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Fritze, LLC v. Kominsky

A-2929-08T1 (N.J. Super. App. Div. 2009) (Unpublished)

CONTRACTORS; SETTLEMENTS — If the settlement of a dispute between an owner and a contractor does not make the completion date an express term within the settlement, the time for completion of the work is only a minor issue and the contractor will be given a “reasonable” time to complete its performance.

A homeowner entered into a verbal agreement with a home improvement contractor to replace his air conditioning and heating system. After the homeowner paid approximately one-half of the sales price and the work was completed, a dispute arose. The contractor sued the homeowner, seeking the balance of the amount that was due. The homeowner counterclaimed, asserting that the contractor had violated the Consumer Fraud Act by failing to: (a) put the agreement in writing; (b) obtain the necessary construction permits from the municipality; and (c) obtain a certificate of occupancy after the work had been completed. He also claimed that the contractor negligently performed the work.

Prior to the trial date, both parties sent separate letters to the Law Division advising that the matter had settled. The settlement was never placed on the record and the parties did not file a stipulation of settlement or a stipulation of dismissal. The contractor then sent the homeowner a proposed stipulation of settlement. It was never signed. Although the parties agreed that the contractor would obtain construction permits and a certificate of occupancy within a ninety-day timeframe, they were in disagreement as to when the ninety-day period would begin. The attorney for the homeowner sent a letter to the contractor’s attorney indicating that his client was prepared to pay the contractor “as agreed” in the event the contractor provided the homeowner with certificates of completion. The parties exchanged correspondence over a twenty month period, with the contractor demanding that the homeowner place the settlement funds in escrow and arrange for the final inspection. The homeowner continued his refusal to place funds in escrow, advising that he would pay the monies on issuance of a final certificate of occupancy. The contractor finally filed a motion to enforce settlement. The homeowner opposed, stating that the parties had never agreed upon a time frame for completion.

The Law Division ruled in favor of the contractor. It held that the parties were able to agree on essential terms of the settlement, including the amount to be put in escrow, and deciding that the contractor would obtain the permits and perform the work required to obtain a certificate of occupancy. It also ruled that the contractor acted as if the matter was settled and performed, completing all that was required under the settlement. Although the parties did not agree to a timeline for the completion of the project, the Court noted that such a timeline was not raised by the homeowner until both parties had indicated to the Court that the case had been settled. Thus, it determined that the homeowner failed to establish that the timeframe for completion of the work was part of the settlement. It believed that the parties manifested an intent to be bound by the terms of the settlement and created an enforceable contract by notifying the Court that the case was settled. It considered the time for completion of the work to be a “minor issue” since the contractor had already performed its responsibilities under the settlement. The Court decided that the homeowner failed to demonstrate that the settlement was not completed within a reasonable time and noted that any delays in obtaining the certificate of occupancy appeared to be due to the homeowner’s conduct. It ruled that the homeowner had to comply with its obligations under the settlement by placing in escrow the balance of the contract within twenty days. The homeowner appealed.

The Appellate Division affirmed. It agreed with the lower court that the time for issuance of the construction permits and the final certificate of occupancy were not material terms of the settlement. It held that a settlement of a legal claim between parties is a contract like any other contract and should be honored and enforced, absent a demonstration of fraud or other compelling circumstances which were not shown here. It maintained that it was of no consequence that the agreement was oral, instead of written, if the parties agreed upon the essential terms of a settlement. It noted that the lower court correctly determined, from review of the extensive record of correspondence and other communications over a twenty-month period, that the parties had agreed to a settlement immediately prior to the scheduled trial date. Based on these facts, it was convinced that there was no genuine issue of material fact, and agreed with the lower court that no plenary hearing was required to determine whether the parties had agreed upon all the essential terms of the settlement contract. It found that the parties settled, with the contractor wanting to be paid for the materials and services performed, and the homeowner wanting assurance the work had been performed in accordance with municipal codes. It concluded that the “mechanics” of completing the process, such as the placing of the escrow, the timing of any remedial work that might be required, and the timing of obtaining the municipal approvals were ancillary to the agreement which could be “fleshed out” in a subsequent writing, and did not trigger the need for a plenary hearing.

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