I just want to chime in and ask whether it's really practical, or makes financial sense, to argue too much about this. I realize that money is money, and $750 (the difference between the cost of the iron railing and the wood railing) is nothing to sneeze at, but now that you've gone ahead and ordered the iron railing it would probably cost you more in time, effort, grief, and lawyers' fees to contest the issue. First, since you placed the order for the iron railing, the iron company will come after you first - because your name was on the purchase order - and most likely you would lose and would have to bring the homeowner into any lawsuit to see if the court would order him to contribute to the cost - which is not a foregone conclusion. Even if your attorney billed for her or his time at $100/hour, you would most likely end up incurring more than 8 hours of time, or more than $800 in attorney's fees, all of the less than 100% chance of getting $750 back.
I know you said the homeowner is refusing to pay for the full amount, but would he/she be willing to split the cost with you some way? I would suggest that you first try that and, if he/she simply puts his/her feet down, that you swallow your pride and just pay the rest of the bill. I know that's cold comfort, but you're likely to feel a lot worse, and be a lot poorer, if you pursue this to the end in litigation.
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You are correct. You were only required to do the bare minimum to get the co. You had a verbal contract which can be enforced. If you can not settle this amicably get the co get your escrow released then if the iron company comes after you for the balance you can sue him in small claims court. If you can get your escrow released before you pay the balance to the iron company then they will probably end up putting mechanics lien on the house which the homeowner will have to deal with.
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Who placed the order with the iron company?
If you made the order, you are likely responsible for payment of the bill. In fact, the iron company would likely have a hard time collecting from the new homeowner under a breach of contract theory - because there was no contract between the company and the new homeowner.
If the new homeowner placed the order, then the new homeowner will be responsible for the bill.
Note that even if you are responsible for the bill, you could still sue the new homeowner for the difference it cost between wood and iron railings.
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