Posts Tagged ‘Litigation’

Part Two: Now What? Three Simple Principals To Mind When Your Involved with a Costly Dispute.

The construction industry is riddled with risk and disagreements, and some say it’s only a matter of time before a construction organization finds itself in litigation. Regardless of its certainty, litigation is a fact of business and has the potential of costing your organization thousands, hundreds of thousands or millions.

Accordingly, your business wants to weather the litigation storm as painlessly and quickly as possible. Here are three principals to mind if your construction company is facing litigation.

1) Settlement Should Always Be An Option
If the dispute is in litigation, there were likely settlement attempts before formal filings. Simply because these pre-litigation settlement efforts have failed, however, does not mean post-litigation settlement efforts are without utility. To the contrary, the reality of litigation often hits parties only after filing and can be a powerful influence to settle.

Attorneys oftentimes are scorned by the public for their desire to settle cases rather than litigation. The practice, however, is not the result of laziness or a fear of the courtroom. To the contrary, attorneys are usually looking out for the best interests of their clients – and in most cases, it’s in all parties’ best interest to settle the case.

Litigation of all types is expensive. The associated legal fees, expert fees and court costs associated with taking a case to trial is going to be a minimum of $10,000 – $15,000.00, regardless of the amount in dispute. The more complex a case, the more expensive the litigation – oftentimes costing parties hundreds of thousands or millions of dollars.

As such, parties should make objective reviews of their legal positions and consult with attorneys to discuss the challenges of their case, its possible exposure, and estimated legal costs.

Judges and mediators often say, “a good settlement is when both parties leave unhappy.” While unhappiness is not the most pleasant end to your legal dispute (in which you may be emotionally and personally invested), it may be the best. Depending on the associated risk of the case and your company’s exposure, full-blown litigation may result in a much worse scenario than a mediocre settlement.

2) Explore Alternative Dispute Resolution
It’s never, ever too late to explore alternative dispute resolution options. In the past, parties have chosen to mediate or arbitrate their differences even on the eve of trial – and successfully so.

In the event of litigation or arbitration, however, you shouldn’t wait that long to explore the possibility to resolving the parties’ differences through mediation or some other less expensive resolution program.

Mediation may be a great alternative to litigation since it is entirely driven by the will of the parties, voluntary and less expensive than a formal dispute. However, mediation is not free (depending on complexity of your case and length of mediation, it may cost between $2,500 and $25,000, or more). Accordingly, you want to agree to participate only if both parties come to the table in good faith to settle the case. Both parties, in other words, should be prepared to have a flexible settlement discussion.

Settlement discussions within mediation are confidential, allowing the parties to discuss details of the case frankly and to exposure each other’s weaknesses. Furthermore, in the event mediation is not successful, it is a great way to prepare your for trial and to gain a stronger understanding of your opponent’s position.

See: ADR Articles on Construction Law Monitor

3) Good Counsel is Priceless
The type of attorney you’ll need to most effectively and least expensively litigate your claims will depend on your desires and circumstances. And unfortunately, there are so many shades of desire and types of circumstances that your company may face in the event of litigation.

A good counselor will review your claims, defenses and financial health to determine the best course of action for your company. While it’s always important for an attorney to be a qualified litigator, “being right” or “litigating your claim” might not be best for your business. There are a number of factors to consider before setting forth on your litigation course.

Counsel should review the risk associated with your claim, your company’s financial exposure and your ability or desire to go through to trial to properly advise an organization on its options to proceed.

Perhaps it is in your company’s best interest to push the matter towards trial as rapidly as possible….but that it not always the case. Mediation may be a better option, or some other sort of settlement procedure.

In short, it’s important to have a counselor to give solid and objective advice about your company’s legal position and options. Your selection of legal counsel is perhaps the most important component of your claim. As such, be careful to choose wisely.

See: Is Your Counsel Helping or Hurting?

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

Electing ADR Post-Contract: It’s Never Too Late


This article is part of a three part series titled “Alternative Dispute Resolution – Why, When & How.” To read the other parts in this series, or to read more articles about ADR, navigate to the Wolfe Law Group ADR page here: ADR.

