Consulting, Resource, Education, and Support Services for Professional Home Inspectors
“A candle loses no light when it lights another candle.”
DRAFT COPY
THIS WRITTEN WORK PRODUCT IS NOT INTENDED AS OR REPRESENTED AS LEGAL ADVICE OR LEGAL OPINION OF ANY KIND WHATSOEVER NOR IS IT TO BE CONSIDERED OR CONSTRUED AS SUCH. DO NOT USE ANY OF THIS MATERIAL IN ANY MANNER WITHOUT PRIOR DISCUSSION WITH AND REVIEW AND APPROVAL BY A COMPETENT ATTORNEY!
27 PAGES
VARIOUS PARTS OF THIS ENTIRE SET OF PROTOTYPE DOCUMENTS WERE AMENDED ON 5/21/07
HOME INSPECTION CONTRACT
Introductory Comments
Each time I’ve been asked to assist a subscriber in responding to a demand letter I find that my task has been made more difficult because the subscriber has not incorporated the essential concepts embodied in the ProSpex prototype documents: “HOME INSPECTION Authorization and Contract and Scope of Inspection,” “HOME INSPECTION Contract Environmental Addendum,” “Description of HOME INSPECTION Services,” “General Information,” and “HOME INSPECTION Report Glossary.” These concepts have evolved out of years of research, use, and modification.
Most inspectors seem to believe that their limitation of liability clause is all they need to protect them from claims made by unhappy clients. Such thinking reveals an incomplete understanding of the concepts pertaining to reduction of their legal exposure. The limitation of liability should be inspectors’ last line of defense, not their first.
The following contract concepts are all essential parts of the protection an inspection contract and agreement can provide:
The “HOME INSPECTION Authorization and Contract and Scope of Inspection” is a negotiated contract. It offers clients a choice of either an inspection with a limitation on liability equal to the fee paid for the inspection or an inspection for which the limitation on liability has been removed for an additional fee.
The following clause is intended to provide liability protection in addition to the clause that limits the inspection company’s liability to the inspection fee.
Client acknowledges that (company name) warrants that its inspection services will be performed in accordance with the Scope of Inspection and the Inspection Report only. This is a limited and non-transferable warranty and is the only warranty given by (company name). (Company name) makes and Client receives no other warranty, express or implied. All other warranties including warranties of merchantability and fitness for particular purpose are expressly excluded. This stated express warranty is in lieu of all liabilities or obligations of (company name) for damages arising out of or in connection with the performance of the inspection and delivery and use of and reliance on the inspection report. (Company name) does not guarantee that the structure inspected will be free from faults or defects. Client waives any claim for consequential, exemplary or incidental damages, even if (company name) has been advised of the possibility of such damages.
*PROSPEX IS A SERVICEMARK OF KEVIN M. O’HORNETT dba PROSPEX
COPYRIGHT 2005 PROSPEX
ALL RIGHTS RESERVED
Introductory Comments continued
The following clauses limit the inspection company’s liability to the inspection fee.
IN THE EVENT OF A BREACH OR FAILURE OF THE FOREGOING WARRANTY, CLIENT AGREES THAT THE LIABILITY OF (COMPANY NAME) AND OF ITS AGENTS, EMPLOYEES, AND INSPECTORS FOR CLAIMS OR DAMAGES, COSTS OF DEFENSE AND SUIT, ATTORNEYS’ FEES, OR EXPENSES AND PAYMENTS ARISING OUT OF OR IN ANY WAY CONNECTED WITH ERRORS OR OMISSIONS IN THE INSPECTION OR THE INSPECTION REPORT SHALL BE LIMITED TO LIQUIDATED DAMAGES IN AN AMOUNT EQUAL TO ALL AMOUNTS PAID FOR THE INSPECTION TO (COMPANY NAME) BY CLIENT. CLIENT AGREES TO INDEMNIFY AND HOLD (COMPANY NAME) HARMLESS FOR ALL DAMAGES AND LIABILITY INCURRED BY (COMPANY NAME), INCLUDING LIABILITY FOR NEGLIGENCE, EXCEPT AS SPECIFICALLY PROVIDED ABOVE.
The following clause should immediate follow the previous clause in the Contract. It explains the limitation of liability and it establishes that, even if the Client refuses to accept or cash the fee refund check, they have agreed by contract, the presenting or “tender” of the full amount of the inspection fee is sufficient to release the inspection company.
