that is available. There are several ways that you may be able to get the lawsuit dismissed (meaning the case is thrown out), but that option is not available if you admit or deny allegations in the answer first. By doing that yourself, you may be preventing an attorney from later dismissing the lawsuit.
For most people who are sued, it is for the first time in their lives (and hopefully the only time). Once the shock, confusion, and anger has worn off, it is important not to bury your head in the snow. Contact a litigation attorney who can help you navigate through the civil system and, hopefully, get your case resolved in the most efficient way possible. If done correctly, you may save a lot of money; however, trying to handle it yourself oftentimes results in the expenditure of more money. If you or anyone you know has been sued, please give the attorneys at Jesson & Rains a call.
In our second installment of Meet Our Team Members, we are interviewing Ed Jesson.
Q: Most of our readers probably know that you and Kelly are both partners in the Jesson & Rains firm, but many of them might not know that you are originally from England.
Ed: If they haven’t heard me talk! (laughs)
Q: What do you miss most about England? And what brought you here to the United States?
Ed: I miss a lot of things--family and the sheer amount of Indian food to name a couple--but I’m certainly very happy over here in the US, too. England and the US are very similar in a lot of ways. I moved over to attend college as I didn’t really know what I wanted to do at university back home. In England, you have to pick your college major while you’re still in high school, and once you do, you’re kind of locked in. My best friend was from the US and moved back after high school in England and told me about how great US colleges are with the ability to take your time to pick a major. I thought that was a good fit for me, and here I am!
Q: So have you always wanted to be a lawyer? What did you eventually choose as your major in college?
Ed: No, I was a sports and entertainment management major at the University of South Carolina and I wanted to work in that industry. It was after working with and getting to know the general counsel at Speedway Motorsports during an internship that my interest in the law was really piqued.
Q: What does your family think of your job as a lawyer?
Ed: My family is very proud of what Kelly and I are building at Jesson & Rains (or at least that’s what they tell me). My dad was a lawyer (solicitor) back home in England. While our practices are completely different, it’s always interesting talking to him about the differences in US v. English practice.
Q: Your focus in practicing law is construction litigation. What qualities does an effective litigation lawyer have?
Ed: In litigation, I think being able to see both sides of the argument is a very valuable skill. It allows you to try and see where the other side is coming from and hopefully help the parties reach an understanding that everyone can live with.
Q: What are your future plans? Where do you see the firm heading in the next couple of years?
Ed: Our firm is still relatively new. We’re in our third year, but Kelly and I definitely are excited to continue to grow and foster good relationships with our clients and others in the local legal community.
Q: What is your favorite type of food?
Ed: Indian food, hands down. The town I grew up in had a population of around 10,000 people and had at least 4 Indian restaurants when I was still living there. Indian take out is England's equivalent of Chinese takeout.
Q: What do you like to do outside of work?
Ed: I’m quite an outdoorsy person. I train pointing dogs, and I like to hunt and fish. People generally don’t expect that from an Englishman.
Q: Do you have any dogs?
Ed: We have two: Jeffrey and Tramp. Jeff is a Pointer. We got him as a rescue when he was 1 and he’s really given me the pointing dog “bug”. We’re getting another pointer this fall, and I’m excited to start training a puppy. Tramp is a border terrier mix and is definitely Kelly’s baby…he doesn’t hunt but he’s fun to have around the house! (laughs)
We are frequently asked what is the difference between an independent contractor and an employee. Hiring independent contractors is often the cheaper choice for employers as the employer saves on taxes and other administrative costs that are involved with hiring and firing traditional W2 employees. However, mistakenly (or intentionally) classifying employees as independent contractors can cost employers thousands of dollars in fines, taxes, and back wages, as well as cost the government millions of dollars in taxes. Several years ago, the News and Observer wrote an article about contractors in the construction industry who were intentionally misclassifying those who should have been employees as independent contractors in order to save money. The article found that the misclassification of employees cost the state of North Carolina $467 million in lost tax revenue that should have been paid by employers; and that was just from a sampling of federally funded projects in North Carolina—ignoring the vast amount of private construction in the State.