Under most circumstances, discourse about Alternative Dispute Resolution centers around the construction contract and the importance of “ADR clauses.” However, it’s never too late for the parties to agree to an alternative dispute resolution process.

Agreeing to ADR before filing suit
At the onset of a dispute, the parties can simply agree to forego filing a traditional lawsuit and to engage in some type of ADR process. When this choice is made, the parties are still “contracting” to submit to binding arbitration, but the notion is sometimes forgotten when the original contract is already history and the dispute has already riled the parties.

It’s advisable to include ADR clauses in the original contract to avoid this “heat of the moment” problem, but there are many circumstances when the parties – even at odds – can agree to ADR post-contract.

During the course of a construction project, there are many situations whereby the parties are amicably dealing with one another but encountering some disagreements. The ADR process can be very valuable to the parties in this scenario.

The parties can simply agree to submit to the decision of a neutral, or to participate in a speedy mediation on this issue. The decision of the neutral or compromise of the mediation can likely resolve the issue, prevent delay in scheduling and keep the parties on good terms.

It’s oftentimes more difficult to engage an opposing party in ADR in a more mature dispute, as the parties are less likely to agree to anything at the beginning of a adverse proceeding. However, the benefits of the ADR process may outweigh any urge to agree with the adversary, and if litigation is actually commenced, the parties can still later suspend the suit in lieu of ADR.

Agreeing to ADR after suit is filed.
As suggested above, it’s common for parties to submit to an ADR process even after suit has been filed. Depending on the county / parish of your litigation, there are different time requirements for when the parties may or may not participate in alternative dispute resolution. Across the board, however, these requirements are extremely liberal, and the parties are usually only limited when the action is close to trial.

While any ADR process may be elected during litigation, the most common ADR vehicle used by litigants is mediation. Mediation allows the parties to meet, express their position, and evaluate its pros and cons and the risks of litigation in hopes of reaching an acceptable compromise.

Mediation may be initiated most anytime, but litigants most often submit to mediation at the beginning of litigation or towards the end. There are pros and cons to mediation during both periods.

The pros and cons to mediating at the start of litigation:

Pros

  • The parties have not incurred much expense and frustration, and therefore may be more willing to compromise to avoid the same;
  • Even if a settlement is not reached, it provides the parties with an opportunity to analyze its case in-depth, and to get a better picture of the adversary’s position.
  • Usually, neither party has clear leverage over the other party. Oftentimes, at the end of litigation, certain facts have been exposed that weakens the position of one party. At the start of litigation, however, the party with the weaker position has a little more leverage than it will later in the proceeding.

Cons

  • The parties are less willing to compromise. The emotional connection to the dispute is still clear and present, and the expenses of litigation have not been exposed;
  • Stones are unturned – or, in other words, both parties are working on a limited set of facts and understanding of the issues at play. The litigation process allows the parties to research its and the opposing party’s position, and a mediation immediately after suit proceeds before this researching opportunity.

The pros and cons to mediating later in litigation:

Pros

  • The parties have incurred much expense and frustration throughout litigation, and they are more willing to compromise certain positions in exchange with “getting the matter behind them.”
  • Through the litigation process, the parties have an opportunity to develop their respective positions and to investigate their adversary’s position, which gives them a good understanding of their risks in going to trial.
  • The threat of trial is real and present, and the parties are more likely to make compromises to avoid the unpredictable event.
  • The “demands” of the respective parties are more developed and understood.

Cons

  • Since the positions of the parties are better developed and understood, the party with leverage will be aware of the fact and be less willing to make a significant shift in their position – and thus, settlement may be less likely.
  • With trial around the corner, parties may be more willing to wait the extra few weeks or months and let a judge or jury decide.

Electing ADR Post-Contract
Electing ADR post-contract is easy, but the actual process will likely depend on the ADR provider chosen by the parties. Typically, the parties should agree with one another in writing, and then submit the written agreement to the ADR provider.