Client acknowledges the liquidated damages are not intended as a penalty but are intended (I) to reflect the fact that actual damages may be difficult and impractical to ascertain; (II) to allocate risk among (company name) and Client; and (Ill) to enable (company name) to perform the inspection at the stated inspection fee. In the event of the tender by (company name) of a refund of the inspection fee, such refund shall be full and final settlement of all present and future claims and causes of action and (company name) shall be thereupon generally and fully released.
The following clause is intended to reduce the potential for holding the inspector personally liable.
Client hereby expressly waives any cause of action against the inspector personally, excluding solely willful misconduct, and agrees to look solely to (company name) for any and all liability related to the Inspection including the negligence of the inspector. Client hereby agrees to indemnify the inspector personally for any and all causes of action, including costs of defense and attorneys’ fees, related to or arising from any claim brought by Client against the Inspector.
The following clause requires the Client to notify the inspection company and to permit the inspection company to reexamine the house before the Client takes any measures to address any condition for which the Client claims the inspection company is responsible. If the Client fails to do this and has work performed, this clause says that the Client cannot then demand reimbursement for the work from the inspection company.
In the event Client has a claim of a breach or failure of warranty, or for negligent inspection of any component or item in the inspection, Client shall notify (company name) by certified mail/return receipt requested within seven (7) days of discovery of the condition which forms the basis of the claim and (company name) shall have five (5) working days to re-inspect the component or item before Client repairs or replaces the component or item. This right of re-inspection is to protect (company name) and Client from the business practices of some contractors who base their recommendations to repair or replace components on incorrect, false, or misleading information. If Client fails to comply with the notification and right of (company name) to re-inspect requirements as outlined above in this paragraph, Client waives any claim against (company name) with respect to the component or item.
The following clause sets specific limits regarding how much time a client has to bring a legal action against the inspection company.
No action, whether in contract or tort, shall be brought against (company name) in arbitration or a court of law beyond the earlier of one year following the date of the Inspection Report or 120 days after discovery by Client of the condition which forms the basis of the action.
Introductory Comments continued
The following clause is intended to reduce the potential for claims made by third parties.
The Inspection Report is not intended for use by anyone other than the Client. No third party shall have any right arising from this Contract or the Inspection Report. In consideration for the furnishing of the Inspection Report, the Client agrees to indemnify and hold harmless (company name), its agents, employees, inspectors, directors, officers, shareholders, successors and assigns, for all costs, expenses, legal fees, awards, settlements, judgments, and any other payments of any kind whatsoever incurred and arising out of a law suit, cross-complaint, countersuit, arbitration, administrative proceeding, or any other legal proceeding brought by any third party who claims that he/she relied on representations made in such Inspection Report and was damaged thereby. Client’s request that (company name) release copies of the Inspection Report shall be at Client’s risk with respect to the contents of this paragraph.
The following clause is intended to reduce the potential for clients’ claims that if they had only known about some condition which was not included in the report, they could have negotiated a better price for the subject property.
Client acknowledges and agrees that it is the Client’s intention to use the inspection and report for the purpose of becoming better informed regarding some of the conditions of the subject property and not for the purpose of negotiating other contracts.
The following clause holds clients liable for the inspection company’s costs of defense if clients bring suits against the inspection company and fail to prove their claim.
Except as provided above for arbitration of disputes, if a claim is made against (company name) for any alleged error omission or other act arising out of the performance of this inspection, and if Client fails to prove such claim, Client agrees to pay all costs and attorney’s fees incurred by (company name) and its employees, agents, inspectors, directors, shareholders, successors and assigns.
The following two clauses are intended to reduce the potential for Client claims that they never agreed to the terms and conditions of the inspection contract because they never signed the contract.
THESE CLAUSES ARE NOT INTENDED TO ENCOURAGE INSPECTORS TO PERFORM OR TO SUGGEST THAT INSPECTORS PERFORM ANY INSPECTION WITHOUT A SIGNED CONTRACT! NO INSPECTION SHOULD BE PERFORMED WITHOUT AN INSPECTION CONTRACT SIGNED ON OR BEFORE THE DATE OF THE INSPECTION! THESE CLAUSES ARE “JUST-IN-CASE-YOU-LOSE-YOUR-MIND-AND-DON’T-GET-A-SIGNED-CONTRACT” CLAUSES!
