Is a Contract Enforceable Without a Fixed Price?
If you’re a professional tradesman, you know the importance of a contract. It protects the rights and interests of all parties while ensuring you and your crew get paid. You also know that most contracts are entered before an actual price is determined. It’s pretty standard. Nobody seems to mind as long as the necessary repairs and restoration are underway. Unfortunately, that doesn’t stop some customers from trying to back out when it’s time to pay.
They’ll try any escape hatch they can find. Some even hire attorneys to exploit “vague language” contained in the contract. We recently saved a roofing contractor over $100,000 in such a case. A big question in that case was: Is a contract enforceable without a fixed price?
Case Background: Customers Who Wouldn’t Pay
Our client, a roofing contractor, entered into a contract with a couple to repair their roof. The price for the project was to be determined by the amount the homeowners’ insurer agreed to pay.
After our client submitted their invoice, the insurance company issued the homeowners a check to cover the costs. However, the homeowners kept the money and refused to pay our client.
So the roofing company sued the homeowners for breach of contract, breach of implied contract, and unjust enrichment.
The homeowners then countersued. Among their claims was that the contract severely limited their legal rights before a set price could be established.
Unsettled vs. Vague in Contract Amounts
A vague contract amount is so unclear that parties may reasonably arrive at different amounts based on their interpretation of the terms.
An unsettled contract amount is undetermined but has an agreed-upon method for calculation.
Can a job’s price in a contract be too vague to be enforced? Absolutely. A contract cannot be considered fair unless it has been agreed to by both parties. Leaving the price blank or open-ended can render terms too ambiguous for an enforceable agreement.
For example: You’d likely pay $25, $50, or even as much as $150 to have your lawn mowed. The price might depend on the skill of the mower and the size of your lawn. However, you’d never agree to pay $20,000 for such a job. You’d never enter a contract allowing the laborer to set any exorbitant price they choose.
Essentially, this was the argument the defendants tried to make against our client: Since the document did not include a fixed price, it should be foundunfair and unenforceable.
Their strenuously-worded argument went:
“ … how can a (roofer’s) work contract limit the ability of (defendants) to enforce their legal rights and remedies … before the critical term of price has even been established? Such a result would violate public policy.”
Unsettled, But Determinable
A contract can still be valid without a fixed price, so long as the amount can be determined objectively. To that end, Colorado law requires all roofing contracts to include:
- Scope of services and materials
- Approximate dates of service
- Estimated costs based on known damages
- Contractor’s contact information
- Contractor’s insurance information
- Cancellation policy and right to rescind within 72 hours for a full refund
- A statement that the contractor cannot pay or waive insurance deductibles
—Colorado Revised Statutes 6-22-103
The contract must also have a bold-faced statement that the contractor will hold payments in trust until materials are delivered or a majority of the work is completed.
As long as a Colorado roofing contract contains the above provisions, it will be considered valid and enforceable.
I have bolded the third condition because that’s the one the court applied to this case.
The price was not fixed because it depended on how much the homeowners’ insurance carrier would pay. Both parties were aware of this and agreed to it when they signed and entered into the contract.
The District Court found that: “The parties agreed to the material terms of the contract and that it is enforceable.”
A Brick Wall on Appeal
When the homeowners appealed, our client won again, receiving full payment, attorney fees, and interest, totaling over $100,000.
The real hero was the well-drafted contract. Our attorneys expertly crafted an unambiguous contract that made the case a near-guaranteed victory from the start.
Protect Your Bottom Line With an Ironclad Contract
Tradesmen save money by hiring an attorney to draft their contracts. You either benefit right away from a contract lawyer’s training and foresight, or learn by trial and error. Few roofers and tradesmen have the luxury of learning by trial and error. If you’re one of them, let’s talk. Call 303-688-0944 to speak with a contract attorney today.