The American Arbitration Association provides the following clauses as example clauses for choosing ADR post-contract:

Construction Dispute Mediation Submission Clause:
The parties hereby submit the following dispute to mediation administered by the American Arbitration Association under its Construction Industry Mediation Procedures (the clause may also provide for the qualifications of the mediator(s), method of payment, locale of meetings, the tolling of the statute of limitations, pre-dispute resolution step clause with time frames and any other item of concern to the parties). If a party fails to participate in any scheduled mediation conference, that party shall be deemed to have waived its right to mediate the issues in dispute.

Construction Dispute Arbitration Submission Clause:
We, the undersigned parties, hereby agree to submit to arbitration administered by the American Arbitration Association under its Construction Industry Arbitration Rules the following controversy: (cite briefly). We further agree that the controversy be submitted to [one] [three] arbitrator(s). We further agree that we will faithfully observe this agreement and the rules, and that a judgment of any court having jurisdiction may be entered on the award.

Large, Complex Construction Dispute Submission Clause:
We, the undersigned parties, hereby agree to submit to arbitration administered by the American Arbitration Association under its Procedures for Large, Complex Construction Disputes the following controversy [describe briefly]. Judgment of any court having jurisdiction may be entered on the award.

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Alternative Dispute Resolution – Why, When & How (3-part series)


This article is part of a three part series titled “Alternative Dispute Resolution – Why, When & How.” To read the other parts in this series, or to read more articles about ADR, navigate to the Wolfe Law Group ADR page here: ADR.

In the world of construction, litigation is perhaps unavoidable.

The complications and high stakes of each construction project make the construction industry a hotbed for dispute and litigation, and failing to prepare for disagreements can prove fatal.
Through dispute resolution planning, construction companies can minimize their potential exposure in the event of a disagreement.

Problems with Litigation
An adequate discussion of all the drawbacks to litigation would consume a volume of books, and so this brief summary should be taken in context. Nevertheless, it seems to be common knowledge that litigating disputes in courts of law can be time consuming, expensive, unpredictable and generally unfavorable to any of the participants.

The average lawsuit takes between 2-5 years from start to finish, and can cost thousands of dollars. The process is draining on the participants emotionally and physically, and in the end, the parties usually compromise their initial positions to reach a “settlement.”

Unlike in dispute resolution proceedings, a party to litigation cannot pick the judge or the venue, nor can the parties dictate the rules. Litigation is consumed by procedural requirements, motion hearings and discovery – each item contributing to increased time and expense.

The Option of Alternative Dispute Resolution
Alternative Dispute Resolution (“ADR”) is centered around the idea of the parties agreeing to resolve their differences through a non-litigation process. Instead of filing a lawsuit and incurring the associated expense and risk, the parties each submit to another procedure. This procedure is usually less formal than the state or federal court system, and is governed by rules crafted by the parties themselves.

Alternative Dispute Resolution can be chosen by the parties at anytime. Normally, parties will include an Alternative Dispute Resolution provision within their contract requiring each other to use ADR in the event of a dispute. In other circumstances, however, the parties will agree to engage in ADR even after filing a lawsuit in an effort to encourage a fair and speedy resolution.

ADR Types
Since ADR is largely driven by the goals and agreement of the parties, the manner in which a dispute will be adjudicated is restricted only by the parties’ creativity. There are, however, a number of ‘standard’ ADR mechanisms used frequently in the construction industry. Oftentimes, all three of the below types of ADR processes are used to resolve a dispute.

The three below discussed types of resolution are discussed in their usual order of use. In many cases, only one of the below ADR processes are used by the parties, and sometimes they are even mixed and matched with traditional litigation.

It’s important to recognize that each process will carry delay and expense, and so it might not make sense to schedule all three processes when the parties are only arguing over $10,000.00. Furthermore, when all resolution types are used, the parties could be faced with delays and costs that resemble traditional litigation. Accordingly, parties must be careful in their selection of their own ADR rules.

1. The Construction Neutral
The “neutral” concept in construction has recently been sanctioned by huge contract document publishers like ConsensusDOCS and AIA, whose documents now contemplate the appointment of a “Initial Decision Maker” to resolve disputes quickly and on-site.

Traditionally, the Architect served as an initial decision maker in a construction project. When an owner and contractor disagreed about a change order amount or quality of work issue, the decision of the architect would be sought.

