The New York Appellate Division recently issued a ruling in a contract dispute involving P.E. Smith Associates, Inc. and Kevin Bandoian and Melissa Bandoian. This case, filed under docket number 2021-08171, centered around claims of breach of contract related to architectural services and renovation costs. The court's decision impacts how similar disputes may be resolved in the future, particularly concerning the enforceability of home improvement contracts.
The dispute began when the Bandoians entered into an architectural services agreement in September 2000 with Peter E. Smith, who owned P.E. Smith Associates, Inc. The couple sought architectural design plans for renovations to their home in Cold Spring Harbor. After the plans were delivered, the Bandoians contracted with Smith Associates in October 2002 to perform the renovations. The relationship between the parties soured over payment issues, leading to the legal battle.
During the renovation project, the Bandoians requested multiple changes to the original plans. They paid for certain materials and services directly, expecting a credit against the contract amount. However, when Smith Associates billed them for additional costs, the Bandoians refused to pay, claiming they had already overpaid. This disagreement led Smith Associates to file a lawsuit against the Bandoians, alleging breach of contract for failing to pay the additional invoice of $156,228.41.
In response, the Bandoians filed counterclaims, asserting that Smith Associates had breached the contract by not refunding the $146,000 credit they believed they were owed. They also initiated a separate action against Smith and his companies, alleging architectural malpractice and fraud. The case eventually reached the Appellate Division of the Supreme Court of New York.
On July 22, 2026, the Appellate Division delivered its ruling. The court modified the lower court's judgment by dismissing Smith Associates' claim for $106,000 against the Bandoians and instead ruled in favor of the Bandoians for $40,000. The court found that while the Bandoians breached the contract by failing to pay the additional costs, Smith Associates was also found to have breached the contract by not refunding the credit owed to the Bandoians.
The court stated, "the Bandoians were entitled to have their obligation regarding the extra costs offset by the $146,000 credit, which consequently warrants a judgment being entered in favor of the Bandoians and against Smith Associates in the principal amount of $40,000."
The ruling also dismissed the Bandoians' counterclaims regarding the violation of Lien Law and their allegations of fraud against the Smith parties. The court determined that the Bandoians had not been fraudulently induced to enter into the contract and that there was no evidence of injury related to the alleged violations of Lien Law.
This ruling signifies an important clarification in contract law regarding home improvement agreements. It highlights the necessity for both parties to adhere to the terms of their contracts, including payment obligations and the requirement for written change orders. The court's decision emphasizes that while contracts must be honored, there can be allowances made for credits and overpayments that affect the final amounts owed.
The outcome of this case may influence future disputes involving home improvement contracts, particularly in how courts interpret the enforceability of contracts that do not strictly comply with statutory requirements. The ruling reinforces the idea that a meeting of the minds between parties can validate a contract, even if it does not meet every legal requirement.
Moving forward, this case may serve as a reference for similar disputes, especially those involving architectural services and renovation projects. Homeowners and contractors alike may need to review their agreements carefully to avoid misunderstandings that could lead to litigation.
As for the possibility of an appeal, the court's decision is final unless the parties seek further review. Details were not available in the court filing regarding any related cases pending or whether the Bandoians or Smith Associates plan to appeal this ruling.