Usually a construction dispute can be traced to either the client s expectations not being met by the contractor or the contractor s expectations not being met by the client. In this article David gives excellent advice about what to do to when you do end up in a dispute and how to avoid disputes in the future. Definitely required reading if you want to avoid conflict on the jobsite! Compilation copyrighted 2013 by Monk and DBug, LLC and InformedContractors.com Copyrights to the individual articles belong to the individual authors of the articles.
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Construction Disputes: Why do they Arise and How to Avoid Them David J. Barnier, Esq. Partner and Shareholder of Barker Olmsted & Barnier, APLC Phone: 1-619-682-4842 Meeting Expectations of the Client and the Contractor Usually, a construction dispute can be traced to either the client s expectations not being met by the contractor or the contractor s expectations not being met by the client. It takes only minimal care to put together a construction contract that describes the work to be performed and price for the work. Many contractors borrow terms they see in other construction contracts, which is a good idea (almost every experienced attorney has borrowed language from documents prepared by another attorney). However, the majority of construction contract forms are not fine-tuned to the type of work being performed by the contractor. A customized construction contract form is useful to a contractor for two chief reasons: obviously, a well-drafted contract form will have terms that protect the contractor s right to payment, and wording that confirms terms such as contractor shall not be responsible for any delays that are not within the entire control of the contractor. In addition to confirming terms favorable to the contractor, a well-drafted contract form will accomplish the goal of setting the client s expectations at a reasonable level. Example: The Cabinet Installer who Installs Natural Wood Cabinets Not only should the contractor have a term in the contract that explains to the client that natural products can vary in appearance, the contractor should strongly consider going out of his way to point this out to the client. The same can be true for concrete color, other natural products such as stone or wood, and any custom-prepared materials. Page 1 of 4
Yes, there is a risk that the client may get cold feet when told that the materials may not match, but in most cases, that same client will refuse to pay or will commence litigation for reimbursement if their expectations are not made reasonable prior to the project commencing. Progress Payments A separate issue that can be largely addressed via contract terms and communications with the client is the issue of how progress payments are to be made. If progress payments are to be made, the first consideration is compliance with local laws. For instance, in California, home improvement contractors cannot ask for payment for any portion of work until the work has been provided. So long as applicable laws are followed, it is smart to ensure that the client understands when progress payments will be due. Slow payment on a project can cause a domino effect for a contractor who has his own payment obligations and requires consistent funding. A contract should clearly set forth the timing of progress payments and should include terms entitling the contractor to service charges for late payments, the right to stop work if payment is late, and the right to recover attorneys fees if a collection lawsuit is necessary. In practice, these rights should only be enforced as a last resort, however the threat of enforcing these rights coupled with a pre-job explanation of the client s payment obligations will usually eliminate most payment concerns with reasonable clients. Mechanic s Lien Rights On a related note, all contractors should be mindful of available mechanic s lien rights under the laws of their state and have a standard practice of maintaining those rights. It usually takes very little effort to maintain these rights and when the project loses funding or any other problem arises, mechanic s lien rights can be the difference between getting paid and not getting paid. Page 2 of 4
Using Past Disputes to Strengthen your Contract When I prepare a customized contract form for a contractor, I always ask the contractor to take a few days to list all of the disputes that have arisen with clients over the years. Those disputes are a roadmap to identifying what terms might be added to that contractor s specific contract form. If a client expected a contractor to work seven days per week, the solution going forward would be to add a term to the form explaining days of the week on which the contractor will work. If a client refused to move children s toys from the driveway, we add a term requiring the client to ensure easy access. While these customized terms can be useful, it helps to take advantage of boilerplate terms that are intended to be beneficial to any contractor. Many terms are beneficial to all contractors and a good contract form is the best place to start. The important message is to not assume that a good contract form is adequate without customization to the contractor s specific business and past experience. David J. Barnier, author of this article, is a partner and shareholder of Barker Olmsted & Barnier, APLC in San Diego, CA. His practice focuses on representing construction businesses. His construction collection practice emphasizes breach of contract claims, mechanic s liens, stop notices, and payment bond claims. Please note that this article is not legal advice and should not be taken as such. Please contact an attorney at http://informedcontractors.com/just-answer-db for specific legal advice. This link will take you to David s full (but condensed for our website) biography: http://www.informedcontractors.com/meet-the-experts.html#daveb You can read more of David s articles here: http://www.informedcontractors.com/articles-by-dave-barnier.html You can visit his website here and if you have any questions feel free to ask him. He s always willing to help whenever he can: http://www.barkerolmsted.com/about/attorneys/david_barnier.php Please let him know that you read his article at InformedContractors.com. Please see next page for additional information Page 3 of 4
Special Note From the Team at InformedContractors.com Although this article is part of a special, free bonus package of articles that is strictly for those who have subscribed to our free newsletter if you know any contractors who really need this information now please do feel free to email a copy to them (or print it and give it to them) and then please encourage them to subscribe to our free newsletter. http://www.informedcontractors.com/subscribe-to-our-inbox-magazine.html Thank you! InformedContractors.com Page 4 of 4