Being hired and paid by the Owner, this put the architect in an uncomfortable and conflicting position. The dispute often escalated even after the architect’s decision, leaving the parties with expensive litigation and a delay in the project.

The idea of a “neutral” or “initial decision maker” simply tenders the decision-making role to a neutral third-party, appointed by the parties during or subsequent to contracting. The initial decision maker provides the parties with a fast and inexpensive third-party voice, hopefully capable of resolving the dispute and keeping the project on-track towards completion.

The decision of the initial decision maker is usually considered “final” by the parties for the purposes of the project’s progress, but in almost every instance, the parties allow the decision to be disputed through further dispute resolution processes (such as mediation, arbitration or litigation).

2. Mediation
Unlike almost every other type of dispute resolution procedure, mediation does not pit one party’s position against the other, does not provide a “decision” of a neutral party and is not binding upon the parties in anyway.

Contrary to any other dispute resolution procedure, mediation is a confidential meeting of the parties, whereby they each air out their positions and explore its strengths and weaknesses. The mediation process encourages settlement by providing a forum for an open discussion of the party’s respectful positions, and the road ahead in the event the parties continue in their disagreement.

Normally, the mediation will begin with a meeting of all parties and the mediator, whereby each party expresses their position and their concerns. The mediator then breaks the parties into different rooms, whereby they only communicate to one another through the mediator.

Mediation is a very successful settlement tool, and when used correctly it can help parties avoid the costs and risks of litigation.

While the mediator is greatly involved with the parties and works to help them settle, he or she will not make any decisions that will binding upon the party. The mediation proceeding is only “binding” if a settlement agreement is reached.

3. Arbitration
The third and final type of dispute resolution process discussed in this article is “arbitration,” perhaps the most traditional ADR procedure.

Arbitration is very similar to traditional litigation in that it involves a decision maker (i.e. judge), witnesses and testimony, a traditional review of evidence and procedural rules.

While similar to litigation in some manners, arbitration is certainly an entirely different proceeding. The parties are intimately involved with setting the rules and proce
dures, as well as even cho
osing who will arbitrate. The “rules” of the proceeding are also much less formal than traditional courts require.

In a typically arbitration, the parties will appear before a single arbitrator, or a panel of arbitrators. These decision makers are typically experienced in the field of law and industry at dispute, and they will listen to each side present their case. Thereafter, the arbitrator(s) will make a decision that is enforceable by one party over the other.

Pros and Cons of ADR
The pros and cons of ADR over traditional litigation is a worn topic.

While there are certainly a lot of positive characteristics to ADR, it is not a process that fits in every circumstance. Like almost any other legal decision, you should consult the advice of an attorney and consider the pros and cons of each procedure before deciding on one over another.

Although there are some circumstances when traditional litigation is preferred over ADR, in the construction industry ADR is a fact of life and is normally an asset to those working on projects of all shapes and sizes.

Here is an overview of some of the most discussed pros & cons to ADR:

Pros to ADR

  • ADR can help preserve the relationship between the parties. In construction, genuine disputes may arise between the parties on scope and quality issues, and although the parties are at odds over this issue they may likely have to continue working together or work on a project in the future. ADR may save the relationship while resolving the dispute.

 

  • The parties are in the driving seat. Unlike in litigation, the parties can choose the resolution procedures, the players, the rules…and even the outcome. Traditional litigation has rigid rules, and you get what you get. The parties are not allowed to explore creative alternatives, and the result may sometimes be unfair. When certain ADR solutions work (like mediation, or construction neutrals)….the result may actually be win/win.
  • Costs of ADR are typically lower than costs of litigation. Traditional litigation can be extraordinary expensive, regardless of whether the dispute is large or small. ADR costs more closely resemble the complexity of the dispute and the purse at stake. Further, its informality results in less obligations and lower costs.
  • ADR is efficient. ADR is run by private companies who get paid by getting claims in and out of the door. Traditional courts, obviously, do not have the same motivation. ADR moves at the pace of the parties, and not the courts.

