Contractor Goodwill Gestures Binding

The Indiana Court of Appeals recently held that a contractor who proposes a goodwill gesture to resolve a dispute with an unsatisfied customer may be bound by such offer and is liable for breach of contract if it fails to follow through to the customer’s satisfaction. In David Vance v. Francisco Lozano, et al., 02A03-1203-SC-142, the Court of Appeals reversed a small claims court decision and ruled that a concrete contractor was obligated to replace a portion of a customer’s driveway even though the evidence showed that the problems with the driveway were not a result of faulty workmanship. The Court of Appeals found that the contractor’s verbal “goodwill gesture” in offering the partial replacement created a binding settlement agreement with the customer that was breached when the contractor did not timely perform the replacement. According to the Court, the proposed settlement of a doubtful claim is sufficient consideration for a contract if the claim is made fairly and in good faith, even if it is possibly a meritless claim based on the evidence.

For more information, contact a member of the Firm’s Construction Law Practice team.

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