Companies that offer home improvement services to consumers are bound by the terms of the contracts entered into with their clients and by the provisions of the New Jersey Consumer Fraud Act, which offers significant protections for consumers within the state. The 1994 case of Cox v. Sears Roebuck and Company is often used as a bellwether case by attorneys and may serve as a cautionary tale for home improvement companies who do business in New Jersey.

The Basics of the Case

In August of 1988, an 82-year-old man named William Cox entered into a contract with Sears Roebuck & Company to perform renovations on his kitchen. The requested work included the removal of existing cabinets and the installation of new ones, the installation of a new vinyl floor, a backsplash and countertop, a sink and faucet, an additional electrical outlet, a garbage disposal, a microwave hood and wallpaper. Sears also agreed to reinstall all appliances, to vent the microwave hood and to perform all necessary repairs to walls for the sum of $7,295.69, which Cox financed on his Sears credit account. In December 1988, Cox agreed to rewire his kitchen at an additional cost of $1,500.

Cox subsequently sued Sears Roebuck and Company for alleged violations of the New Jersey Consumer Fraud Act and for breach of contract. During the jury trial, Cox presented evidence that the contractors enlisted by Sears failed to perform the duties as outlined in the contract, failed to obtain the necessary permits and generally performed the renovations in a deficient manner. The work performed did not measure up to the building and electrical codes in place at the time and was unattractive and incomplete.

The jury found in favor of the plaintiff, but the judge at the Law Division granted a motion for judgment by Sears Roebuck, stating that there was no ascertainable loss to Cox because he had not paid for the work that was not performed. Sears Roebuck was required to remove all charges from the plaintiff’s credit account. This eliminated the ascertainable loss as a factor in the decision reached by the court.

The case was then taken to the Appellate Division for the state of New Jersey, where the findings of the lower court were mostly upheld. The Appellate Division Court found for the plaintiff on breach of contract. The dissenting opinion would have upheld the original jury finding and would have allowed for the recovery of attorneys’ fees and treble damages by Cox.

The Supreme Court Ruling

Cox v. Sears Roebuck was appealed to the Supreme Court of New Jersey, where the court ruled unanimously on September 15, 1994, that the New Jersey Consumer Fraud Act should be construed in a liberal manner and in favor of consumers. The ruling, which was written by Justice Clifford, indicated that the jury verdict was correct and added to the amount awarded by that decision the attorneys’ fees and costs incurred by Cox during his pursuit of his legal case.

In the ruling, Justice Clifford explained the three types of Consumer Fraud Act (CFA) violations, which consist of affirmative acts, omissions and violations of CFA regulations. While not all breaches of warranty constitute CFA violations, the court found that the negligence and affirmative actions taken by the Sears Roebuck contractor did rise to the level of a CFA violation. Additionally, the court found that the victim does not have to actually pay for the repairs or renovations before filing a lawsuit or claim. The Supreme Court of New Jersey also ruled that because Sears had filed a counterclaim for payment and had placed a lien on Cox’s property, there was indeed an ascertainable loss that merited treble damages and the repayment of attorneys’ fees to Cox.

What the Ruling Means for Your Business

The important elements to keep in mind from this case are the fact that CFA provisions are to be construed liberally and in favor of your customers and that you may be liable for attorneys’ fees and other expenses if you lose your case under CFA or breach of contract regulations. This can add up to thousands of dollars in losses for your home improvement business and could leave you financially devastated if you do not prevail in court.

At the Di Lauri & Hewitt Law Group, we offer the most practical and effective representation for your business against legal actions involving the CFA, breach of contract or other civil litigation matters. We are committed to providing you with the right defense solutions for your needs. Call us today at 973-285-3220 to schedule an appointment or to discuss your case with us. We look forward to the chance to serve you.