Archive for the ‘Disputes’ Category

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What is a Construction Change Directive (CCD)?

construction change directive

The construction industry, just as any other industry has its own terminology or lingo. There are many examples such as “punch-list,” “lien” and “substantial completion” to name a few. No words are more dreaded than change order. Construction change orders are some of the most litigated and disputed documents in all of construction law.

A cousin of the change order, is the construction change directive. Although the names are similar the legal implications are significantly different. The construction change directive may be even more disputed than the construction change order but it is not as widely used. This post will help to familiarize readers with what exactly a construction change directive entails.

Definition of Construction Change Directive

I found a quick definition of construction change directive:

An alternate mechanism for directing the contractor to perform additional work to the contract when time and/or cost of the work is not in agreement between the owner and contractor performing the work.

at DictionaryOfConstruction.com.

To break down this definition, one must look to its parts. First, its an alternative mechanism, meaning that there are other way  to accomplish the goal of the owner/architect. Second, it directs the “contractor” to perform additional work. Its not a request but rather a directive. Lastly, its a directive given by the owner when time and/or cost are not in agreement. This is vastly different from the change order, which has to be agreed to by the contractor and owner.

Basically this is an order to do something even though there is no agreement as to timing and/or price. This type of authoritarian mechanism is prone for heavy dispute.

Application of the Construction Change Directive

The application of the construction change directive is less complicated than its definition. The AIA G714 is a single page document that basically has four sections.

  1. A section containing all of the project information which is standard on any contract document which includes a brief description of the change that is being directed;
  2. The proposed adjustment with regards to price;
  3. The proposed adjustment with regards to time; and
  4. The signature blocks for the Architect, Owner (required) and Contractor (no signature required for contractor).

Once this document is filled out and signed by the owner and architect,  it needs delivery to the contractor for effectiveness. This is a bold and powerful document.

Construction Change Directive: Risks and Rewards

As with any document, whether it be an agreed upon change order or a construction change directive, there are inherent risks involved with taking on new work. The owner has to weigh the risks and rewards with taking such bold move in order to get what it wants. This move could backfire and be costly for the owner and/or negate any damages for delay that the owner may have against the general contractor because of the forced additional work.

Its important to speak with an experienced attorney when dealing with complex procedures on a construction project. Click here or call 504-894-9653 for more information.

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Posted in:     Change Orders, Construction Contracts, Construction News, Damages, Delays  /  Tags: , , ,   /   Leave a comment

I’ve Received Contractor Lawsuit. What Happens Next?

Builder Ripping Up A Contract Lawsuit

The project is either over or it is winding down, money and tensions are getting tight. Contractors know this scenario very well. The problem arises when a lawsuit is delivered because of the dispute. Many contractors do not know what to do once they receive a lawsuit. This post will outline the possibilities of what happens after the lawsuit is received.

Why Did I Receive A Lawsuit?

On a typical construction project, whether public or private, commercial or residential, there are typical players. These players include: the owner, general or prime contractor, subcontractors, laborers, suppliers and equipment lessors. All of these parties have the ability to file a lawsuit and/or receive a lawsuit, depending on the facts of the situation.

In actuality, you have received this lawsuit because of your involvement in the project and someone in this group has alleged that you are liable for some type of damage. This undoubtedly will be money damages. Other types of damages exist but courts like to compensate with money.

What Happens Once I Am Served With The Lawsuit

The clock starts running! No matter the jurisdiction, whether it be state or federal court or in Louisiana or another state, the time to respond to the lawsuit begins to run once service is made. Depending on the jurisdictions for which I am familiar you have anywhere from ten to sixty days to respond. The usual here in Louisiana is fifteen days from service in a state court, see La. C.C.P. 1001.

Many times if you contact an attorney they can get an extension of time for which to file and answer or other responsive pleadings. This is customary in our business.

Options With The Lawsuit

There are a few options that I see people do when they receive a lawsuit, some are advisable and others are inadvisable.

Hire An Attorney: The first, most logical and most advisable option is to contact your attorney and retain his services to defend you in the lawsuit. An attorney will know the landscape of the Court procedures and assure that you will be protected within the confines of the law. Attorneys are not miracle workers, but they have a number of strategic and tactical maneuvers which can be deployed to protect you or your company’s interests.

