Paige Kurtz

To Write or Not to Write (a Contract)?

Part 2

If there are two writings, who wins?

Recently, the North Carolina Court of Appeals tackled some thorny issues related to written contracts that are quite prevalent in the construction industry today. Three issues: whether there was a contract, which document was the contract and whether there was a valid arbitration clause all created litigation between two general contractors. In the first part of this series, we looked at why you should put your contract in writing.

However, even if you take that first step, we acknowledge that there are still many pitfalls between parties and litigation-free projects.

The case is T.M.C.S., Inc. dba TM Construction, Inc. (“TM”) v. Marco Contractors, Inc. (“Marco”). TM quoted Marco for renovation and painting work on a Wal-Mart in Forsyth County in which TM would provide the labor and Marco would provide the materials. The parties came to an agreement as to scope of work and price.

Several days later, Marco approached TM with the “standard form contract” of Marco. Rightfully so, TM noticed that the “standard form contract” stated that TM would provide materials, a significant difference. When the point was raised with Marco, its representatives asserted that it was only a “draft for Marco’s files.” After representing to TM that the “standard form contract” would be changed to match the earlier agreed upon terms, TM put the company name on a signature page.

Shortly thereafter, Marco claimed that it had no signed contract with TM, but that it would hold TM to the terms of the “standard form contract.” In addition to putting TM on the hook for materials, the form also included an arbitration clause.

The matter comes to the Court of Appeals on the issue of whether Marco can compel TM to attend arbitration in Pennsylvania because of that clause in the “standard form contract” that Marco wants to enforce against TM. This scenario probably sounds familiar to many subcontractors and contractors.

There are probably a limitless number of examples in the construction industry where the parties come to an agreement only to be thwarted by the “standard form contract” after the work has begun. There are probably just as many examples where the subcontractor is promised that the contract will be modified to conform to earlier agreements or threatened that if the form contract is not signed, they will be dismissed from the project.

Despite its desire to attend arbitration, Marco did not actually make that demand for arbitration until significantly after the litigation had commenced. Thus, the Court of Appeals did not reach the question of which contract was the valid contract between the parties.

The reasoning was that even if Marco’s “standard form contract” was the valid contract, Marco could not enforce the arbitration clause due to its late notice.

We certainly would like to see the Court’s analysis on the question of which contract governed the parties. Despite the litigation that occurred here, it is still highly recommended that parties commit their intent to a written contract. It is without question better to be arguing over written terms rather than oral terms, which are much harder to prove.

The foregoing is written for educational purposes only and should not be relied upon as legal advice. It should not be utilized as a substitute for the professional services of an attorney. If legal advice is required, the services of a professional should be sought.  Please contact Kurtz Law, PLLC for assistance with legal matters.