When there’s defective or unsatisfactory work, it’s tempting to make claims or even take legal action. However, in many cases, a contractor or sub will have the right to cure the issue before action is taken. Even if the right to cure doesn’t exist, it’s a good idea to give an opportunity to cure anyway.
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What is the Right to Cure?
When faced with possible termination or defect claims, contractors and subs may be entitled to the right to cure their own material breach. This opportunity can benefit everyone – it can help avoid nasty payment disputes while also getting the project back on track, or, it can help avoid a legal battle over defect claims. Even if the issue can’t be completely resolved, it can present the opportunity to mitigate whatever problem is present.
The right to cure may apply to a number of different things: defective materials, violation of building codes, failure to follow specifications, or simply falling below the standard of workmanlike construction. With an opportunity to cure, there’s one last opportunity to fix prior mistakes before a battle ensues.
Want to Learn More About Termination?
- How a Termination Clause Works in a Construction Contract
- Termination for Cause | When Can Construction Contracts Be Terminated for Cause?
- Termination for Convenience | Can Your Customer Terminate You Without Good Reason?
The Right to Cure May Involve Careful Procedure
The whole point of creating a right to cure is to resolve disputes before drastic actions are taken. Most disputes in the construction industry can be resolved with better communication and collaboration, and this forces the parties to try and talk it out. When the right to cure is in play, specific notice procedures might be necessary. Those procedures can often be found in the contract, or they might be created specifically through statute.
Even if the contract and state law are both silent, it’s a good idea to take a conservative approach. There’s no reason to lose rights or create liability over a technicality. Plus, if the ultimate goal is to fix the issue, terminations or legal claims aren’t an efficient way to do that.
Below are some general procedural guidelines. But keep in mind – if the right to cure is specifically set out by contract or if your state has rules surrounding the right to cure, those requirements must be followed.
Notice May Be Required (and Should Be Sent, Regardless)
When there’s a problem, it’s a good idea to send notice before taking action. Sending notice of default or notice of defective work might be mandatory under the contract or statute. On top of any “requirements”, it just makes good business sense to give some form of notice before contemplating termination or sending a claim. Working through an issue will almost always be cheaper and easier than cutting bait with a contractor or sub and moving forward with someone else, and it will definitely be cheaper than pursuing legal action.
Generally, notice should be a formal written document which includes a statement claiming a default has taken place, or a defect exists with the work performed. “Formal” meaning that regular correspondence, statements in meetings or punch lists won’t suffice. The notice should make it abundantly clear why the document was sent and that it’s not a normal part of the back-and-forth present on every job.
The notice should be paired with a sufficient description of the nature of the defect and any resulting damage that was caused. It should be specific enough to give the contractor or subcontractor a reasonable opportunity to evaluate the claim. Providing specific steps that would be required to fix the issue is a good idea, too. Finally, the notice should state that the owner or GC considers the issue significant enough to warrant termination if the defect isn’t corrected. That way, everything’s out on the table.
How to Respond
Once notice has been given, the recipient will have some specific amount of time (depending on the contract provisions or statutory requirements) to remedy the alleged defects before filing a lawsuit or arbitration claim. At this point, the contractor or subcontractor will have a few options on how to respond. First, they can request an opportunity to inspect the alleged issue before deciding how to proceed. Another option is to offer to make the necessary repairs. Or, if there’s too much backlog, the recipient can offer money (or a credit) instead of making the actual repairs themselves. Lastly, a recipient can always contest the issue.
Regardless of how and when a response is sent, it’s important to keep a cool head. The natural response to a claim of defective work or termination talk will be to fight back. Still, it’s important to try and take emotion out of the issue and to make sound decisions when given the opportunity to cure.
What Happens if the Opportunity to Cure Isn’t Given?
Because the right to cure will look different from state to state (and even from contract to contract), it’s hard to narrow down the potential outcomes. But there are some general themes here. If a contract or statute creates the right to cure, but the opportunity to cure isn’t actually given, the tables can turn pretty quickly. Even where a legitimate defect or other issue is present, a party making a premature claim or termination could be saddled with liability.
Specifically, it’s common for the party who makes an improper defect claim to be liable for their contractor or sub’s legal costs in defending against the claim. The thought being – had the opportunity to cure been given, then none of the legal costs would have ever come up in the first place. And that’s the whole point of the right to cure! It helps construction businesses and property owners resolve their disputes without taking to the courts.
It’s easy for serious frustration to mount when an owner or contractor doesn’t receive work performed as promised. But that doesn’t mean caution can be thrown to the wind. Failure to provide the opportunity to cure could quickly compound the issues on a project rather than alleviate them.
Right to cure requirements can feel like a burden, but they’re a strong ally in curbing legal expenses for an overly litigious industry. As it stands, the construction industry spends more on legal disputes than nearly every other industry. With rights like the opportunity to cure, legal costs can be avoided, and construction businesses can do what they do best rather than battle things out in court.