For anyone who has ever hired a contractor to either build or remodel, the chances are that things did not work out exactly as planned. Everyone has heard the nightmares and stories of contractors who never show up, never finish the work, use substandard materials, or completely destroy the homes or businesses they were hired to repair. The suppliers are always out of stock, the time schedules are never observed, and cost estimates are always inaccurate.
Before the work is completed, the project may be “abandoned” by the contractor. There could be union negotiations on large scale projects. The occupational and Safety Administration may have Ordered a work Stoppage. There could be supply issues, insurance issues, and subcontractor issues. Additionally, there can be an anticipatory breach by the contractor, or a wrongful termination whereby the contractor is not allowed to continue the work. A work stoppage, an abandonment, suspension or termination, may involve a breach of contract which is generally defined as the failure, without legal excuse, to perform any promise which forms the whole or part of a contract.
Fortunate for us, the courts have generally provided guidance on what constitutes completion of the construction contract under the substantial work approach. Usually, completion of the contract has having to satisfy a two-part test.
First, in order for a contract to be deemed complete, there must be at least substantial completion or substantial compliance of the project. Substantial completion is typically means that only minor or trivial work to be accomplished for the contract to be fully performed. This is decided by determining whether the disputed work is a substantial continuation of the work under the contract or a minor or trivial adjustment or the remedying of trivial imperfections.
Second, in order for a court to determine that a contract is complete, the owner must have accepted the work. The court seemed to imply that, under certain circumstances, work performed at the request of the property owner can possibly extend the date from which the contracted time period is measured. The courts explained that if an owner requests that additional work be done on the project, then he or she should be estopped, or prevented, from claiming that the contract was not completed prior to the additional work being done.
By nature, contractors have a bad name. We hear far more complaints than praises for their work. However, if you hired a contractor who did not perform the job as agreed, you may have a remedy at law. However, every state imposed a time limit in which you may file a complaint to protect your rights. If you hired a contractor who did not live up to your expectations, or you are a contractor with a difficult client, speak with one of our network of independent attorneys to learn about your rights and which laws will protect you.
Construction law concerns the contracts for the design, building, construction or development of real estate and structures, as well as the relationship between construction professionals (general contractors and subcontractors) and private landowners. Construction Law deals with all legal issues relating to the construction process from land acquisition and project financing to post-construction claims and settlement. These include such matters as, building contracts, bonds and sureties, construction and builders’ liens, tendering, and construction claims, which affect all participants in the construction industry, including lender financial institutions, architects, general contractors, subcontractors, suppliers, builders, owners, planners, designers, developers and engineers.
Construction law covers legal issues and disputes arising from building and improvements of all sizes and complexity from basic, residential work (private projects) to large and complex projects such as: government or commercial and industrial projects, including high-rise buildings, light-rail transit systems, nuclear and fossil fuel power plants, hospitals, business office complexes, nursing homes, schools, shopping malls, historic renovations, bridge and highway construction, prisons, steel mills, continuous galvanizing lines, hydroelectric projects, sports and entertainment facilities, ships, cogeneration and alternative energy projects, development communities, and water and wastewater treatment plants.
The construction contract is a legally binding agreement between two parties on the details and cost of a construction project. This type of contract covers very expensive, complex projects and simple renovations. There are two types of clients that use construction contracts: residential and commercial. Each client has different requirements that determine what is included in the construction contract. A residential construction contract includes three basic elements: project scope, schedule of work and payment details. The property owner who has requested the work and the project manager for the construction company must sign the contract.
a. Project Scope – The project scope is a statement of exactly what construction work is included in the contract. This section should include detailed schematics, artist’s rendering, and any specific instructions. Both parties must agree that this section provides an exact representation of the required work.
b. Schedule of work – A schedule of work indicates the start date, milestones, and project completion date. Review this section in detail to ensure that all the primary requirements from the project scope are included. The process for inspection and quality assurance should be provided here.
c. Payment details – The payment details section includes the total project cost and payment dates. All construction projects are paid on a percentage of completion. A deposit of no more than five percent of the total costs is provided at the start of the project. The next payment is made when the predefined section of work is completed.