On August 11, 2017, Governor Cooper signed into law the Employee Fair Classification Act (S.B. 407). Many in the construction industry have supported this move, feeling that the misclassification of workers by their less scrupulous competitors was making it difficult for them to compete. Companies that misclassify employees and independent contractors can save more than 20% on their labor costs.
The new act provides a way for the state to receive complaints that employees are being misclassified as independent contractors by creating the Employee Classification Division within the North Carolina Industrial Commission. The Employee Classifications Section’s website states that:
Upon receiving the complaint for employee misclassification the Director will provide this information to the North Carolina Department of Labor, North Carolina Industrial Commission – Compliance and Fraud Investigative Division, North Carolina Department of Commerce - Division of Employment Security, and North Carolina Department of Revenue where each separate agency shall conduct independent investigations to determine whether violations of their operating statutes has occurred. If determined there has been a violation of any operating agency statute, each agency will ensure the necessary enforcement actions under the respective statutes.
As such, should a complaint be made, independent investigations will be made into the company being complained of by several different North Carolina governmental agencies and employers could be facing multiple fines from multiple state agencies. Also, employers are now required to post notices including the following information:
To avoid any issues with the Employee Classification Section, employers must ensure that they are correctly classifying employees as either employees or independent contractors. While the classification is determined case by case and depends a great deal on the specific facts surrounding each individual’s employment, here are some basic considerations:
That is not an exhaustive list, and no one question will determine whether a worker should be considered an employee or an independent contractor. However, if in answering those questions, you are finding that you have a lot of control over how the worker performs his or her work, then it is likely that they should be classified as an employee and not an independent contractor.
If you find yourself questioning whether your worker should be classified as an employee or an independent contractor, or if you find yourself being investigated by the Employee Classification Section, please give Jesson & Rains a call to assist you in the matter.
We have written before that businesses do not necessarily have to have written contracts to form a binding contract. If a customer verbally offers to pay you $200 to do X, and you verbally agree to do X for $200, you may have a binding contract. To form an oral contract, there must be an offer, an acceptance, and mutual assent. This last requirement, also called “meeting of the minds,” means that you both agree to the terms of the contract – which can be tricky if the contract is not written down.
Even though oral contracts are valid, we always recommend contracts in writing because (1) then there is proof that the parties contracted with each other, other than just two people’s versions of the truth, and (2) there are oftentimes many more terms and conditions other than X and the price that need to be included in the contract. What time does X have to be completed? When is payment due? Inclusions/exclusions? For example, if X is painting a house, does the painter include white paint on the front porch railings but exclude the stain on the wood deck?
If you and the customer are not on the same page and do not have a “meeting of the minds” as to these terms, there can be no contract. However, if you hand your customer a piece of paper with terms and conditions written on it, that is simply an offer (or a counteroffer to their offer). How do you know the agree to the terms? This is why people get their customers to sign it, which acknowledges that they agree to the terms (even though a signature is NOT a legal requirement to form a contract).
For a lot of our clients, written contracts and signatures just aren’t practical. The house painter is going to want the homeowner client to agree to the terms and conditions BEFORE the painter buys supplies and drives out to the house, for example.
These days, everyone has e-mail. A lot of our clients are already utilizing e-mail to send their customers appointment reminders and quotes. Why not incorporate terms and conditions into the email? To legally guarantee that those e-mailed terms are incorporated into the contract, the customer would need to take some affirmative step to acknowledge that they’re agreeing to it. They could hit reply to the e-mail and say they agree to everything, you could include a way for them to electronically sign a document, or you could utilize software that allows the customer to click “I agree” or “I disagree” to the terms. This latter example is called “click-wrap” and technology companies like Apple have been using it for years to get consumers to agree to their terms of service. Click-wrap contracts are universally upheld as long as some procedures are put in place, like allowing the customer to click “I disagree,” putting the terms and conditions near the “I agree” button, and allowing the customer to download or print the terms of service.
Putting all the terms of the contract in writing helps to avoid confusion between the parties and prevent potential lawsuits if customers become unhappy. Please keep Jesson & Rains in mind if you or a colleague needs assistance drafting a click-wrap contract or other terms and conditions.
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