Can a Contractor Sue Without a Contract
Can a contractor sue without a contract? The answer to this question will vary from situation to situation.3 min read
2. Suing without a Contract in Maryland
3. Different Forms of Construction Contracts
4. Tips for Suing without a Contract
Updated November 19, 2020:
Can a contractor sue without a contract? The answer to this question will vary from situation to situation. In some circumstances, contractors may be able to sue without a formal contract in place, and in other cases, a lawsuit will not be possible.
Filing a Lien without a Written Contract
It's common for contractors to wonder if they can file a lien without a written contract in place. In the construction industry, verbal contracts are much more common than they are in other fields. Despite this fact, it can be hard to determine if verbal contracts provide the right to file a lien.
There is great variance between the states when it comes to lien laws, so you'll need to research the rules in your state to decide if you can file a lien without a written contract. In some states, a claimant will not be able to file a lien if there is no signed contract. Other states have more flexible rules for granting lien rights.
Generally, there are four groups that states can fall into related to lien rights:
- Locations where a written contract must be in place.
- Locations where lien rights can be granted without a written contract.
- Locations that base contracts on the amount of work completed.
- Locations with no specific rules for acceptable contracts.
Suing without a Contract in Maryland
Some states have decided there are circumstances where a contractor should be able to file a negligence lawsuit against a design professional even without a contract in place. Other states, such as Maryland, use something known as the Economic Loss Rule (ELR) to prevent these lawsuits. The ELR applies to lawsuits where one person is suing another only for a financial loss.
In the construction industry, the ELR is of the utmost importance. This rule is so important because it's possible for contractors to experience a financial loss because of a flaw in the design documents, and to get back this money, the contractor may want to sue the designer.
In a lawsuit in this state, the court upheld the use of the ELR and did not accept numerous claims that a contractor had made against a designer.
Different Forms of Construction Contracts
Like many types of contracts, construction contracts can either be verbal or written. In the modern world, written contracts can also be in electronic form. Many construction contracts are in the form of oral agreements. For instance, a contractor could request that a subcontractor perform a task in exchange for money. If the subcontractor verbally agrees to the arrangement, a verbal contract is now in place.
While they can be harder to enforce than written contracts, oral contracts are legal agreements. When a verbal contract winds up in court, proving the agreement can be difficult if there were no witnesses to the contract other than the contracted parties. Whenever it's possible, you should use a written contract. If there is no written contract in place, however, a contractor will retain lien rights if they can demonstrate that a verbal contract exists and that other requirements have been met.
An idea that you should understand is that there can be an "implied in law" contract. Essentially, this concept allows courts to determine that an agreement was in place, even if the parties never reached a formal contract. This allows the court to protect one party from being harmed by the actions of the other. This ruling, however, can only be used to stop one party from being enriched unjustly. In Florida, when a contract is implied in law, the contractor does not have lien rights.
Tips for Suing without a Contract
When doing any kind of business, it's important to have a written contract in place. If there is a problem later on, and there is no contract, resolving the dispute can be nearly impossible, as the case will boil down to one party's word against the other. If you don't have a contract in place, you could still file a breach of contract lawsuit against the contractor, and they will also have the ability to file a suit against you.
Under the statute of frauds, certain contracts must be in writing to be enforceable. This rule, however, does not apply to contracts related to services, such as installing an appliance. Basically, this means you and your contractor may have agreed to an oral contract without realizing this fact, meaning you could sue for a breach.
If you need help deciding can a contractor sue without a contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.