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Curing a HICA Violation Does Not Relate Back to Original Agreement; McGraw Property Solutions, LLC v. Jenkins

The last case shows that a contractor cannot get around HICA’s provisions by refusing to bill a homeowner. This case addresses another way that a contractor tried to get around HICA’s provisions—by arguing that an amended version of the contract related back to the signing of the original contract.

Jenkins owned a home that was damaged during a severe storm. McGraw is a general contractor who focuses on storm remediation, and the two entered into a contract in June 2017 for the storm remediation at the price to be approved by Jenkins’ insurer. The contract said that it would terminate if insurance did not pay the claims. Moreover, it required that Jenkins pay 20% of the replacement cost value as liquidated damages if he cancelled the contract. McGraw estimated a total replacement cost of $170,559.63, but Jenkins’ insurer approved Jenkins’ claim with a replacement cost value of $109,371.97 and issued a total payment to Jenkins in the amount of $64,597.37. Jenkins decided not to complete the repairs and moved to Florida.

McGraw sued Jenkins in August 2017. Jenkins sent McGraw a notice of violation under HICA alleging a number of violations, including the failure to include a right to cancel the contract within three days. McGraw sent a replacement contract, which includedthat right to cancel. Jenkins signed the replacement contract and sent a notice of cancellation the same day.

The parties filed cross-motions for summary judgment, and the trial court found against McGraw on its breach of contract claim because Jenkins properly exercised his right to cancel under the replacement contract. McGraw appealed.

On appeal, McGraw argued that allowing Jenkins to cancel his contractual obligations to McGraw under the replacement contract “would lead to absurd results,” so the replacement contract must relate back to the execution date of the first contract. Doing otherwise would unfairly give homeowners the upper hand whenever “immaterial boilerplate language” is omitted from a contract. This argument did not go over well with the Court.

It is irrelevant whether the language that was omitted from the contract was boilerplate or important, as soon as one of the statutorily enumerated requirements is not included in the contract, a deceptive act has occurred and the contract is in violation of HICA, regardless of any intent by McGraw.

Moreover, the Court found it was McGraw’s position which “would be meaningless and not cure the original contract.”

The main focus of the right to cure was to remedy the deficiencies of the original contract and to grant Jenkins the rights he was not awarded originally despite the provisions enumerated in the HICA. These cured deficiencies only become meaningful if a possibility to exercise these rights exists. By relating the replacement cure contract back to the effective date of the original contract, McGraw attempted to circumvent granting Jenkins an effective remedy. As the HICA is instrumental in protecting consumers with contractors held to a strict standard, the protection can only be effective if the consumer has knowledge of the right.

Thus, the trial court properly found that Jenkins exercised his rights under the contract.

It should be noted that this is not the end of the case, for McGraw could still pursue its unjust enrichment claim. But it did mean that McGraw was not entitled to the liquidated damages it sought.

Lessons:

1. If a contractor commits a HICA violation, then a homeowner should give the contractor a chance to cure that violation under the Indiana Deceptive Consumer Sales Act.
2. Any cured contract is effective in full from the date of the new contract; it does not relate back to the execution date of the original contract.
3. As HICA requires that homeowners be given three days to cancel, this means that homeowner can cancel a contract after it is cured.
4. Even if a contract is cancelled, the homeowner may be liable under other theories, such as unjust enrichment.