 

Cons to ADR:

  • Instant Legal Remedy. Sometimes, the parties need an instant legal remedy (i.e. construction lien, construction lien removal, injunction, eviction, etc.). These instant remedies cannot often be obtained through ADR, and litigation is necessary. When an instant legal remedy is required and the parties have chosen to resolve their disputes through ADR, the party seeking the legal remedy may have boxed themselves in to an unnecessary and expensive process.

 

  • Loss of Leverage. Sometimes, the costs and burdens of litigation is actually leverage for one party over another. While not exactly fair, it is a fact of life in the legal world. If one party is better funded, or if one party is in possession of the money or property in dispute, the long and expensive process of litigation is actually leverage for that party against the other.
  • Quality Standards. While it might seem humorous to many to assert that the court systems have “quality control,” in reality there may be more quality control in that system than in ADR systems. In court, there are manners to appeal decisions not found with most ADR proceedings. Furthermore, arbitrators, mediators and neutrals are oftentimes not decision makers by trade, and that inexperience makes them prone to mistakes.
  • Too Focused on Compromise. A pro to the ADR system is its focus on settlement and compromise, but its also a con to the system. Sometimes, the parties do not want to compromise, or they cannot find “justice” in a compromise. The ADR system’s encouragement of compromise consumes a large amount of time and resources that is wasted on a litigant who seeks a final and fair determination. Even when the ADR system gets to the arbitrators, they are still less likely to impose severe penalties on one party or to make a very prejudicial decision.

 

Where Do I File For ADR?
With so much discussion of ADR, a reader may be quite curious as to who manages “ADR,” and where the ADR courthouse is located.

Interestingly, there isn’t a courthouse system for the ADR network. Every city has a number of private companies that offer ADR services, and these services are usually located in office buildings in-between doctors, lawyers and accountants. Since the parties are in the driving seat of ADR proceedings, they can even choose their neighbor or relative to conduct the proceedings (not recommended, but mentioned to highlight the informality of the processes).

Some companies are more established than others, and you should investigate any organization before choosing them to adjudicate your dispute. In many instances, the parties will actually select the ADR provider at the time of contracting .

The most popular provider of ADR services is the American Arbitration Association.

The Next Series
Next in this three part series on Alternative Dispute Resolution is a discussion on:

  • Choosing ADR in Contract: Well crafted ADR clauses and some of the factors you should consider when constructing your ADR requirements in contract.
  • Choosing ADR Post-Dispute: How to involve ADR in an already existing dispute
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A Cure for Construction Litigation: Proactive Thinking Before You Get Started


Litigation is a frightening word to many yet to others it is seemingly unknown. The world of construction litigation has become massively entwined with confusion as to goals, limits, and the expectations of a litigant. Attorneys are often unable to properly advise a potential client as to the presumed costs and lengths of a legal proceeding simply because there is absolutely no way of knowing.

A legal proceeding depends upon several factors: the types of parties, the extent of the damage; the willingness to settle; the ability to settle; the requirements of outside contracts; the delays which may ensue; the ability to afford to legal representation; and unfortunately personal feelings towards another party. Though attorneys try, it is impossible to predict the extent of the variables and where and how the cookie may crumble. In the end, it is all an unknown.

Because parties are unable to predict the other side’s wherewithal to go the distance with a proceeding or arbitration, several dangers bear notice. Is it worth the risk to lose your financing? Is it worth the possibility of losing a good customer? Is it worth the costs of obtaining adequate legal assistance? These are the questions a headstrong business owner should be asking. Whether it be prior to contracting with another party, prior to beginning the work, or immediately after dispute arises, it is important to have a dispute resolution process or plan in mind for each job, contractor, or customer.

The dangers associated with contracting fallout can be prevented in a number of ways by being up front in your contracts with customers, contractors, and others. A good attorney can provide you with options as to strategies to use for dispute resolution. These strategies may encompass the whole project or merely deal with specific aspects. For instance, it may be wise for you to force immediate mediation of change orders or altered job conditions for price resolution, however you may want to utilize binding arbitration or even court intervention for disputes arising out of final payment. These mechanisms should be addressed during the contracting period, and every detail down to the venue, choice of law and choice of neutral should be decided by the parties.

