[CLC-Discussion] Question re: Residential Construction Contract Drafting and a Three Day Right to Rescind

[Michael D. Randolph]

Is there an AG or admin opinion on this topic?  I believe the answer is there is no formal opinion.
However, I also believe (and based on some limited experience) the AG will read the statute(s) broadly and find they apply in most situations when a rep shows up at the door to get a contract signed.


Michael D. Randolph | Shareholder
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From: clc-discussion-bounces at lists.flabarrpptl.org [mailto:clc-discussion-bounces at lists.flabarrpptl.org] On Behalf Of Randall Gilbert
Sent: Tuesday, June 28, 2016 4:21 PM
To: leslie.tomczak at akerman.com; clc-discussion at lists.flabarrpptl.org
Subject: Re: [CLC-Discussion] Question re: Residential Construction Contract Drafting and a Three Day Right to Rescind

This was a letter that I wrote to the FTC in 2006 that never got answered:


Paul Davis, Esq.

Federal Trade Commission, Suite 1500

225 Peachtree Street

Atlanta, FL 30303

                    Re: Request for staff-opinion regarding the applicability of the Door-To-Door Sales Act to Pool Contractors

PURPOSE

There is a great deal of confusion as to whether Title 16 Part 429 regarding “Door-To-Door-Sales” applies to most construction contracts, and whether the mandatory 3-day-right-of-rescission disclosures should be included in construction contracts.  Therefore, this request is being solicited on behalf of a pool contractor, with the hopes that the guidance that the FTC offers will better assist lawyers and contractors in drafting contracts and furnishing applicable notices to consumers if in fact the law is intended to apply.

STATEMENT OF FACTS

Pool contractor and types of jobs.  I represent a Pool Contractor which has its own office.  Its customers include both residential single and multi-family houses, and also commercial projects which would include hotels, condominiums, and apartment buildings.

Initial contacts.  The Pool Contractor obtains customers either by referrals or from advertisements.  The Pool Contractor does not initiate calls to its customers; instead, the customers are the ones who solicit the Pool Contractor for estimates and bids.  The Pool Contractor also does not solicit customers by “cold-calling” or physically going “door-to-door” without first being contacted by a potential customer.

Negotiation of Pool Contracts.  Sometimes the customer knows exactly what they want.  Most of the time with single-family-homes, the customers know that they want a pool but do not know all of the options that can be included in a pool.  A salesman from the Pool Company will have a brochure for the customer to pick out different options and upgrades that may be included in the pool e.g. waterfalls, heaters, lights, types of gunite (the material the pool shell is made out of), types of tiles to go around the perimeter of the inside of the pool, types of decking (marble pavers, cement, cool-deck), types of drainage, types of filtration systems, islands, stools. The customer will then select from the options provided by the Pool Contractor

Privity of contract.  For both types of projects (residential and commercial) the Pool Contractor may either contract directly with the owner, but sometimes the owner hires a general contractor and the owner contracts directly with a general contractor and the owner’s general contractor then hires the Pool Contractor.  In those situations the Pool Contractor is a subcontractor and is not in direct privity with the Owner.

Plans and specifications.  Sometimes the Pool Contractor is provided with a set of plans, either from the owner, the owner’s architect, engineer, or general contractor, and then the Pool Contractor submits a bid based upon the plans and specifications.

Place where contract is signed.  Sometimes the pool contracts are executed by the customer at the place where the pool is to be installed, sometimes it is done by mailing back the executed contract to the Pool Contractor, and sometimes the contracts provide that even after the contract is signed by the customer, it still must be signed by the Pool Contractor’s in-house-manager/officer to be valid.

QUESTIONS

(1)   If all of the pool contractors customers are from advertisements and referrals, and does not “initiate” any contact with customers in any other way does Title 16 Part 429 apply since a portion of the definition of “Door-to-Door Sales” applies only to “contracts in which a “seller or his representative personally solicits the sale, including those in response to or following an invitation by the buyer….”?

(2)   Whether Title 16 Part 429 applies to a pool contractor when Section 429.0(a)(6) exempts transactions “pertaining to the sale or rental of real property” and when the pool is permanently incorporated into the real estate so as to become real estate itself?

(3)   Whether Title 16 Part 429 applies to a pool contractor when pools are considered real estate and Section 429.0(a) Section 429.0(a) defines a Door-to-Door Sale as “A sale, lease, or rental of consumer goods or services…”, and when  section 429.0(b) defines “Consumer Goods or Services” as “Goods or services purchased, leased, or rented primarily for personal, family, or household purposes….”?

(4)   Because neither “Buyer” nor “Consumer” are defined in §429.0, and since a pool is ordinarily used “primarily for personal, family, or household purposes” (a) does the Door-to-Door Sales contracts apply to commercial contracts (e.g. buildings, apartment complexes, and hotels) if the pool contracts are not directly with the ultimate consumer, but instead are with a general contractor, architect, construction manager or some other agent of the owner; and (b) does the pool constitute a “consumer good or service” if it is not being purchased directly by the Consumer, but by the owner’s general contractor, architect, construction manager or some other agent of the owner?

(5)   If the last party to sign the contract is the contractor at the contractor’s place of business, does it matter where the contract was executed by the customer (e.g. if the customer signs and mails it to the contractor, or if the customer signs and it is not a valid contract until reviewed and signed by the contractor’s manager)?

