How many times did your parents used to tell you to clean your room or make your bed and you just rolled your eyes? Such a simplistic act of organization seemed unnecessary and a waste of your time. Well, now we are older and time is money. Simple acts of organization in the construction industry can be the big difference maker in a legal dispute. A Wisconsin Court decision reminds us of how important some simple housekeeping can be.
The Case Background
The case was a contract dispute arising out of a construction project for army training facility in McCoy, Wisconsin. The project was valued at over $13 million. The general contractor, Alacran Contracting, LLC (Alacran), hired two subcontractors for the project. Specifically, Weather Technologies, Inc. (WTI) was hired and contractually promised over a $3 million share of the project value. Orally, the contractors agreed that they would ultimately share all the profits or losses equally. After only receiving a little over $700,000 in payment, WTI filed suit against Alacran for the additional +$2 million. Alacran contested that the project resulted in a loss and therefore nothing is owed to WTI.
In Weatherproofing Technologies, Inc. v. Alacran Contracting, LLC, the Wisconsin District Court wholeheartedly disagreed with Alacran’s argument. Alacran tried to argue that there was never an agreement to pay invoices. The only agreement was to share the profits or losses. Because the project suffered a loss, nothing further was owed to WTI. What hurt this argument was the fact that Alacran had insufficient records to show a loss on the project. The court stated
Alacran’s accounting records are a mess, and the expenses reflected in those books are fraught with contradictions that its witnesses could not explain. In a previous order, the court precluded Alacran from introducing any of the underlying documentation of its expenses because Alacran had not produced that documentation to WTI. Dkt. 32. Alacran’s expenses are therefore completely undocumented. No reasonable jury could base a verdict in this case on Alacran’s contention that it suffered a loss of $259,135.51, because Alacran does not have admissible evidence to support that contention.
Alacran then tried to shift the burden to WTI to prove the breach of contract and amount owed. The court refused to shift the burden because “[t]he lack of evidence of Alacran’s expenses is a problem of its own making, which it cannot blame on WTI.” Accordingly, the court awarded WTI the amount claimed. Because the Alacran had no records to dispute amounts and expenses, the only evidence available was the invoices submitted by WTI.
Alacran lost because it was unorganized and had no evidence or records to show to support its defense. The company decided to try and use QuickBooks to manage its records and did not hire a consultant until after the project was over. The owner of Alacran admitted he did not understand what he was entering into QuickBooks and the records were filled with contradictions.
There are two lessons here. The first is to understand what you are doing. If you don’t, ask for help! Continuing down the path of ignorance can result in a huge loss. The other lesson is to be organized with your business. A simple record of expenses and revenues could have saved Alacran time and money. Also, a clear and well-written contract defining the terms that each party has agreed to would have gone a long way in saving both these sides from unnecessary litigation.