Most people forget the contracting is open to the parties. It seems obvious that most contractors believe that there are only certain things that can go in a contract. Remember, the law of contracts appeals to your creativity. The more creative and forward thinking a party is, the more likely the contractor will have its way when dispute rears its ugly head.

Wolfe Law Group intends to release a series of Contracting Toolkits for construction companies. It is our hope that the Toolkits will spark some conversation amongst your company and your employees as to some of the problems you may face or have faced in the past. The Toolkits will provide a vast assortment of issues that face many contractors today, and the remedies that may save your firm endless time and money.

Whether you are in mold remediation and require extensive environmental obligations; whether you work in asbestos and need proper disclosures and releases; whether you lease heavy machinery to subcontractors and need warranty and release language; whether you provide fire damage services and need safety disclosures; or whether you simply need to ensure specific insurance compliance, Wolfe Law Group’s Toolkits can help you find a way to manage your needs.

Please stay tuned for more information. In the meantime, begin to think about what could make your construction process is run smoother.

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Bidding Errors and Change Orders – Avoiding a Nightmare: Part Two

Bidding Errors and Change Orders – Avoiding a Nightmare: Part Two

Every construction project will undergo change during its evolution from conception to completion. Without respect for this inevitability, disputes understandably arise between owners, architects, and contractors. Fights over who is responsible for project changes, as well as who bears the burden of any increased expenditure of time or money, can effectively stop a project. The filing of lawsuits may follow — something everyone is better off avoiding if at all possible.

Over time, the construction industry has seen the evolution of several methods for avoiding litigation and encouraging a smooth change process. < — more — >

At the Beginning of the Project

1. Build Good Communication at the Get-Go

Stopping the problems before they start is the optimal solution. Owners, architects, and contractors that view themselves as a team will overcome project hurdles much better than those who view the work as another project on their hands.

During the bidding process, working together to form and build professional relationships and establishing an ease of communication between Owner, Architect, and Contractor needs to begin. There should be mutual respect for what each party brings to the table: all are necessary for the construction project to get done. Everyone starts out wanting a smooth process and a good result.

2. Take Time With Your Contract Documents

Don’t trust the talk, get good working documents in place. Once you’ve signed, you’re committed.

  • Review the bid documents, the plans and the specifications, and the contracts. Even in a time crunch, nothing is more important in the long run than a thorough understanding and agreement on the fairness and clarity of the contract documents. The expense of a lawyer now is much cheaper than a trial attorney later.
  • Bid accurately.
  • Don’t sign a contract until you are comfortable with its language. You’ll be held to this document later — or you’ll have to negotiate around parts that you don’t like, that become unworkable, or that simply don’t exist, and that can get expensive and burdensome.
  • Check the other project contracts for consistency. Do the general contractor and sub-contractor agreements jive? Does the owner’s duties in his contract with the architect dovetail with his responsibilities in his agreement with the contractor?
  • Check the scheduling. Is it realistic — for the Owner? The Architect? The Contractor? The subs?
  • Check for delay damage clauses: who is bearing the burden of construction delays?
  • Where quantity may vary, think about incorporating unit prices for items of work into the contract documents.
  • Discuss how the project will be administered on a daily basis, and make sure that process is efficient and that it is described in the contract documents.
  • Make sure that the contract includes a clear discussion of how Requests for Information are to be processed, as well as Change Orders. Who will sign the change orders? Should change orders less than or equal to a certain amount be treated differently than those involving larger sums? Will oral change orders be respected?
  • Change Order forms should require exact descriptions of the requested change; the time impact of the change; the money impact of the change; signatures for those impacted by the change; and a specific time for approval (a deadline).
  • Know which state law controls the documents. Know what your duties and responsibilities are under that state law.
  • Consider adding alternative dispute resolution options in the contract documents in advance of any disputes. Will you agree to a binding mediation? Will you agree in advance on a mediator? What about arbitration?

During Construction

1. Keeping Good Communication

Once the contracts are signed, work begins. Keeping up the relationships between Owner, Architect, and Contractor can be difficult, but it’s extremely important for a smooth job. Yes, this can be exasperating: owners can be ignorant of construction realities; architects can be immovable on design; and contractors can be insistent in their demands.

