Unsigned Inspection Contracts

 by Nick Gromicko and Mark Cohen

 

If someone tells you that an unsigned contract is not enforceable because of the “statute of frauds,” that may be wrong for several reasons.  First, in most jurisdictions, the statute of frauds applies only to the sale of real estate and sometimes to the sale of goods.  Second, and more importantly, there is an exception to the statute of frauds called the partial performance exception.  If the inspector performs as required by the unsigned agreement and the client accepts the benefits of that, the partial performance exception will apply and the client’s statute of frauds argument should fail.

Sometimes an inspector provides the agreement to the client and performs the inspection without the client ever signing the agreement.  If a dispute arises after the inspection, the question becomes whether the inspector is entitled to the benefit of the protections in the unsigned agreement (with a limitation on damages, the right to attorney’s fees, etc.).

The answer is a definite “maybe.”  An unsigned agreement may be evidence of an agreement between the parties.  An agreement may be oral or implied by the parties’ conduct.  There are reported court decisions in nearly every jurisdiction that affirm this principle. For instance, in Cowden Mfg. Co., Inc. v. Systems Equip. Lessors, Inc., 608 S.W.2d 58, 61 (Ky.Ct.App.1980), the Kentucky Court of Appeals held that parties may be bound by the terms of an unsigned contract when their actions demonstrate assent to the agreement.  Similarly, the Illinois Court of Appeals held that a party named in an unsigned contract may, by his conduct, indicate his assent to its terms and become bound by it.  See,Amelco Electric Co. v. Arcole Midwest Corp. 351 N.E.2d 349 (Ill. App. 1976).

Applying this principle in the context of a home inspection, if an inspector’s client pays the fee quoted in the unsigned agreement, allows the inspector to perform the inspection, and accepts the report, that would be evidence of the client’s assent to the unsigned agreement.

Also, having a client sign your agreement after the inspection is not wise.  The client has to agree to the terms of the contract before the inspection.  You can’t impose on the client any conditions contained in the contract that he was not aware of when he hired you to do the inspection.  Your only real protection is to have your client sign your contract prior to the inspection.  In addition to notifying your client upfront as to the terms of the bargained-for services, your contract can also help define the limitations of those services, thereby effectively managing his or her expectations.

InterNACHI has worked hard to develop a plain English pre-inspection agreement that protects inspectors.  Every inspector should use this agreement or some variation of it (where needed to comply with local law).  It works best when used within InterNACHI's, free, online electronic agreement system  at https://www.nachi.org/onlineagreement.htm

InterNACHI has extensive experience with inspection contract issues. If you or your attorney need help, please email legal@internachi.org.

 

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