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Dream Builders v. Estate of Paton

A-0493-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT; CONTRACTORS — Even though a contractor may have violated regulatory requirements by not reducing every change order to writing, its customer is not entitled to damages or an award of attorney’s fees if it cannot establish a causal link between the contractor’s regulatory violations and an ascertainable loss.

Residential owners hired a contractor to construct a first-floor extension and second-floor addition to their home. Their contract provided for scheduled payments. Disputes arose after a significant amount of work was performed, and all but two final scheduled payments were made by the owners. The contractor sued for its money.

The contractor’s claim was that those two final payments were due for work under the original contract as well as for work done pursuant to oral change orders that the owners had approved. The contractor admitted that most of the written changes contained neither its contractor’s license number or the Division of Consumer Affairs’ toll free number, both of which were required, by regulations, to be on the documents. The owner’s expert testified there were problems with the contractor’s poor workmanship. The contractor’s expert, on the other hand, blamed the plans provided by the owners for any resulting damages.

A jury awarded contractual damages against the contractor (less amounts for contractual breach by the owners), damages under the Consumer Fraud Act (CFA) representing an ascertainable loss to the owners for the contractor’s regulatory breaches, and counsel fees and costs under the CFA. The contractor got no award for the alleged oral change order amounts.

The contractor appealed and the Appellate Division ruled that the homeowners failed to demonstrate a causal link between the contractor’s regulatory violations and any ascertainable loss as is necessary to support a violation of the CFA. Even though the contractor did not reduce every change order to writing as required by the CFA, the jury did not award damages to the contractor despite the contractor’s claim that the unsigned change orders had been orally approved by the homeowners. The Court also held that the owners had not established any causal link between the contractor’s regulatory violations and any ascertainable loss. The Court further remanded the matter for the lower court to consider an award of counsel fees commensurate with the now limited success the owners had achieved on this CFA claim.

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