Contractor Disputes Explained
While the vast majority of construction contracts in New York are performed to the satisfaction of all parties, disputes can arise despite everyone’s best efforts. Late work, things not built according to the contract documents, additional work, payment issues, and disagreements concerning defective and/or deficient work are some of the most common types of disputes that arise between construction professionals and their contractors and/or subcontractors. The list is certainly not exhaustive but it is a good start.
Late work may arise for many reasons. A project goes sideways due to unusual site conditions or maybe because the design was poorly developed. Traffic could be an issue causing late delivery of materials. Plan approvals could take longer than expected. Inclement weather could delay a completion date. Whatever the reason, a late project completion is a common dispute among commercial Maryland construction professionals and their contractors and subcontractors.
Breach of contract is one of the most common types of construction disputes. In the case of a breach of contract, one party to the contract does not fulfill its contractual obligations. For example, a contractor may have failed to complete its work within the time specified in the contract. Or the contractor may have departed from the Contract Documents causing a problem for the owner. A contractor may have charged too much for the work by making substantial mistakes or just overcharging for the costs of labor and materials. Or the contractor performed inferior work in violation of the contract. These are only a few examples of the possibilities that may arise in a breach of contract situation.
Problems with payment are a recurring problem with construction professionals. Because construction projects usually are only on the jobsite for a limited time period , the issue of delay of payment can come up frequently. Contractors like to get paid because they have to pay their subcontractors and suppliers and because they have other jobs to move to once the job is completed. An owner typically wants payment to follow progress and may not want to provide payment that is not backed up by a proper invoice. At times, an owner may discover construction defects just after making a payment and want to recover those funds.
Construction defects can occur for many reasons. An architect may have drafted the design drawings in a way that makes illegal or impossible for a contractor to follow the Contract Documents. Or the contractor’s work may not have conformed to the Contract Documents. In some cases, a client may change the scope of work while the project is going forward and not want to pay for the additional work. Or the contractor may have caused construction defects via its professional negligence.
Client and contractor disputes can arise during construction, after construction, or after a dispute arises that is related to the construction of a property. Such disputes can involve making changes to existing construction as well as pursuing damages and/or injunctive relief in court. Once again, the list of potential construction disputes is not exhaustive.
Lawyers and Contractor Disputes
If the dispute with your contractor is not easily resolved without professional assistance, it might be worthwhile to hire a lawyer for a few reasons:
Lawyers are skilled at negotiation. The reason for this is that lawyers never forget the cardinal rule of negotiating: Never make your opening number your final number. Once you commit to a figure or position, you are often stuck with it because you have no leverage to negotiate further. While this is usually a benefit, there are exceptions, particularly if your lawyer can negotiate a non-monetary value such as modifying the manner in which the contractor is paid (such as paying only for completed work rather than work paid for in advance), paying some of the contract price for early completion or extra work, or limiting your damages should our efforts not result in settlement.
Lawyers can research non-legal issues. If the scope of the work has changed, good lawyers listen carefully and study the contract to determine after the fact how this will affect the contract price. This requires doing some research and polishing our crystal ball, because we really don’t know how a judge or jury will view this change. However, we can do research and study past cases to increase the chances that our clients get a fair shake.
Lawyers know the Courts and the rules. This is what lawyers do 100% of the time. They study the rules that govern trial practice. These rules apply statewide, and are followed by judges in all counties. Not only are the rules important for filing and preparing a lawsuit, they also govern how the trial is conducted and evidence is presented, and ultimately how the jury determines your case.
A lawyer can take your case to court. Sometimes litigation is unavoidable. Many contractors have their own legal counsel, so having your own legal counsel is an essential leveler of the playing field; especially if the matter can be resolved before a lawsuit is filed. Having legal counsel prior to filing of a lawsuit increases the likelihood of resolving the matter amicably.
Judges and juries are there to give fair hearings and make good decisions. Fortunately, many cases are resolved before it gets to this point, however, when the time comes to try your case, you want to know that you have the best advocate for you.
Characteristics of a Construction Lawyer
A variety of skills and qualifications can help determine whether a lawyer or law firm is right for your contract issues. Finding an attorney who has spent years successfully representing contractors in the same situation you face can mean the difference between victory and failure. For construction contractors, these qualities may include:
Industry Experience: What exact type of construction does the attorney or firm specialize in? Locally, nationally, or internationally? Many attorneys will focus on niche construction types, such as residential, commercial, industrial, highway/infrastructure, or heavy civil projects.
Licensing: Laws and regulations related to construction projects often vary by state. If you’re working on a project from out-of-state, for example, you’ll want a lawyer who’s licensed in both states and knows the laws in each location as they relate to the contract in question.
Track Record: Whether you’re dealing with complex or simple contract disputes, it’s best to find a lawyer or firm whose team comes highly recommended (with readily available testimonials) and has a long history of victories in similar contract disputes. If the firm has several attorneys, do the individuals have specific expertise that relates to your project/work?
Fair Fees: With massive amounts of money flowing through your industry each year, it’s no secret that many lawyers charge high fees to construction contractors. In addition to making inquiries about hourly or retainer rates, you’ll want to learn about how the firm charges compared to other law practices in the surrounding area.