However, once that feeling of cooperation is gone, it’s almost impossible to get back. And projects that are working at loggerheads are vulnerable to conflicts that can suddenly explode into arbitrations and trials.

2. Procedures For Minimizing Conflict

Knowing that there will come a time when Owners, Architects, and Contractors are going to disagree, how can you keep the lid on and the work smoothly moving forward?

  • Discuss the change order process and the request for information process in advance, so everyone knows what’s expected and to expect to see Change Orders and RFIs during the construction process.
  • Make sure your field and office people understand the construction management process for the job.
  • Set up your internal procedures to catch problems as fast as you can. The faster you know about a problem, the faster you can solve it.
  • Make sure those involved in the Change Order process know how it works. Where’s the form? Who signs? When do you need one?
  • Implement a process of daily reporting. This helps to identity things that may cause problems in the future, and it helps keep up good communication between everyone involved. You’re a team, not adversaries.
  • Remember to consider the other guy: Owners should consider the perspectives of Architects and Contractors; Architects should reflect on Contractors and Owners viewpoints; and Contractors should understand the concerns of Owners and Architects. For example, an owner wanting to change the doors and windows might do better to consider the architect and contractor before unilaterally requesting the change. Having the other players in mind when writing an RFI or requesting a Change Order can be a big help in keeping the change process as painless as possible.

When Construction Conflicts Do Occur

No matter how cooperative and congenial everyone may be, circumstances may arise when serious conflicts cannot be avoided. Perhaps a serious bidding error has resulted in extremely high and unexpected costs. Maybe there’s been an unexpectedly heavy rainy season, and construction delays must be borne by someone. Then again, maybe there’s a fight on the site because of an impasse: is the problem because of a design flaw or because a sub installed something wrong?

Even now, there are things which can help to avoid a project melt-down. Before emotions escalate, each party should do the following:

  • Review the contract documents carefully. Is there any language that applies to this situation?
  • Organize all the documents that pertain to the situation. Put them in chronological order.
  • Gather information from your people on the situation. There may be important facts that haven’t been put on paper, despite your protocols.
  • Check with your attorney. Your lawyer should be experienced in construction law, which keeps your costs down. Perhaps a quick phone call or a short office visit can answer your questions on legal issues like what the governmental codes provide for the situation, what the state law holds, and what the contract documents mandate. Don’t procrastinate on seeking legal advice.
  • Reserve your rights if you want to proceed while resolving the dispute. Do this in writing. Get legal counsel here, waiver and estoppel are legal doctrines that can impact this situation to your detriment.
  • Checking with your lawyer should not be a last resort. Knowing your legal position
    is part of gathering all the facts to hopefully help in resolving the conflict.

After these steps have been undertaken, each party should be forthright in what the contract documents provide. If the contract states that the Owner bears the construction delay, then the Owner should bear it. If there’s disagreement on what the contracts provide, then an agreement to disagree in order to finish the project usually makes sense. Attorneys should be involved here to make sure rights are not waived by this process, however.

Why Everyone Should Want to Avoid Litigation

A cold reality that should throw a damper on the most inflamed construction conflict is the possibility of litigation. Should the conflict escalate into a formal dispute:

  • Owners, Architects, Engineers, Surveyors, Suppliers, Sureties, Contractors, and Subcontractors can all be involved in the lawsuit;
  • The legal process is slow: the process of getting to trial can take 1-2 years, and appeals can add years before a final determination is reached;
  • Results can be unpredictable;
  • Time can fade witness memories and documents can be unclear; and
  • The realities of litigation can be devastating to those involved, not only to the ultimate loser in any trial but also to those businesses who cannot weather the impact, direct and indirect, of a long term and protracted litigation process.

The Bottom Line

Make sure that you keep communication as open as possible: a conflict was predicted at the get-go, and now that it’s here, it can still be resolved before it grows into a formal dispute. Good communication and good contract documents can keep the biggest construction projects on a smooth course to completion with the minimum of crisis.

Posted in:     Change Orders, Construction Contracts, Disputes, Litigation  /  Tags: , , ,   /   Leave a comment