Customer Service or Settlement Agreement?

January 25, 2013 in Construction, Creditors Rights, Indiana Courts, Uncategorized by Brad Council

Customer Service or Settlement Agreement?

In December of 2012, the Indiana Court of Appeals made an important decision regarding settlement agreements.  The appeals court reversed the decision made by the small claims division of the Allen Superior Court in the case of Vance v. Francisco Lozano, et al., finding that a compromise on a dispute can be considered an enforceable settlement agreement even if the claim is meritless.

The events that led up to the dispute began in May of 2009 when David Vance hired Rock Solid Concrete Inc. to remove and replace his driveway, sidewalks and drive approach at his home in Fort Wayne, Indiana.  The work was completed in July of 2009 and Rock Solid informed Vance of the proper ways to care for his new drive and that fresh concrete could be damaged by road salt.  In December of 2010, Vance noticed some pitting and scaling in his drive.  Both parties agreed to have an inspection done on the drive in order to determine the cause of the damage.  The third party inspection was done by Erie Haven, who came to the conclusion that the damage was cause by road salt that made its way onto the drive via the snow melting away from vehicles in the drive.

Erie Haven reached his conclusion in March of 2011 and recommended that Vance’s driveway be power washed and resealed.  As a solution, Rock Solid offered to complete this service for Vance, but Vance was not satisfied.  On June 7, 2011, Rock Solid offered to replace Vance’s drive way for no additional cost and gave a hopeful time frame for the end of August 2011.  When the work was not completed by this time frame, Vance unsuccessfully attempted to contact Rock Solid multiple times.  With no response regarding a tentative date for completion of his new drive, Vance filed suit against Rock Solid for breach of contract.

A trial was held for Vance’s claim in the small-claims division of Allen Superior Court.  This court found that Rock Solid made a goodwill gesture by agreeing to replace Vance’s drive, but did not breach a contractual agreement by not performing the task.  However, the Indiana Court of Appeals disagreed with this ruling and reversed this decision.  The appeals court reasoned that any attempt to compromise on a dispute can be considered an enforceable settlement agreement, regardless of whether or not a merited claim existed, as long as the claim was made fairly and in good faith. The Appeals Court found that Vance acted fairly and in good faith when making his claim and that Rock Solid offered to replace Vance’s drive in order to avoid litigation; therefore, the court found that an enforceable settlement agreement existed between the parties and reversed the findings of the small claims court.

The Full Text of the Court Opinion May Be Found Here:

http://www.in.gov/judiciary/opinions/pdf/12101202nhv.pdf

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A.