Introduction
Only two types of people enjoy litigation: lawyers, and (other) crazy people. Litigation is time-consuming, extraordinarily expensive, and often has other negative effects like causing delay in payment or destroying business relationships.
With that being said, in the construction industry, litigation is almost impossible to avoid completely. While reasonable compromise should always be sought, you will always encounter “my way or the highway” personalities who will never consider reasonable compromise – who offer only two options, litigation or surrender.
Knowing that if you stay in the construction industry for any period of time, you will have at least some exposure to litigation, the following tips are a guidebook on how to put us construction litigation attorneys out of business – or at least, to keep us as a vendor without putting us on your permanent payroll.
There are concrete steps you can take and practices you can adopt for use before taking a job, during the job, and even after the job is substantially complete, to help minimize your litigation experiences. And even when litigation seems unavoidable, there are things you can do to manage the experience so that it does not consume your life or your company’s financial health.
Before the Job
A. The most critical step to take before the job is to actually read the contract documents and be sure you understand fully what is in them. This may seem fairly obvious, yet it is still the most commonly omitted step that leads to future conflict.
Most of the energy leading up to taking on a project is expended on getting the job – familiarizing yourself with the project plans and specifications, visiting the site, attending meeting, etc. So much emphasis is placed on doing take-offs and bidding the job that examination of contract verbiage, especially in what might be lengthy general and special conditions documents, is skipped.
- If “an ounce of prevention is worth a pound of cure,” then the best time to consult your lawyer is actually before you sign the contract, so that you get sound advice on what you’re getting yourself into, and whether you may wish to seek amendments that make the coming relationship more fair to your side.
- Remember, whether you are a general contractor signing the owner’s contract, or a subcontractor signing a general’s contract, someone paid a lawyer to have that document drawn up to protect THEM, not you. Some parties are fairly reasonable in the extent to which they slant the playing field. Some are not at all reasonable. You cannot simply assume that onerous contractual clauses would never actually be applied to you, or that they would never be legally enforceable. The fact is, virtually any contract language you might sign is almost certain to be applied exactly as it is written, if you should ever get to court. (The exceptions are extremely rare and always hotly contested when claimed.) If you sign what their lawyer wrote without even reading it, you are very likely not to like how that project turns out for you. And again, you will be better served to level the playing field by getting your own lawyer to review the documents with you before you obligate yourself.
- The most common excuse for not negotiating changes to contract language is fear that you will lose the job. This fear is typically overblown. Remember, there is only one reason you’ve been presented with a contract to sign. You were the low bidder. What this means is, if you ask for changes in the contract language, the original drafter either has to work out the differences with you, or else move on to the next bidder – which makes rejecting your changes an expensive decision. You have leverage; use it!
- Common problematic clauses to flag, depending on whether you are a general contractor or a subcontractor, could include:
- “Pay when paid”
- “Flow down” relationship
- Attorney’s fees
- Arbitration or other dispute resolution procedures
- Delay damages – liquidated damages, waivers, etc.
- Unilateral control of schedules
- Mechanic’s liens – procedures, waivers, etc.
- Procedures and deadlines for handling extras/change orders/additional time
B. When you are negotiating contract terms, be sure that you have completed actually making a contract BEFORE you start work. Parties often assume that if they have exchanged documents and started the project – or started the project and then exchanged documents, which often happens in that reverse order – then they have a contract. Quite often this is not so. If you got a document and changed it before signing, you don’t have a contract unless the other side accepts your changes. If you got a document you didn’t like and you simply laid it aside, you may not have a deal on that point, but you are almost certainly heading for conflict.
There are legal rules that are applied in these situations to resolve disputes, but they are not the rules that you chose. The beauty of a contract is that you and your business customer get to choose your own rules. This is not an opportunity to be discarded lightly.
C. Another key aspect of making a contract is knowing whom you have on the other side. A contentious, overbearing jerk will not become a different person because you have a good contract document. Even if the documents were carefully crafted to assure that you were treated fairly, some people are extremely adept at causing trouble. And even if you win the disputes, the time, expense and other fallout involved in winning will make the job unprofitable for you. If you have dealt with someone before and been burned, stay away and let your competitors suffer this time around. If you don’t know the other side, watch for “red flags” and check into their reputation before committing too much of your resources into their care.
The fact of the matter is that litigious people cause problems far out of proportion to their number. Let them isolate themselves, and focus your energies on more enjoyable, and profitable, relationships.
And of course, it should go without saying that if you see yourself in those last two paragraphs, your “win at all costs” attitude will not profit you over the long haul.
The materials on this website are meant for informational purposes only and nothing contained in this site is to be construed as legal advice. If you need legal advice, you should contact an attorney directly. Do not act upon the information on this site without seeking professional guidance. Information on this website about specific matters or success in previous cases is not meant to be a prediction or guarantee of similar results in any other case. Each case consists of factors and applicable law unique to that case and you should consult an attorney.
