Homeowner plans to sue me over construction job. How do I handle this?

What should I do if I'm hit with a lawsuit from a homeowner?

Question

I own a small contracting business. A local homeowner hired me to do some renovations in his bathroom. For $3,000, I agreed to supply the labor and materials to retile the floor, repaint the walls, and install a new sink. We didn’t have a written contract or anything formal like that, but communicated mostly through email. I did everything I promised to do.

Now he’s suing me, saying I installed the wrong tiles and didn’t use the right kind of sink or color paint. This has taken me completely by surprise. What should I do?

Answer

Running a small business is difficult enough without the threat of litigation. Even a small claims court case can be stressful and time consuming. It involves court appearances, document drafting, and financial uncertainty. All of this distracts you from your work. So what should you do if you’re hit with a lawsuit from a homeowner?

First, before responding, consider an honest evaluation of your performance on the project. Did you actually do something wrong? Did one of your subcontractors do something wrong? Or is this simply a misunderstanding, or an irrational customer? Your answer to this question will guide, in large part, how you react to the lawsuit.

Second, consider the statutes of limitations in your state. What is your former client suing you for? In some states, statutes of limitations can restrict the time that the plaintiff has in which to sue for breach of contract or property damage to just a few years. If the work you performed came before that period, the homeowner’s claim may be subject to dismissal.

Third, consider making a counterclaim. As a defendant, you will have an opportunity to file a document called an “Answer,” and you can simultaneously respond with a counterclaim against the homeowner. Often, this claim will be for breach of contract from any nonpayment of fees. A counterclaim has a number of advantages. Not only does it give you a potential to recover, but it also puts the plaintiff on the defensive. It will make him consider that he, too, has something to lose, in which case it might make more sense to settle than risk going forward.

Indeed, you should always consider settlement before proceeding to trial. Small claims court litigation, as mentioned above, can be uncertain. A judge might believe you, or might believe the homeowner. A settlement mitigates your risk, and also saves you time and energy.

A settlement is also a smart move if you answered the first question – about your honest level of fault – in the affirmative. It’s often a smart business decision to settle small claims, rather than fight them over a long period and risk further reputational harm.

If you are not having much luck negotiating with your former client, consider mediation. In mediation, a third-party neutral will sit down with you and the homeowner and attempt to work out a compromise. Many courts provide no-cost mediators, who are in many cases attorneys or retired judges with ample experience. Often, mediation is an excellent way to nip a small claims litigation in the bud.

If negotiation and mediation fail, you'll need to prepare for trial. Just as the homeowner can be expected to present evidence and make a statement to the judge, you should prepare evidence in your defense and your own statement describing what transpired. Try to anticipate what the homeowner will say and offer as proof.

For example, the homeowner may bring a photo of the tiles, purportedly showing that they're the wrong color. You might want to bring a leftover sample of the actual tile, just in case the photo is off. Even your own handwritten notes of conversations with the homeowner can serve as evidence. If, for example, you have a notebook in which you wrote the date, the homeowner's name, and a note that "he wants Sky Blue semi-gloss," make a copy and follow the court's instructions for presenting this as evidence. For more information, review Nolo’s Small Claims Court Guide, as well as Nolo’s guide for defendants.

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