I’m a licensed general contractor in the Detroit, MI. area. We do
small home improvements and use sub-contractors to do our work.  We
applied for a city permit to do a small porch repair job.  The
sub-contractor used our permit to do the job for himself and had the
home owner make the check payable to him. Our contract with the home
owner stated explicitly that ALL CHECK MUST BE MADE PAYABLE TO OUR
COMPANY AND NO CASH IS ACCEPTED.   The work that was done by the
sub-contractor did not pass city inspection and now the homeowner
can’t get in touch with the sub-contractor and he demands that we come
out to make the repairs so the job will pass city inspection.

Am I obligated to correct the problem? What course of action should I
pursue? The total amount for the job was approximately $2,500.00
dollars.

Note: We have on occasion had homeowners contract with the
sub-contractors on the side. As to where this is the case I’m not
sure.

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Request for Question Clarification by serenata-ga on 21 Mar 2003 18:24 PST

Hi Houston ...

This is a tough question for any Google Answer Researcher to answer
for you, as we are not licensed to practice law and do not answer
legal questions.

Such information that would be have to be interpreted would be the
original contract and things like:
1. Who was responsible for hiring subcontractors;
2. Who supervised subcontractors;
3. Who was responsible for paying subcontractors;
4. Whose license (yours);
5. If your license, who was responsible for the work - regardless ...

Well, you start to get the picture. It could even be that you could
fight it in Court and win, but what would that do to your reputation?
Would it cost you more in lost business than it would to fix it, etc?

You are a contractor, so you should be aware of the laws on
contractors and contractor's licenses, and it could be that you are
responsible regardless, whether or not you ever saw the job, because
it is your license.

As a rule, these issues are more than Google Answers Researchers are
equipped to handle, but if you feel you still want to pursue it along
these avenues, you might wish to give as much other information as you
can.

Personally, I think it would be well worth it to consult with an
attorney who deals in contract and construction law and get the real
facts of law and a valid opinion on how to proceed with this issue.

Warm regards, and good luck,
Serenata

Dear Houston,

I happen to be a Michigan attorney with some experience in
construction law and I was pleased to learn of your question, though I
am afraid that my news for you is not so good.

You indicated that you pulled the city permit which I assume means
that your company’s name (or your name personally) was on the building
permit. In addition, the contract that was signed by the homeowner was
presumably accepted by you or your company.

One question for you is whether the homeowner knew of any “assignment”
of the contract from you to the subcontractor?  If the owner did know,
was any assignment of the contract, if it occurred, was made in
writing?  I am assuming from your description of the facts is that NO,
the homeowner did not know of an assignment. If this is not the case
the answer below may change. If there was any chance of an assignment
of the contract from you to the subcontractor, please let me know the
facts.

ISSUE #1:  Whether you have an obligation to make the job “right”? 
ANSWER:  Yes, assuming that you did not “assign” the contract to the
sub, you must make the alterations and repairs so that the project
complies with the applicable building code.

The rules in Michigan that pertain to residential contractors can be
found here:
http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=Single&Admin_Num=33801511&Dpt=CI&RngHigh=

You complied with the regulations by having a contract in place prior
to the work being performed. The performance of the work was by the
subcontractor who was your “agent” both in fact (you “deputized” the
sub to do the work) and impliedly (the owner fairly assumed that the
sub worked for you).

The agent’s (sub’s) work was therefore your responsibility. The owner
relied upon your license and representations.  The obligation to make
the job “right” would then belong to you, and if not made right, the
owner would have a clear basis to file a complaint with the Michigan
Department of Consumer and Industry Services.


ISSUE #2:  Whether the payment by the owner to the sub (your agent)
constituted payment under the contract?
ANSWER:  Probably, yes.

IF the contract was, in fact, with you or your company, the payment to
your agent is probably sufficient to relieve the owner from
responsibility.

The payment clause that you refer to, requiring payment only to you,
may give you an opening for a claim filed in the Wayne County District
Court – Small Claims Division. In order to prevail, I would suggest
that you would need to show (1) the contract provision concerning the
payments only to you; (2) that the owner recognized that the
subcontractor was an entity separate from you and your company; and
(3) that the owner made the payment to the sub with the knowledge that
the sub was separate from you.

You certainly have a claim against the subcontractor, if you can find
him/her. Again, small claims court may be a useful tool to pursue the
subcontractor and receive the judgment that you seek.

OTHER ISSUES:

IF, IN THIS CASE, THE HOMEOWNER contracted with the sub “on the side”
as you suggest may have happened, you may well be free from liability
to repair the faulty work. In such a case, you would merely have
arranged the work for the principals (the owner and the sub), or the
facts may show that even if you had signed the contract, you may have
“assigned” the contract – particularly if this was done with the
owner’s permission or knowledge.


I hope that this explanation helps. PLEASE LET ME KNOW IF I CAN
CLARIFY ANY PART OF THIS ANSWER.

Best regards and best of luck,

Weisstho-ga

Search Strategy:

Contract Assignments:
://www.google.com/search?q=contract+assignments&hl=en&lr=&ie=UTF-8&start=20&sa=N

Michigan Department of Consumer and Industry Services:
http://www.michigan.gov/cis

Very well researched answer, although not what I wanted to hear. I
would personally feel comfortable retaining him for an attorney. Very
pleased.

I think Serenata gave excellent advice. As licence holder, everything
that goes wrong is your fault unless the licence specifies some things
such as earthquakes. If you succeed in getting the home owner to pay
for the additional work, your reputation in the community will be
tarnished. Professionals have such a bad reputation that many people
figure they should hire a jackleg or they should buggle the job at
lots less cost all by themselves instead of paying a professional big
money to bungle it for them.   Neil