Interesting Arbitration in Oregon and another reason why all contracts need to be in writing

Here's an interesting case that was arbitrated up in Oregon, but should serve as a lesson learned for all of us to establish a written contract, a scope of work and a written warranty that combined with proper construction techniques, will hopefully allow you to avoid a huge headache on a million dollar home being built. Click the headline to go to the webpage where the whole dcument is to read it all...

BREACH OF CONTRACT

Sometime in February 2004, the parties entered into a verbal contract. Neither party recalls the exact date of the contract or the specific terms of their agreement. When presented with a verbal contract, it is not possible; without a detailed, accurate presentation of the contractual agreement; for a fact finder to fully and accurately determine the specifics of the parties’ promises; their performance; and the extent of their compliance or breach, which ever the case may be. The only provisions of the verbal contract for which the parties provided credible evidence were that the claimant agreed to provide a waterproof membrane on a deck and that in return the respondent agreed to pay $980. The evidence in the record supports, by a preponderance of the evidence, that the claimant provided a waterproof membrane on a deck and that the respondent paid the claimant in full. Neither party breached the only contract provision that the parties were capable of recalling with credibility.

IMPROPER WORK

The claimant contracted with the respondent to have a waterproof membrane installed on a deck. The claimant explained to the respondent that the deck area would eventually be covered with concrete. The respondent informed the claimant that the waterproof membranes he installed were designed to be open and exposed to the elements as roofing material for flat or low-sloping roofs; he had no experience, prior to working with the claimant, installing a waterproof membrane under a concrete slab. The claimant told the respondent to, “Do whatever it is you do.” The claimant also told the respondent in the same conversation, “not to worry because concrete does not leak.” After a leak was discovered and both parties investigated, they learned that, in cases where concrete is going to cover a waterproof membrane, industry standards require that the membrane itself curve up or “flash” the vertical wall for a distance of at least eight inches. In this case, it did not. In addition, they learned that industry standards require that a protective layer or “protection board” separate the waterproof membrane and the concrete. In this case, it did not. Neither was aware of these requirements prior to the work being performed, nor did the claimant require that the respondent adhere to those standards at the time of performance. Yet the claimant contends that the respondent should be solely responsible for improper work. The claimant’s contention is in error. The claimant directed the respondent to “do what it does” to install a waterproof membrane. The respondent did exactly that. The claimant did not ask or direct the respondent to investigate the procedure for placing a waterproof membrane under a concrete slab. In fact, the claimant implied by its statement—don’t worry, concrete doesn’t leak—that it did not require the respondent to do anything other than that which it regularly did when installing waterproof membranes on a roof.

The claimant served as the general contractor for the residence constructed at 1949 Cheryl Court, Lake Oswego, Oregon. The claimant visited the site daily. As of the date of the hearing, the claimant had been working in the Lake Oswego area as a general contractor for over 36 years. The house the claimant constructed is valued at over $1,000,000. Taking all of these factors in consideration, the claimant knew, or should have known, that it was ultimately responsible for quality and workmanship. Nevertheless, the claimant inspected the respondent’s work and made payment-in-full without ever mentioning improper work. What’s more, the respondent’s work was open for inspection and viewing by the claimant for a period in excess of four months. During that time, the claimant did not raise the issue of improper work. Without any indication that the respondent’s work was improper, the claimant directed another subcontractor to pour concrete over the respondent’s work, making any necessary repairs to the respondent’s work exponentially more difficult and costly. Therefore, the claimant alone bears the responsibility for the high cost to make repairs.


The claimant contracted with a concrete subcontractor to pour a slab of concrete over the respondent’s waterproof membrane. The waterproof membrane was flashed to a height of no more than three inches. The subcontractor poured a 4.5 inch slab. Industry standards require that concrete pours not exceed the height of any flashing. The concrete contractor’s work was improper. What’s more, it is highly likely that the fact that the concrete rose above the flashing contributed, if not caused, the leak at issue.

Finally, during the period between the installation of the waterproof membrane and the discovery of a leak, several intervening events took place, any of which could have either caused or contributed to the leak. Construction workers walked and performed construction work directly on the waterproof membrane, concrete was poured directly on top of the membrane without the benefit of a protective barrier, and the claimant removed and replaced a post that had been flashed by the respondent. The claimant’s evidence did not eliminate any of the above factors as the cause of the leak. Similarly, the claimant failed to establish that the respondent’s work was either the sole or a significant cause of the leak. Rather, the claimant proved only that the respondent’s work was one of several possible causes of the leak.

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