There are a litany of statutory notices, and deadlines that need to be complied with in order to secure your mechanic lien rights. But that’s not all, many state lien laws have certain requirements regarding the construction contract itself. A 2010 Delaware Supreme Court case dealt with the intersection of contract requirements and mechanics lien rights. This decision confirmed that claims arising out of a verbal contract can still be the basis of a valid Delaware mechanics lien.
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Delaware contract requirements for lien rights
*Thanks to the Fox Rothschild LLP blog for calling our attention to this Delaware Supreme Court decision.
One question contractors ask all the time is, “Do I need a written contract to file a mechanics lien?” As with most things in the legal realm, it depends. Specifically on the state where the project is located.
In Delaware, the requirements regarding the filing of a mechanics lien statement can be found under Del Code tit. 25 §2712(b), which states that the complaint and/or statement shall set forth:
(4) The amount claimed to be due, and, if the amount is not fixed by the contract, a statement of the nature and kind of the labor done or materials furnished with a bill of particulars annexed, showing the kind and amount of labor done or materials furnished or construction management services provided; provided, that if the amount claimed to be due is fixed by the contract, then a true and correct copy of such contract, including all modifications and amendments thereto, shall be annexed.
The case that solidified written contracts aren’t required for lien rights is outlined below. Not only did it determine that an oral contract is sufficient, the case also helps clarify how to properly file a claim under one.
Written contracts are not required for Delaware lien rights
The case in question is A&E Drywall Services, LLC v. Eugene A. Delle Donne & Son, LP, et al.
- Owner: Eugene A. Delle Donne & Son, LP (Eugene)
- General contractor: Ashland Construction Company (Ashland)
- Subcontractor: Woodland Interiors, Inc. (Woodland)
Eugene hired Ashland as the general contractor to do some interior construction work on a Food Lion grocery store. Woodland was brought in under a subcontract to install drywall and acoustic ceiling panels. A few months later the project was complete, but Woodland had yet to be paid. Accordingly, a mechanics lien was filed for a little over $37K.
Oral agreements can be the basis of a lien claim
During the enforcement action, Eugene challenged the validity with a motion to dismiss based on the fact that a copy of the contract wasn’t attached to the lien claim as required under §2712(b)(4). While Ashland contended that the statute should be read as an either allowing a claimant to attach a copy of the contract, or a bill of particulars if there is none.
The Court agreed with Ashland; reasoning that a mechanics lien action is not an action on a written contract between the parties. But rather, “an action of assumpsit for the value of work, labor, and materials furnished by the claimant.” Furthermore, they explained the allowance of verbal agreements (and the requirements to file a lien) with the following:
The Court finds both oral and written contracts can be the subject of a mechanic’s lien action under Section 2712(b)(4). If the contract in question is an oral contract, the Plaintiff is required to attach a bill of particulars showing the kind and amount of labor done or materials furnished or construction management services provided. However, if the contract is written, then “a correct copy of such contract must be attached.” Simply put, an oral contract requires attachment of a bill of particulars, whereas a written contract requires a copy of the original agreement.
Bill of particulars must be attached when the contract is oral
After it was established that an oral contract is sufficient, as long as a bill of particulars is attached to the filing. Ashland did attached a bill of particulars, but one final question remained. Was the attached bill of particulars sufficient?
The bill of particulars is required to show the basis of the mechanics lien claim. It should be “a detailed statement of the facts and must set forth the facts upon which plaintiff bases his claims with sufficient particularity that the interested parties can have no doubt as to the details of the claim.” According to the Supreme Court, the bill need not provide specific breakdown of contracted labor and materials, but simply provide the total contracted amount. Ashland’s bill set forth the pertinent information including the dates, the type of labor performed, materials used, and the value of the labor and materials provided.
Accordingly, the motion was dismissed, and there court upheld Ashland’s mechanics lien claim.
Filing a Delaware mechanics lien with no written contract
The decision in this case clarified that a mechanics lien in Delaware can indeed by based on an oral contract. Obviously, a written contract is always preferable. And contractors in Delaware, and in general, should always insist on a written agreement. But if there is no written agreement, the lack of a contract is not fatal to a lien claimant’s rights in Delaware.
If you are working under an oral contract, a bill of particulars must be attached to the lien filing. Without a written contract, the court requires some sort of evidence supporting the claim. This bill doesn’t need to bet a fully itemized, line-by-line description of all of the labor and/or materials furnished to the project. But it does need to be sufficiently detailed to established the basis of the lien claim.