If you are considering running a sweepstakes to offset declining lead generation, the good news is that a sweepstakes can be run by even a smaller contractor.

The bad news is that you still need to be careful. Before a contractor begins to operate any sweepstakes as part of a marketing plan, it is paramount that he or she understands the difference between a legal sweepstakes and an illegal lottery. An illegal lottery consists of a prize; the chance to win the prize; and consideration — something valuable given for the chance to win the prize.

If just one of these elements is eliminated, an illegal lottery is transformed into a legal sweepstakes. Traditionally, companies have eliminated the consideration factor by stating “no purchase necessary to enter.” However, be careful to ensure that there is not some hidden form of consideration that can trap you, such as a required in-home presentation, filling out a lengthy survey, or requiring entrants to submit contact information about friends and family.

The heart of any sweepstakes promotion is the “Official Rules,” which constitute the contract between the contractor and the consumer. They must be drafted with care and precision. By accepting and agreeing to be bound by the rules, a participant enters into a binding contract with the contractor.

Overseen primarily by the federal Deceptive Mail Prevention and Enforcement Act, sweepstakes must contain certain disclaimers and statements. Specifically, sweepstakes mailings must disclose:

  • Contractor's name and business address;
  • Estimated odds of winning each prize;
  • Quantity, estimated retail value, and nature of every prize;
  • Clear statement of the payment schedule of any prize.
  • These are just the basics. If you're foolish enough to copy someone else's sweepstakes rules, be prepared to get burned. One large contractor found itself in trouble with the New York attorney general when it copied the official rules from a window and siding company's sweepstakes. Of course, you can install siding and windows into just about any house. But try installing a basement refinishing system on a house in Buffalo that does not have a basement. They were less than thrilled to find the customer demanding they dig out a new basement. — D.S. Berenson is the Washington, D.C., managing partner of Johanson Berenson LLP (www.homeimprovementlaw.com), a national law firm specializing in the representation of contractors and the home improvement industry. He may be reached at info@johansonberenson.com.

    This article is for informational purposes only and should not be construed as legal advice.