Comply With the Consumer Fraud Act if You Want to Get Paid

New Jersey’s Consumer Fraud Act imposes numerous requirements on home improvement contractors, including registration with the State and disclosures to customers. A contractor that does not comply with these requirements exposes him or herself to being sued by customers, often homeowners. Even if a contractor is confident in the quality of his or her work and does not fear suit from customers, a contractor that wants to ensure he gets paid for his work should make sure he complies with New Jersey’s Consumer Fraud Act.

How Violation of the Consumer Fraud Act Jeopardizes a Contractor's Ability to Recover Outstanding Payments

In the event a customer fails to make promised payments and the contractor takes legal action to obtain payment, there is a reasonable likelihood that the customer will raise a counterclaim based upon any technical violation of the Consumer Fraud Act by the contractor. Even if the customer has not been harmed or defrauded in any way, and the contractor believes he has done nothing wrong, when a Consumer Fraud Act claim is raised, it can easily increase the cost to the contractor of obtaining payment, reduce the amount of the ultimate payment and/or reduce the likelihood of any recovery.

Contract and Disclosure Requirements for Home Improvement Contractors Under the Consumer Fraud Act

Failure to obtain a signed written contract with the homeowner that includes the many disclosures and terms required by the Consumer Fraud Act (and/or the administrative regulations that implement the Consumer Fraud Act) is perhaps the most frequent pitfall for contractors that have already successfully registered with the State of New Jersey. Many of these terms and disclosures are ministerial, like the proper identification of the contractor’s legal entity, registration number and insurer. Others are more substantive, like the description of the work to be completed, time for completion of the work, total contract price, payment schedule and applicable finance charges.

The Potential for Treble Damages and Attorney’s Fees Under the Consumer Fraud Act

Whether substantive or ministerial, by failing to comply with the Consumer Fraud Act’s requirements, a contractor enables a customer to articulate at least a superficially legitimate Consumer Fraud Act claim that may not be quickly dismissed by a judge or arbitrator. Such a claim carries with it the threat of an award of “treble” damages to the customer, meaning triple damages, along with attorney’s fees, if the customer proves his or her claim. Lee v. Carter–Reed Co., 203 N.J. 496, 521 (2010)(quoting Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009)).

Establishing a Claim Under the Consumer Fraud Act

To establish a claim under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -195, a plaintiff must prove that the defendant engaged in an unlawful practice, that the plaintiff suffered an "ascertainable loss," and that there is a causal connection between the unlawful practice and the ascertainable loss. Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 576 (2011). A failure to comply with the Consumer Fraud Act’s requirements governing home improvement contractors constitutes an unlawful practice. N.J.S.A. 56:8-146. “When an unconscionable commercial practice has caused the plaintiff to lose money or other property, that loss can satisfy both the ‘ascertainable loss’ element of the CFA claim and constitute ‘damages sustained’ for purposes of the remedy imposed by the CFA.” D’Agostino v. Maldonado, 216 N.J. 168 (2013).

Even if the customer cannot ultimately prove his or her claim, they may be able to use it to drive up the cost of litigation for the contractor, increasing the desirability of settlement for less than the full amount owed. In addition, if the customer can identify any credible damage suffered, the possibility of triple damages and the award of attorney’s fees make it much easier for the customer to identify reasons for a judge or arbitrator to reduce any award the contractor may obtain.

Consumer Fraud Act Lawyers

Our firm devotes a significant amount of its practice to New Jersey construction law and litigation, including construction liens. As part of this practice, we serve as attorneys to clients defending or prosecuting claims under New Jersey’s Consumer Fraud Act. We also assist business owners with contract drafting to further business objectives and protects the bottom line. We welcome you to contact us for further information if believe you have a claim under the Consumer Fraud Act, a claim is being asserted against you or you are proactively looking to prevent future claims.

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