Acceptance of the Inspection Report by any party shall constitute acceptance of the terms and conditions of this Contract as if signed by that party and shall constitute authorization to any person signing as Client to act as an agent in agreeing to the terms and conditions. This contract is binding on Client, Client’s spouse, heirs, distributees, guardians, legal representative, successors and assigns.
The presence of Client has been requested during the inspection. If Client is not present at the time of the inspection or for any other reason is unable to sign this Contract at the time of inspection, acceptance of the Inspection Report shall constitute acceptance of the terms and conditions of the Contract as if signed by Client.
The following clause combines all of the inspection company’s written inspection and inspection report related documents into the contract.
The HOME INSPECTION Report, any addenda, and the “HOME INSPECTION Authorization and Contract and Scope of Inspection” collectively constitute the contract document. In the event any provision is held to be unenforceable, it shall be severed from the contract document and the remaining provisions shall be fully enforced.
The following clause is intended to reduce the potential for clients’ claims that they were, somehow, “forced” to use a company’s inspection services.
If the terms and conditions of this Authorization and Contract are not acceptable to the Client, the Client agrees to notify (company name) or (company name’s) representatives and the inspection shall be canceled, no fee charged, and the Client shall be free to seek inspection services elsewhere.
Introductory Comments continued
These paragraphs form the basis of much of the protection that an inspection contract and agreement provides to an inspector. If a client fails to follow these mutually agreed upon requirements, it’s much easier for me to assist a subscriber effectively when denying or refuting a claim of negligence or incompetent inspection by a client.
Also, all of the information on page 1 of the “HOME INSPECTION Authorization and Contract and Scope of Inspection” document is important. Its purpose is to create a “negotiated” contract which may reduce the potential for clients to claim that they had no choice other than to sign a liability limiting contract.
Together, the ProSpex “HOME INSPECTION Authorization and Contract Scope of Inspection,” “Description of HOME INSPECTION Services”, “General Information,” and “HOME INSPECTION Report Glossary” form a single, comprehensive, and closed document. Each is designed to work in concert with all the others.
There are certainly many ways of saying the same things. The ProSpex model is simply an example of a concept that has been “field tested” for fifteen years and has consistently proven to be effective.
All such documents should be reviewed and approved by your legal counsel before using them.
Don’t make it more difficult to respond to a demand letter if the need arises.
NOTE TO ProSpex SUBSCRIBERS: Testing for radon gas, lead, mold, or other environmental contaminants, inspection for compliance with the Americans with Disabilities Act, the performance of Phase 1, 2, or 3 environmental surveys, or inspection of other systems including but not limited to fences, yard walls, swimming pools, spas, recreational facilities and landscape irrigation systems, and commercial and industrial buildings are excluded in many, if not all, home inspection standards of practice. Therefore, when no standards or scope of work for such testing and inspections are part of the inspection standard(s) in accordance with which an inspection is conducted, it is recommended that consideration be given to performing these services or inspections under separate contracts and agreements which have been reviewed and approved by competent legal counsel and which clearly define the scope and limits of such work. Such scope of work may include any governmental or industry protocols which apply to the work.
COMPANY NAME
HOME INSPECTION
AUTHORIZATION AND CONTRACT
AND SCOPE OF INSPECTION ©
______
CLIENT
______
______
SUBJECT PROPERTY
AUTHORIZATION AND AGREEMENT
1. Client hereby authorizes and contracts for (company name) to perform a HOME INSPECTION at the Subject Property. Client agrees to the terms and conditions in this Contract. The Inspection Report and its contents are intended for the exclusive use of and are the nontransferable property of the Client. The agreed Inspection Fee is payable at the time of the inspection. Client agrees to pay all telephone long distance and FAX charges associated with the inspection.
2. My signature below acknowledges that I have read, understand, and accept the terms, conditions, and limitations as outlined in the “HOME INSPECTION Authorization and Contract and Scope of Inspection.”
I received and had the opportunity to read both pages of the “Description of HOME INSPECTION Services” and all four pages of the “HOME INSPECTION Authorization and Contract and Scope of Inspection” and I DO NOT elect to pay an additional fee of $750.00 for the removal of the limitation on liability, liquidated damages, and indemnification described in paragraph 7 for this inspection and report.