LEGAL ANALYSIS

Title 16 Part 429 of the C.F.R. is entitled “Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations.”  Section 429.0(a) defines a Door-to-Door Sale as “A sale, lease, or rental of consumer goods or services with a purchase price of $25 or more, whether under single or multiple contracts, in which the seller or his representative personally solicits the sale, including those in response to or following an invitation by the buyer, and the buyer's agreement or offer to purchase is made at a place other than the place of business of the seller (e.g., sales at the buyer's residence or at facilities rented on a temporary or short-term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants, or sales at the buyer's workplace or in dormitory lounges).”
Section 429.0(b) defines “Consumer Goods or Services” as “Goods or services purchased, leased, or rented primarily for personal, family, or household purposes….”

Section 429.0(a)(1) through 429.0(a)(6) provides exemptions to §429.0 of which only the following seem applicable.

First, section 429.0(a)(5) states that, “The term door-to-door sale does not include a transaction in which the buyer has initiated the contact and specifically requested the seller to visit the buyer's home for the purpose of repairing or performing maintenance upon the buyer's personal property. If, in the course of such a visit, the seller sells the buyer the right to receive additional services or goods other than replacement parts necessarily used in performing the maintenance or in making the repairs, the sale of those additional goods or services would not fall within this exclusion.”

Secondly, section 429.0(a)(6) states that, “The term door-to-door sale does not include a transaction Pertaining to the sale or rental of real property….”

The Federal Regulation does not define what real estate means, what goods means, or what services means as used in §429.0(a)(6) or §429.0(b).  Therefore, the undersigned has found it necessary to look at state law since these transactions are being conducted in Florida.

Florida Chapter 713 Part I is the construction lien law.  Section 713.01(25) (2006) defines "Real property" as “the land that is improved and the improvements thereon, including fixtures….”

Section 713.01(13) defines "Improve" as “build, erect, place, make, alter, remove, repair, or demolish any improvement over, upon, connected with, or beneath the surface of real property, or excavate any land, or furnish materials for any of these purposes, or perform any labor or services upon the improvements, including the furnishing of carpet or rugs or appliances that are permanently affixed to the real property and final construction cleanup to prepare a structure for occupancy; or perform any labor or services or furnish any materials in grading, seeding, sodding, or planting for landscaping purposes, including the furnishing of trees, shrubs, bushes, or plants that are planted on the real property, or in equipping any improvement with fixtures or permanent apparatus or provide any solid-waste collection or disposal on the site of the improvement.”

Section 713.01(14) defines "Improvement" means any building, structure, construction, demolition, excavation, solid-waste removal, landscaping, or any part thereof existing, built, erected, placed, made, or done on land or other real property for its permanent benefit.

Florida Chapter 672 is the Uniform Commercial Code.  It defines “Goods” as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (chapter 678) and things in action. ‘Goods’ also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (s. 672.107).”

Therefore, because (1) a pool is a permanent improvement, (2) section 429.0(a) defines a door-to-door sale as involving consumer goods, and (3) Florida defines goods as all things movable, Chapter 429 seemingly does not apply to any contractors which permanently improves real estate including Pool Contractors.

Moreover, construction which permanently improves real estate also does not seem to meet the other definition of being a service since the construction is not just labor that is provided but the physical pool and materials as well, which is really the crux of the pool contract. See, Black’s Dictionary 6th Ed. Service. (“Duty or labor to be rendered by one person to another, the former being bound to submit his will to the direction and control of the latter.”).  In other words, there would be no pool service without the pool.


Very truly yours,



Sincerely yours,

Address:    1720 Harrison Street, Penthouse B


                   Hollywood, FL 33020



Office:       (954) 620-5000


Fax:           (954) 620-5105



Web#1:      www.TheConstructionLawyers.com<http://www.theconstructionlawyers.com/>

Randall Gilbert, Esq.

Web#2:      www.TheTitleLawyers.com<http://www.thetitlelawyers.com/>

Board Certified Construction Lawyer

Web#3:      www.TheCorporateLawyers.com<http://www.thecorporatelawyers.com/>

[Randall Gilbert][cid:image003.gif at 01CD3F4A.EF94F960]

From: clc-discussion-bounces at lists.flabarrpptl.org<mailto:clc-discussion-bounces at lists.flabarrpptl.org> [mailto:clc-discussion-bounces at lists.flabarrpptl.org] On Behalf Of leslie.tomczak at akerman.com<mailto:leslie.tomczak at akerman.com>
Sent: Tuesday, June 28, 2016 3:46 PM
To: clc-discussion at lists.flabarrpptl.org<mailto:clc-discussion at lists.flabarrpptl.org>
Subject: [CLC-Discussion] Question re: Residential Construction Contract Drafting and a Three Day Right to Rescind

Good afternoon all!

We are reviewing a Florida residential construction contract for a general contractor who does home repair work (remediation work following a flood or other casualty, and then reconstruction work if needed).  Candidly, I don’t do that many residential contracts.  Does anyone know if the 3 day right to rescission found in Section 501.031, Florida Statutes and/or the 3 day right to rescission found in 12 CFR Sec. 226.15 applies to this type of work so that the general contractor would need to include certain notices of same in its construction agreements with homeowners?  Any input would be greatly appreciated!!

Leslie Miller Tomczak, LEED AP
Board Certified by The Florida Bar in Construction Law
Akerman LLP | Las Olas Centre II, Suite 1600 | 350 East Las Olas Boulevard | Fort Lauderdale, FL 33301-2999
Dir: 954.759.8926 | Main: 954.463.2700 | Fax: 954.463.2224
leslie.tomczak at akerman.com<mailto:leslie.tomczak at akerman.com>

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