Once the Chinese Drywall story began dominating news in the construction industry, attorneys, contractors, scientist and inspection outfits naturally looked to cash in on the crisis.

The rush to capitalize on the new demand for drywall inspections and replacement lead Florida’s Palm Beach Post to headline one of its articles on the topic “There’s gold in them there walls.”

While filling a void for services in demand is good, and profitable, those rushing to the aid of Chinese Drywall victims should analysis the legal risk of their new ventures to ensure they aren’t over-exposed and one-day facing expensive litigation and claims.

Here’s a breakdown of some of the legal risk associated with these new ventures.

No Puffing

puffing n. the exaggeration of the good points of a product, a business, real property, and the prospects for future rise in value, profits and growth. Since a certain amount of “puffing” can be expected of any salesman, it cannot be the basis of a lawsuit for fraud or breach of contract unless the exaggeration exceeds the reality. However, if the puffery includes outright lies or has no basis in fact (“Sears Roebuck is building next door to your store site”) a legal action for rescission of the contract or for fraud against the seller is possible.

The Florida Attorney General has already issued a consumer alert for scam artists trying to capitalize on Chinese Drywall problems, and other state’s are likely to follow suit with similar warnings.

While your business may not be a scam, the AG warnings and news reports on related scams will heighten the concern of your customers…and may make your customers over-sensitive to unfulfilled promises of your product or service.

Your company may eventually be exonerated from a complaint to the Attorney General’s office, but it will be subjected to the complaint, incur expense, and possibly find itself with negative press.

To avoid these legal troubles, tell things like it is with your produce and service, and try to avoid “puffing.” It would also help to have an attorney go through your promotional materials and ensure that you are not misrepresenting your company’s services.

Know the Unknown

Here is a fact: it’s impossible to know the unknown. So, why are we suggesting that you do know the unknown? Because we’re suggesting that you simply know that the unknown is there.

And with Chinese Drywall…there is a lot of unknowns.

Anyone setting up a business to remedy, repair, inspect or investigation Chinese Drywall should realize that experts just aren’t yet sure of what causes Chinese Drywall, or how to find it and properly replace it.

If your company purports to repair Chinese Drywall problems, be cautious that a coating may or may not do the trick, that the drywall may or may not need total replacement, and that other building elements may be affected. With the homeowner’s health and integrity of the property at possible risk, incorrect moves can expose you or your company to substantial damages.

Knowing the unknown involves two steps:

- Take inventory of the unknowns associated with your concept; and

- Legally protect yourself with disclaimers, good contracting and clear communication.

Consult Legal Counsel

Since scam artist have increased consumer sensitivity, the legal risks are high and the unknowns are plenty, it’s worth discussing your business plans with counsel.

Through advice and help with contracting, an attorney competent in construction law can help protect your company against liability risks it proceeds to provide services to a new and unpredictable customer.

Learn about good general contracting practices at our firms general construction law blog, the Construction Law Monitor here.

Also, Wolfe Law Group would be happy to review your company’s business model to advise you of its inherent risks, and to help craft a contract that can communicate the risks to the consumer and best protect your business from liability. Contact us to learn more.