The flaw here is that lawyers are not cheap. A good lawyer will tell you whether the amount and nature of your dispute are worth fighting over. Many times its a better business choice to work out a deal and move on with making money.

Self-representation: I see this more and more these days. A person can always represent themselves in a court of law. The Fourteenth and Sixteenth Amendments have been interpreted through the years to allow individuals to represent themselves pro se in court. The key here is individuals representing themselves. A corporation or limited liability company is not an individual. They are juridical entities, which cannot be represented in court unless by an attorney.

Due to the fact that most smart business owners are some type of business entity, courts will not allow for self-representation. Self-representation can be advisable in some situations, but most of the time it is not.

Do nothing: This option is popular, but it is disfavored and inadvisable. When a party who is sued does nothing, the suing party can get a judgment by default. Once a judgment is rendered against the party who is sued, then bank accounts, garnishments and property are all options for a quick collection.

Instead of doing nothing, if you file and answer or other responsive pleading, the judicial process will take much longer and you have many other legal moves at your disposal.

Other options: – Informal negotiations or ADR clause are other options. Once you have been sued and within the time frame to answer, you and/or your company could engage in informal negotiations with the adversary. I always encourage my clients to work out a deal and move on. This can be with informal meetings or telephone calls. Its always smart to bring in an attorney to help here, even if not for the full lawsuit.

Finally, many construction contracts have some type of alternative dispute resolution (ADR) clause. Even with these clauses present an adversary may still file suit contrary to the contract. This can be done for a number of legitimate reasons. All you or your attorney have to do is enforce the ADR clause. This can be done informally or via formal court Motion.

Conclusion

Once a lawsuit is received by a party to a construction project, there are a number of options, as discussed above, which can be implemented. The key here is to do something and avoid a default judgment. Contacting an attorney for advice is a smart play, even if it is to decide which of the above methods is best for you.

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Commercial Debt Collection – How Do I Collect When A Company Owes Me Money?

 businessman with financial symbols coming from hand

In today’s business culture we call businesses working with other businesses B2B. It has always been a popular practice to the alternative, business to consumer. The rules are different governing B2B as opposed to B2C. The legal and business world assume that the B2B relationship and players are more sophisticated.

This post discusses what happens when the B2B relationship sours and one company must collect what it is owed from another company. The most important distinction between the rules of B2B and B2C is that consumers are much more protected by government regulation. The Fair Debt Collection Practices Act protects the consumer, not businesses.

Phases of Collection

Most business think that when an account is overdue, then they call up a debt collection agency and the debt will be collected or its deemed bad debt. Businesses write off huge percentages of accounts receivable every year based off this flawed thinking.

There are at least two phases of debt collection, each of which could arguably be broken down into subcategories. You have a pre-debt fact gathering and document filing stage, as the first phase. Then there is the actual debt collection which can consist of many different options and this occurs after the debt is due. So more of a pre/post mindset.

Pre-Collection Phase – Getting Your Ducks In A Row

The pre-collection phase is often over looked and much more important than the post-collection phase. It is the foundation for the collection. This is the fact gathering and organizational portion.

This phase includes the initial fact gathering on the business. Your business should have an in-take sheet whereby it gathers all important information from the other business. Some of my clients even go as far as running credit checks on the business or getting personal guarantees from its senior members.

For contractors, suppliers and equipment lessors that I represent, this pre-collection phase is essential to keeping the accounts receivable low. This phase also includes sending out notices and filing liens, in a timely manner and properly. All of these essential elements make the post-collection process much easier, more efficient and most importantly successful. The old adage that I preach, is an ounce of prevention equals a pound of cure.

Finally another important aspect of the pre-collection phase is a well written contract between you company and your business client. This contract should have specific default and attorney fee provisions.

Collection Phase – It’s Time To Get Paid

Now your company has all of its intake information, gathered credit reports, personal guarantees, sent your notices, filed your liens, and have a well written contract, but your business client refuses to pay on its obligation to your company, what do you do?

