I just responded to an inquiry on the Avvo® website, and thought my comments might be valuable to a wider audience. The “asker” was a contractor who wanted to know if a property owner could claim that a job, was incomplete despite verbal (i) instruction to refrain from doing certain work, (ii)acceptance of work as complete, and (iii)payment for all work per a written contract.
The short direct answer to your question is that a lack of proof should prevent this “owner” from beating you in any legal or administrative context, but will never stop such an individual from coming after you. A consultation with a business attorney seems warranted to see where you are and what you should do.
Those of us in the legal community who do defense work will concur on an important principle: it does not matter whether you are “right” in any particular transaction – any aggrieved fool or commercial “terrorist” can come after you and purport to be a claimant. Regrettably, when a business-person like you is responsible, has every necessary license, permit, and insurance policy, and adheres to best practices, doing business the “right” way can be a magnet that draws every potential claimant from under every rock. As the adage says, no good deed ever goes unpunished.
A claim or complaint doesn’t need to be well-founded to keep the claimant from trotting it up the courthouse steps. Unfortunately, there are many attorneys out there who will eagerly participate in an unwarranted shake-down of a good business. Please don’t think that the evils of the legal system run one way. Many plaintiffs have a legitimate case, and lots of plaintiffs’ attorneys routinely perform a valuable service in our communities. There are indeed as many bad businesses as there are claimants who bring nonsensical claims. One important aspect of your situation is that your choice to live and work in the People’s Republic of San Francisco comes with a jury pool that isn’t known for being business-friendly.
To make matters worse, selectiveness in taking on customers is a luxury that many businesses cannot afford in this economy. Accordingly, all you can do is all you can do. Most companies would be well advised to consult with a business transactions attorneys in order to develop standard forms (and other documents) for use in day-to-day contact with their customers and employees. For a contractor, such forms would definitely include a good preliminary notice of lien form, a solid form for acceptance of work and release of lien, and a clear disclosure/statement that explains your warranty (or lack thereof) with respect to services rendered.
If you’re lucky enough to be in a position to investigate/vet your prospective customers, you should find a cost-effective way to do so. A bit of common sense before you sign on for a project goes a long way toward keeping your blood pressure down, and an ounce of prevention (or avoidance) can be worth two hundred fifty seven tons of cure. While terrific front-end legal work and/or due diligence on your behalf can’t prevent a slimy claimant from coming out from under his/her rock after you, well-crafted documents in the paper-trail that tells the story of your transaction and/or a simple investigation of your prospective client will go a long toward helping you stay out of trouble, or shutting a garbage claim down when the rubber meets the road. If you stay in business for a while (particularly in San Francisco), you will recover the cost of legal services such as those I’ve described many times over in peace of mind and reduced legal fees down the road.
If it makes you feel better, even lawyers are not immune from the marketplace hazards that I describe. We have to be carefully prepare our fee agreements, and be very careful about the clients we agree to represent. Lawyer up, and if your documents are really in line with a solid defense, try to avoid negotiating with a terrorist. That said, never be blind to the potential for a “nuisance value” settlement. If the plaintiff/claimant makes a demand that will cost you less to pay than the lawyers’ fees attached to defending your case, consider the benefit of throwing a small amount of money at the problem to make it go away. Good luck!