Originally posted 2014-06-06 09:00:34.
After an hour long phone conference with a client, I have had several thoughts, only a few of which I can share here (grin). The first is that my friends and clients in the construction industry are hurting, but need to work with an attorney to assure that the pain is lessened. The second is that more, not less, precision is needed in construction contracting these days.
The reason for the first thought is that the construction industry has taken a hit lately. The news is fraught with stories of the economic downturn and its impact on construction. While the money may be hard to part with, all construction professionals should get their contracts and business practices audited regularly to avoid risk and assure, as best as is possible, that they are protected. One place to get such triage is at my firm.
If you don’t use me, please use someone else.
On the second point, clients need attorney fees provisions, indemnity clauses and to assure that a scope of work is very specifically defined. Wiggle room is not available. In tough economic times. Owners will look for something closer to perfection when money is tight than when money is not. Contractors should also. Your contract is the first line of defense. While no contract can possibly cover every contingency and contracts are only as good as those who sign them when it comes right down to it, a good base contract is the best shield.
No construction project goes perfectly. Weather, companies going out of business and unforeseen conditions always occur. The contract lets the parties decide how to deal with inevitable change. A good contract at the beginning can help you avoid mechanic’s liens, arguments and the inevitable lost revenue that comes with having to resort to these sorts of tactics.
At least in Virginia, the contract will be enforced absent some serious criminal or policy violation (along the lines of trading your first born for a job). Take advantage of this. Make sure that the contracts that you sign are such that you know your rights, with precision at the outset.
If you find this or anything else on my blog helpful, please take the time to subscribe, comment, or digg to let me know. I want to make sure this blog is as helpful as possible and your feedback is the most valuable source of information to assure that I am in fact helpful to you.
Thanks for reading and I look forward to hearing from you. Please subscribe to keep up with the latest Construction Law Musings.
Hey Chris – you’re dead-on with this post. I can’t count how many awful situations could have been thwarted with proactive legal TLC.
Some good news to report, however, is that most of our clients turn to proactive representation after being cornered in a bad legal situation.
Good explanation of the problem. And good advice: “Whoever you choose. Just choose someone.” These contractors are spending big-money, and in this penny-pinching environment, they really need to be cautious.
Thanks Scott. If only we could talk them into doing it without having to have a problem first! As always, I appreciate your input.
Another of the past “Blogger” posts now at the “new” Musings
.-= Christopher G. Hill´s last blog post ..How a Legal “Blawg” Helps! (Thanks Blog for Profit) =-.
All contracts should be written to protect both parties but BIG Contractors these days are adopting the policy to protect themselves only and if subs don’t like it they can hit the road because there is always someone else to take their place. But there is no other work to be had so we keep tight hold on what work we do have. So we sign their contracts and hope for the best. (I know, that was addressed in another blawg). ALL risks are transfered to the subs but there is no compensation for it. Even if we had legal counsel they will NOT alter the contracts in any way, so why bother? I wish I could send you one we just recently had to sign. It does feel like I just traded my first born 🙁
Thanks Kathy. I feel your pain. As one who represents many subcontractors, I understand the frustration, especially in light of the recent trends and economy. Hang in there!
As I have said in many posts, the best thing you can do is trust those who you work with. If you can look them in the eye and see they’re honest, that’s great.
Chris, good advice as usual. There is no doubt professional advice/guidance will help contractors better understand what they are signing on for, and therefore make more prudent risk assessment decisions. But that is only a part of this story.
I’d like to throw in two additional thoughts – including one responsive to a ‘comment’ above.
First: It is abundantly clear from my forensic work these past 25 or so years that good contract language will not help any contractor if, once signed, the document is simply filed away. Every person involved in the execution of the contract MUST know (intimately) what is required under its terms (and act accordingly). More often than not key individuals do not fully understand: the detailed agreed scope of work; the entire menu of standards governing the work; key administrative/management requirements for daily operations, recordkeeping, scheduling, accounting; responsibilities for timely obtaining clarifications from the A/E’s; steps related to resolving mid-course discovered errors/omissions; strict timelines for providing Notices; and… and… and… the list goes on. As you know (and have repeated often) the Contract is King (in pretty much every US jurisdiction), so failing to comport with each and every aspect of the contract terms can be fatal to an otherwise successful project – and result in lawsuits all around. If the players don’t know what is required of them (at every level) the likelihood of litigation rises exponentially.
Second: When it comes to the subcontract tier, it was noted above that terms of the Prime contract are (with rare exceptions) made a part of the subcontract. Yet, most subcontractors never even ask to see the final/executed Prime contract before signing on and accepting this boilerplate provision. If so, how can the sub have a clear understanding of how the Prime contract’s terms impact the subcontractor’s obligations. When it comes to subcontractors the unfortunate reality is that the sub is wholly reliant on the ‘smarts’ of the GC’s counsel (if there is one). Subs can rarely negotiate any kind of agreement that will correct a ‘subcontractor unfairness’ that has already been built into the Prime contract – and even if they do, the different GC/Sub provisions may well fail when tested in litigation. For this reason, subs increasingly have to rely on the personal relationships they have established over their careers, and keep their fingers crossed that this will help them when a dispute arises. BUT… once a suit is filed (and the resolution process is under control of the GC’s insurer), those personal relationships will, unfortunately, be of no consequence. When the insurer comes to the table it’s “every policyholder for himself”.
Best regards,
Howard