How to Locate an Experienced Contractor Lawyer
There are several practical steps one can take to find a reliable contractor lawyer. First, if you know a good general practice lawyer, they may be able to refer you to an experienced contractor lawyer. Next, check online reviews for specific lawyers in your area that have experience dealing with contractors. Finally, consulting legal directories such as Martindale-Hubbell (which rates lawyers) and A-Vvo (which features lawyer reviews) is a good way to narrow down your search for an underlying lawyer.
A comprehensive guide to locating a contractor lawyer includes looking at samples of their work, checking with the Better Business Bureau, using Super Lawyers, AV-vo ratings, other online ratings, and reviews. Another good resource is your local bar association, which often has a referral service that screens lawyers and can suggest a contractor lawyer suited to your needs. Many bar associations also track complaints against lawyers. If a lawyer has a serious number of complaints, it is good to know before you make a formal hire.
The Initial Consultation: What to Anticipate
During your initial consultation with a contractor attorney, they will generally ask you questions about your case to get a better idea of what’s going on. They will likely start by asking for a straightforward description of the history of your situation, what work is in dispute, if any contracts exist, if you have had any mediation or arbitration under your contract and, if so, what happened. This will likely also include a discussion of the type of damages incurred, how the contractor has hurt you, and established a breach of contract.
Depending upon the lawyer’s practice area, it’s very possible you may find an attorney with a background in contract law and litigation who’s experience crosses over into real estate transactions and representation of the owners. Contractors are often represented by a combination of construction and litigation attorneys.
During the initial consultation , the contractor attorney will most likely explain your legal options and provide guidance to you before you move forward with hiring them or another contractor attorney. They will also discuss the cost for representation (if you decide to use them), including any retainer that may be required up front. An important question to ask your prospective attorney-including one specializing in construction litigation and/or construction defects, will be their fee structure. Do they charge for their services on an hourly basis or do they take a contingency fee? If it is an hourly rate, it’s important to find out how much they will charge per hour.
It’s also important to understand how legal costs can add up, so make sure you’re up front about what kind of a budget you can manage to spend on this matter at hand. Of course, the cost of hiring a contractor attorney is only part of the equation- you need to get the results you need in order to make the costs offset.
Regarding Fees: Legal Costs and Expenses
Fees charged by contractor lawyers can vary widely based on the type and size of the firm, the level of experience of the lawyer and the nature of the matter. The most common fee structures employed by lawyers are hourly, flat, contingency and blended. The vast majority of contractor lawyers employed use blended fees. The blended rate is the generally accepted hourly rate that the lawyer charges for work performed on a file. Even where lawyers charge an hourly and/or flat rate for their work on a file, the rates often vary based on the degree of experience of the lawyer. Partner rates are typical higher than associate and junior rates.
Contingency fees are less common in construction and building claims. These types of claims are generally paid only when the litigation has been successful, trial or settlement. Contingency fees are more common for personal injury claims, medical malpractice claims and other types of damages claims. In these types of claims, a contingency fee means that the lawyer gets paid only if the lawsuit is won. The lawyer takes a percentage of any award (usually 30 to 45%) but the lawyer does not get paid for any legal expenses.
Dispute Resolution: Mediation or Lawsuit
The process for resolving contractor disputes is different from almost all other disputes due to the nature of the dispute. Most disputes involve completed transactions regarding money, property, companies, individuals, etc. While those disputes often revolve around Florida’s substantive laws, contractor disputes are unique: they involve contract provisions, but that is not all. Those disputes also involve the Construction Lien Law, Registered Design Professional Compensation, Prompt Payment, and Fair Scheduling laws, and the arbitration or mediation provisions included in the contract and found in the construction statutes. Because of these special circumstances, contractor disputes are resolved by either mediation or litigation.
Litigation is used to ask the Court to adjudicate a dispute through the Court process. Florida Statute § 255.0516 requires disputes regarding government construction contracts be litigated (not go to binding arbitration or mediation) in the County where the project is located. For all other disputes, Parties can litigate the issues in the County the contract was signed or was performed. However, Parties often include jurisdictional or venue stipulations in the contract to allow for the most neutral forum for resolution of the dispute.
Many Florida contracting parties do not want to litigate a dispute because it can take years to litigate a matter through the Circuit Court to a final trial. That is one reason many contractors will agree to mediate as an alternative to litigation. Mediation, however , is a contractual right found only in a conflict resolution provision included in the contract. The statute provides no right to mediation for construction disputes. So if the contract lacks such a provision, the Parties have no duty to mediate prior to filing a lawsuit (or as a lawsuit progresses).
Under a contractual mediation provision, the parties agree to engage in a non-binding process to try to settle their dispute prior to proceeding with a lawsuit, or proceeding with a lawsuit included in a pending matter. Mediation happens in a conference room rather than a court room, and the parties are represented by counsel versus the judge. No discovery is allowed before mediation, but the nature of the process allows all sides to freely discuss the dispute and potential resolutions. The mediator does not make decisions regarding the dispute, rather the mediator assists the parties in reaching a mutually acceptable resolution. Mediation is often the first time parties sit down together to discuss the merits of the dispute, and many times, it is all that is necessary to resolve a matter.
In a perfect world, all contracts would include a mediation provision. Despite many Florida contractors using a contract form that lacks a conflict resolution provision, Florida law requires the Parties attend a mediation before proceeding with a lawsuit. However, many Florida contractors do not know the law requires mediation first, and some contractors are willing to skip that step and jump directly to litigation. A contractor should engage experienced counsel who will ensure their client engages in the litigation process consistent with Florida law.