Commercial construction contracts vary slightly from this format, as they must include more details. In addition to the standard items provided above, a commercial construction contract has: procurement process details, specifications about legislative coverage, contingency plans, and dispute resolution instructions. The principle signatory document lists all the people who are involved in the project, their role, and reporting structure. This document is especially important on a large project, as it ensures that all parties have agreed to the authorization for changes, payment, the work flow process and design elements.
Construction contract issues:
Construction contract is an agreement entered into between two parties under the terms of which one party agrees to perform a specific job of construction in consideration of payment by the other parties. Generally, following issues arise out of construction contract leading to litigation:
1. Government contracts and administrative law – public works construction
2. Contract bid disputes – bid protest, bid withdrawal, bid change and bid error
3. Extra work claims, payment and collection disputes – including stop notice and mechanics lien rights
4. Construction claims – equitable adjustment, delay, disruption, and acceleration damages
5. Surety Issues – performance and payment bonds
Those who work on construction of property or provide materials, and are not paid-in-full, have a right to enforce their claim for payment against property. This claim is known as a construction lien.
If your contractor fails to pay subcontractors or material suppliers, the people who are owed money may look to property for payment, even if you have paid your contractor in full. This means that if a lien is filed against your property, your property could be sold against your will to pay for labor, materials, or other services which your contractor may have failed to pay.
If you hire a contractor and the improvements cost more than $2,500, you should know the following:
1. You may be liable if you pay your contractor and he then fails to pay his suppliers or contractors. There is a way to protect you. A Release of Lien is a written statement that removes your property from the threat of lien. Before you make any payment, be sure you receive this waiver from suppliers and subcontractors covering the materials used and work performed on your property.
2. If your contract calls for partial payments before the work is completed, get partial releases of lien covering all workers and materials used to that point.
3. Before you make the last payment to your contractor, obtain an affidavit from your contractor that specifies all unpaid parties who performed labor, services or provided services or materials to your property. Make sure that your contractor provides you with final releases from these parties before you make the final payment.
4. Always file a Notice of Commencement before beginning a home construction or remodeling project. The local authority that issues building permits is required to provide this form. You must record the form with the Clerk of the Circuit Court in the county where the property being improved is located. Also post a certified copy at the job site. (In lieu of a certified copy, you may post an affidavit stating that a Notice of Commencement has been recorded. Attach a copy of the Notice of Commencement to the affidavit.)
5. In addition, the building department is prohibited from performing the first inspection if the notice of commencement is not also filed with the building department. You can also supply a notarized statement that the Notice has been filed, with a copy attached. The Notice of Commencement notes the intent to begin improvements, the location of the property, description of the work and the amount of bond (if any). It also identifies the property owner, contractor, surety, lender and other pertinent information. Failure to record a Notice of Commencement or incorrect information on the Notice could contribute to your having to pay twice for the same work or materials.
Attorneys specializing in construction laws:
Attorneys specializing in construction laws must have insight and knowledge in areas such as contract, mortgage, compensation, etc. If you are involved in a construction project, you should consult with an attorney. You don’t even necessarily have to involve with a commercial construction dispute to benefit from an attorney’s counsel. The attorney can help you with obvious issues like determining construction claims and disputes, litigating construction disputes in court and with competitive bidding disputes. But, you should also consider retaining attorney for drafting and negotiating contracts, legal assistance during project with contract compliance and scope of work issues, assistance with mechanical liens and other day to day issues that arise.
IF YOU ARE INVOLVED IN A CONSTRUCTION DISPUTE, CLICK HERE TO SPEAK WITH A CONSTRUCTION ATTORNEYS NOW