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When contract disputes or payment roadblocks arise, a construction lawyer can help guide clients through rocky waters. Having a capable attorney in your corner can be the difference-maker in many problematic situations.
However, construction lawyers usually don’t get called in until after something has gone wrong. Though they may be skilled at fixing a bad situation, lawyers also have a wealth of useful information on avoiding issues from the outset.
We reached out to a number of experienced construction attorneys in our network and asked for their thoughts on preventative measures for contract and payment issues.
From ineffective recordkeeping, to handshake deals, and a shared aversion for business conducted through text message, these lawyers laid out their advice for preventing construction issues before they come up.
“You live and die by what’s in the contract”
The lawyers we spoke to told us that one common problem they see many contractors fall prey to is not properly reviewing contracts before signing. Unfortunately, too often folks assume they know what’s in the contract and sign it without looking over it closely.
Attorney Shana Rothman advised: “[Don’t gloss] over the contract’s terms before signing the contract, or not even reading the fine print. Often contractors will sign away very important rights when they fail to read all of the contract’s terms before signing on the dotted line.”
Attorney Cathleen Curl said: “Stop looking at just the contract price when you get the contract. You need to review the whole contract. If it’s too long or complicated, have an attorney review it for you.”
So, how do you review a contract like a lawyer? Beyond the contract price, Ms. Rothman says some of the most important terms to look for in your contract are:
- Payment terms: Does the contract include pay-when-paid language or conditional pay-if-paid terms, which can be devastating to a subcontractor?
- Notice requirements: Within how many days must the contractor provide notice of a claim?
- Attorneys’ fees clauses: Is the complaining contractor going to be required by the contract’s terms to pay the attorneys’ fees of both parties to the dispute, even if the contractor prevails?
Periodically review your own contract and keep it up to date
In addition to carefully reviewing any contract from someone you’re working with, be sure to routinely review your own as well.
“Don’t keep using the same old contract. Have your contract reviewed every few years to make sure it complies with the law & to address any issues you may have experienced in the past,” Cathleen Curl said.
Construction laws and regulations routinely change, and specifics can vary depending on whether you’re working on a public or private project. Having your contract reviewed ensures you’re always up to code and protecting your business as best you can.
When considering updates to your contract, Cathleen advises the following: “Use the problems you’ve had with a difficult client as an opportunity to change your contract to deal with these types of issues in advance.”
Fool me once, shame on you; fool me twice, shame on me. Being proactive and learning from your past mistakes can save you tons of money and trouble in the long run.
Proper and thorough documentation protects your bottom line
According to Attorney Matthew Lakind, “The most important advice any attorney can give to a contractor currently on a project is to make sure they are documenting their efforts on the job.”
Proper documentation “may go beyond a schedule of values,” says Mr. Lakind, “and include progress photos, sign in sheets, payroll, etc.”
In short, the more records and documentation you have pertaining to a project, the better.
Keeping records ensures your work stays on track, lends credibility to your business, and protects you should any disputes arise. Handshake deals are common practice in the construction industry, as are their 21st century counterparts, the text message deal.
Whether it’s due to the fast-paced nature of the construction industry, or the various moving parts and parties, agreements often get made without proper documentation. However, even if it’s someone you’ve worked with for a long time or think you can trust, you should protect yourself by going through the proper processes before beginning work.
“Stop trusting others to remember what you tell them without putting it in writing,” says Cathleen Curl. “Confirm important information from your telephone calls in writing. If you get into a dispute, you can be sure that the other side won’t remember things that discredit their position.”
All that paperwork may seem like it’s slowing down your work, but if a disagreement does come up you’ll be poised to resolve it quickly and move forward with minimal friction.
More info: Watch our webinar on “Construction Record-Keeping Essentials”
As Cathleen recalled, “You didn’t get into the construction business because you like paperwork… Stop trying to do it all. Get office help if you need it. You need to keep good records. ”
In the case of a dispute, “The person who leaves the best paper trail usually wins,” Cathleen said.
Don’t let change orders throw a wrench in your workflow
Construction projects can be unpredictable. Factors and expectations can often change on the fly. It’s especially important to document any changes orders to ensure your business is protected and you’ll get paid for the full extent of your work.
Cathleen Curl stressed the following: “Don’t do extra work without getting a signed written change order first. If it’s a commercial job, make sure that you’ve put your request for a change order in writing and give the GC or owner your own proposed change order. At the very least, send the GC or owner an email saying that they’ve ordered you to do the work before a change order is written, state your price for the work, and that you asked for a change order.”
Mr. Lakind weighed in as well: “If any delays are encountered, or situations/conditions are discovered that give rise to a change order, these must be documented immediately, either by a simple email, or more formally if that is what is required of a contract. A sizeable change order claim could be dismissed by a court if a contractor fails to give proper and timely notice of such a claim.”
He continued, “While staying on top of this type of administrative work can be difficult, especially for small contractors who have seemingly trusting relationships with their general contractors or owners, it is imperative that projects be documented as they occur, so that this documentation can be used later to support your claims in the event of any dispute.”
A proactive approach is the best way to head off construction payment issues
The attorneys we polled agreed that two of the best things you can do for your business are negotiate good contracts and keep thorough records. When it comes to protecting your business and ensuring you get paid for the work you do, being as proactive as you can will go a long way.
Speaking with an attorney before you run into problems can set you up for success and protect you from any unexpected issues.
According to the lawyers at Bitman O’Brien & Morat, “Seeking an attorney’s help before signing a contract can help you avoid potential legal battles down the road, ensure your legal rights are protected and help secure the most favorable terms that could benefit your business.”
Hopefully, disputes and problems won’t arise. But if they do, having an attorney in your corner can make all the difference. You can rest assured that you’ve done all you can to mitigate payment delays, timely and costly legal disputes, and work stoppages.
Have questions we didn’t cover here? Contact the lawyers in this article directly at our Attorney Directory. Or head over to the Payment Help Center where you can post your questions for free and have them answered by a construction lawyer in your area.