Anyone who has ever worked with a builder or contractor on a rehab project, remodel or new build knows that building projects have hurdles to clear. The challenges often become exponentially more complicated when they involve a multi-million-dollar commercial space, contractors, subcontractors, tight deadlines, supply issues, and faulty materials or workmanship. It occurs as everyone ideally works together toward the final goal of finishing the project and getting paid.
Common areas of dispute
Disputes among the parties may be minor and addressed through clear communication and regular inspections, but they turn serious when they involve non-payment. Common grounds for non-payment are:
- Delays: Construction delays are typically due to insufficient materials, conflicting schedules, or staffing. Some delays are beyond the control of the plumber, roofer or contractor. Still, a perceived lack of progress without a valid reason may lead owners or project managers to withhold payment.
- Scope: Contracts ideally outline the work’s scope and cost, but different interpretations of the contract and changes made during the process can lead to confusion over the scope.
- Quality: Owners or project managers who hire various contractors or subcontractors will have a clear idea of what they want, and these standards may or may not be realistic. There may also be design or planning errors that complicate the job for others.
Because of the work’s complex nature, construction contracts usually have exculpatory clauses that allow one or more parties to avoid liability when certain circumstances come into play. These clauses mitigate risk and guard against inadequate goods or services. These should not cover faulty materials or other problems beyond their control.
Enforceable or unenforceable?
Contracts can include exculpatory clauses, but they may not apply. Courts usually look at the following criteria for an enforceable construction contract:
- Do the parties have equal bargaining power?
- Does the clause clearly and unmistakably limit liability?
- Is the clause a deterrence against negligence?
- Was the agreement drafted and signed in good faith?
Court may be the best option
Litigation may be the best solution if there is a pattern of fraud, breach of contract, gross negligence, public policy violations, or inappropriate action. Considering what’s at stake, working with a legal team that handles construction disputes is often best. They can protect their client’s interests to ensure a fair and equitable solution.