Reference no: EM131473542

Question: KAMPOSEK v. JOHNSON, 2005 OHIO 344 (OHIO APP. 2005)

FACTS Phillip and Vickie Johnson operated a construction company. In response to an inquiry from Albin and Carol Kamposek, Vickie Johnson went to the Kamposeks' home and offered a proposal for construction work. The proposal included construction of a pole barn, an addition to the residence, new windows, conversion of a garage into living space, and siding of the entire house. The parties agreed upon a price of $28,800. The Johnsons did not provide the Kamposeks with a notice of their right to cancel this contract as required by the Ohio Home Solicitations Sales Act (HSSA). The Kamposeks paid part of the contract price to the Johnsons, but were unhappy with the quality of the work, and refused to make the final payment. The Johnsons ceased work at that point. The Kamposeks filed suit against the Johnsons for breach of contract. Seven months later (before the trial), the Kamposeks sent a letter to the Johnsons canceling the contract. The trial court granted the Kamposeks' motion for summary judgment, finding that the contract was subject to the HSSA. The trial court ordered the Johnsons to return the $20,152.64 that the Kamposeks had paid toward the project. DECISION The appellate court affirmed the outcome. The HSSA states, in relevant part:

(A) "Home solicitation sale" means a sale of consumer goods or services in which the seller or person acting for the seller engages in a personal solicitation of the sale at a residence of the buyer, including solicitations in response to or following an invitation by the buyer, and the buyer's agreement or offer to purchase is there given to the seller or a person acting for the seller, or in which the buyer's agreement or offer to purchase is made at a place other than seller's place of business. Here, the contract was offered and accepted at the Kamposeks' residence, and previous case law had established that home improvement contracts generally fall within the HSSA. Thus, this contract was subject to the HSSA. The HSSA further provides that a buyer in a home solicitation sale may cancel the sale within three days of signing the agreement. The seller must provide the buyer with notice of this right of cancellation, and the three-day period begins only when notice is given. The buyer may cancel the sale at any time prior to receiving notice of the right of cancellation. If the buyer cancels, the seller must return all payments to the buyer, and the buyer must, upon demand, allow the seller to reclaim the goods from the sale.

If the contract involves services, the HSSA does not permit the seller to begin performance of the contract until the three-day cancellation period has run. If the seller begins work before the expiration of the buyer's right to cancel, the seller bears the risk of loss should the buyer choose to cancel. Home improvement contracts are classified as service contracts, and hence the Johnsons bore the risk of starting work prior to the end of the cancellation period. Moreover, the physical items involved in a home improvement contract are typically of little value to the seller if reclaimed, and removal of them often causes damage to the buyer's property that is difficult to restore without subjecting the buyer to additional hardship. Thus, the court concluded, the Kamposeks were not liable for compensating the Johnsons for the partial work performed. Rather, the Kamposeks were entitled to a full return of all money paid to the Johnsons because the Kamposeks exercised their right of cancellation in a timely fashion; nor were the Kamposeks required to return any materials received. The appellate court explicitly noted that the "HSSA is intended to be a ‘shield' for the consumer, not a ‘sword.'" Where a consumer entered into a contract for the sole purpose of taking advantage of the seller's possible failure to provide adequate notice of the right of cancellation, the trial court would "have the discretion to make an equitable determination of damages." There was no evidence that the Kamposeks had misused the HSSA in this manner, however.