There are a few options here and  only one good solution. Your business could write off the debt, it could try to collect internally, hire a debt collection agency or contact an attorney to collect. Obviously I’m biased here, but I do see this often. Writing off the debt is never good. Collecting internally can be okay but its slightly less successful than a debt collector. Attorneys can do all of the following steps which make the percentage chance of collection go up.

Your commercial debt collection attorney has a number of weapons at his disposal to collect on the outstanding debt. Many of them have time delays built in by law, which slows the process. First is to send a demand letter which includes the Louisiana Open Account Statue language. This is another avenue to get attorney fees and costs associated with the debt collection.

After the demand letter is sent out and thirty (30) days elapse, then its time to file suit against the debtor. Many businesses balk at this option because litigation can be costly and risky. Depending on the size of your debt, you attorney will likely take it on contingency which will minimize the litigation costs. From there your attorney will get a judgment, either by default or after trial.

Once the judgment is obtained, there are a number of possible means of collection. The attorney can examine the assets of the debtor, in a judgment debtor rule hearing whereby the debtor will be sworn-in and give testimony as to what the business owns. Further, the attorney can garnish banking and physical assets of the business. The judgment will be good for ten years and can thereafter be reinscribed. Once a judgment is granted collection chances go up.

Conclusion

In the end, some debts are simply bad and cannot be collected. Others, however may just be tricky or require persistence. Having a good commercial debt collection attorney at your side will greatly increase your collection rates and keep your accounts receivables low.

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Posted in:     Collections, Litigation, Louisiana  /  Tags: , , , , ,   /   1 Comment

Tips for Mediation Success

Measure SuccessHere at Wolfe Law Group, LLC, I mediate disputes many types. The disputes I usually handle are construction, collections, insurance claims, contracts and leases . Often times I am asked, what it takes for a mediation to be successful and if there is a trick to getting a successful mediation. Normally, it all depends on the parties frame of mind.

What Is A Successful Mediation?

The number one measuring stick and overall way the legal industry measures mediation success is whether the case settles, due to the mediation. This typically is a clean way for all parties to know whether the mediation was a success.

There are other types of successful mediation, whereby the parties agree to resolve some of the disputed issues but not all of them. In my mind, these partial settlements are a success.

Finally, I believe that just about every mediation that is completed and the parties work through the entire process is a success. Mediation is a unique tool that lets the parties prepare and evaluate the case strengths and weaknesses, before getting into a trial setting. There is no judge or decision maker, therefore parties as well as their attorneys can see what a neutral third party thinks of the merits. This can be very helpful and a real eye-opener for clients.

Another success story that comes out of working through the mediation process is knowing what the opposition is willing to do to resolve the dispute. You can determine whether you have someone who will work to get a resolution or an adversary who is irrational.

There Are A Number Of Factors That Go Into A Successful Mediation

There are many factors which can lead to a successful mediation. Each case is different therefore the importance of success factors will vary from dispute to dispute.

Ripeness is a big issue when it comes to whether a mediation will be successful. Some times its impossible to know if your matter is ripe until you engage in the mediation process, due to unexpected factors which may arise. Further, many attorneys will jump into mediation in order to get a quick deal. This practice is not beneficial to the client or the outcome of the dispute.

Attitude of the parties is another huge factor when it comes to the success of a mediation. There are disputes where all sides are irrational and cannot make a deal. There are other disputes when its just one party who is creating an impasse. A good mediator will work on parties to encourage positive attitudes with regard to making a deal. The mere fact that the parties agreed to come together, is a sign that reason is being applied and there’s a possibility for a deal.

Having all parties actually listen and work through all of the issues presented by each other party. Many times a party will only want to discuss its issues and not listen to what other are saying. This breakdown in the communication process can be very problematic for the mediation process.

Other Sources For Mediation Information

Mediation is quickly becoming one of the go-to methods for alternative dispute resolution. Its been around for a long time and will continue to be here because of its cost-effective alternative to standard litigation. There are a number of good sources which talk about successful mediation. NOLO.com has a good article with Ten Rules for Success. Marc Engel has a similar article with good information entitled 8 Steps to Make Mediation Successful.

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Posted in:     Arbitration & ADR, Construction News  /  Tags: , ,   /   1 Comment