Tag Archives: business dispute

How to Smartly Handle Project Documents

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mountain of construction paperwork

Paperwork by luxomedia via Flickr

In the Contract Risks Management Group on LinkedIn, L.H. Chin wrote an article about file keeping for contract risk management.  Basically, his premise is that if you cannot keep your Project files orderly, you have exponentially increased your chances of a problem later.   His particular example dealt with originals versus reproduced copies, which is only somewhat germane to North Carolina contracts.  (Here, copies can be used as evidence most of the time—though not always).  His main point, however, about the ability to minimize future risks by having good document control policies in place, is something every project manager should think about.

 Here are a few tips of my own in that regard:

1.   File all communications in one place.  Don’t keep faxes in one file, email in another, and letters in a third.  Don’t keep incoming and outgoing correspondence separated by vendor.  Keep it all in one chronological file.  If you ever find yourself needing legal assistance, this will save many hours and untold stress for everybody.

1.b.  Caveat:  don’t feel like you need to print out every email.  Do, however, maintain a separate email e-folder for the Project, and go ahead and print those really crucial, smoking gun emails.

2.  If you insist on violating Rule 1 (and I know those of you who read this blog would never consider such a thing, right?):  Have all the files, categories, and such you want, but please also make a “master” chronological file of all correspondence.   Just do it.

3.  If you have any communications with your lawyer, an insurance representative (outside of the normal bonding paperwork), or otherwise have documents relating to potential claims, do keep them separate.  Put all such correspondence, in a folder marked “legal,” away from the Project file to prevent inadvertent disclosure to anyone else if there is ever litigation on the matter.

3.b  If in doubt whether something should be in “legal” or “correspondence”, err on the side of “legal.”  Your attorney can always change the classification later, but she can’t put the genie back in the bottle if something that is privileged is mistakenly given to a party suing you.

If you have any questions about these tips, or want to discuss your current procedure for record management, shoot me an email.  My contact information can be found on my Firm bio or at the Footer of the Blog.  Or, you can simply leave me a note in the comments. 
 

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Photo: “Paperwork” by luxomedia via Flickr/CC license.

How Long Should My Construction Contract Be?

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The answer, as is always the answer when you ask an attorney a question, is “it depends.”  Lawyers don’t say “it depends” just to drive clients mad—really, we don’t.  The thing is, lawyers, by their very nature, are cautious.

Lawyers want to plan for all situations and possibilities.  Likewise, a construction contract can become an unwieldy document that only a lawyer could love, as it provides for all conceivable areas of dispute and all possible contingent situations.  Such a contract does no one much good.

The best contract for you is the contract that is appropriate for your construction project and the players in that project.  If the project is a multi-million dollar, multi-year project, you probably should not skimp on having a well-crafted, attorney-vetted contract specific to your deal.  If, on the other hand, the project is a one-day residential job, you can get by on much less.

Do not assume, however, that just because a contract is small in terms of dollars or man-hours that you do not need a contract. You do. (See my earlier post on the importance of a written contract.) Paradoxically, some of the most hotly contested lawsuits involve homeowners.  After all, their home is their castle.

In fact, a house is usually the single largest investment decision that most people will ever make, often involving a mortgage that may take as many as 30 years to pay off.     It is only natural, therefore, that homeowners will be extra exacting when it comes to issues relating to their home.

To go back to the original question—how much contract you need depends very much on the situation.  A two page, simple contract may be sufficient for your purposes, if it is carefully crafted to account for all common areas of dispute which may arise.  It is vital, however, that you have one, and that it is in writing.

Of Mice and Men: Yes, you need a written construction contract!

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Field mouse

Photo by delphywnd via Flickr*

 

Does a written contract *really* matter?   Yes; yes it does.

While you can get by for years- decades, even- on handshake deals—when something goes wrong you will wish you had a written contract.  Even the best projects, with familiar clients and trusted contractors, can go awry.  (“The best laid plans of mice and men often go awry”).

Many of my clients come to me after having been in business 20, 30 years or more.  They come to me because they have either already been sued, or the handwriting is on the wall and they are about to be brought into litigation.  They tell me they’ve never needed a written contract before now.  That’s well and good.  However, I’d bet dollars to donuts those same folks have fire insurance, and yet very few if any of them have actually experienced a house fire.  What’s different about business contracts?

The goal, of course, is that you will never need to rely on the written provisions in your contract.  But if you ever find yourself facing a lawsuit, you’ll wish you had a written contract.

A written contract spells out expectations, rights, and responsibilities.  It sets standards that may be understood by the parties, but very different from what the common law would allow.  Without a written contract, you are trusting yourself to laws you may not agree with or giving up protections you may otherwise have.  Why chance it?

Get something in writing—a signed proposal, an email which is confirmed—something that spells out basic agreements that might come into dispute later.  A thorough contract written for each project is ideal, though not always practical on smaller, quick-turn deals.  That’s fine.  But get something on paper.  You’ll be glad you did, if and when you ever find yourself on the courthouse steps.

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*Photo: Have you seen the Muffin Mouse by delphwynd via Flickr and made available via Creative Commons license.

Spring Cleaning: 6 Contract law tips for limiting risk on construction projects

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cleaning suppliesIt’s springtime! That means spring cleaning. Out with the old and in with the new. This is also a good time to think about cleaning up your systems for limiting your risk on construction projects. Here are a few short things to consider as you attempt to improve your construction contracts:

  1. Do you have a standard written contract or proposal for every project, no matter how small or how long the client has been doing business with your company? This should be your number one priority. If it is a standard form, it shouldn’t be a big deal to use even on short projects. And if you think your longtime customers will be offended, blame it on the attorneys! That’s what construction attorneys are here for– we’re tough and can take being the bad guys.
  2. Has your contract or proposal been reviewed by your insurance carrier? This is an important step you can take to limit any risk issues in your contract. Many insurance carriers will review your contracts at no cost to you– they view it as a good loss prevention measure. Check with your insurance agent or broker to see if your carrier offers this service. This is also a good time to see if your insurance coverage is sufficient for the amount of work you are currently performing.
  3. Has your contract been reviewed by your attorney? If your insurance carrier has an attorney licensed in your jurisdiction review your contract, you can skip this step. Otherwise, strongly consider having the contract reviewed by a professional, preferably an insurance defense attorney. Measure twice and cut once applies to the legal world, too.
  4. Does everyone on your staff know to use the contract or form proposal and where on your system to find it? It does you no good to have a great contract template that some of your employees don’t use. Educate them on the importance of all contracts and proposals being produced in a uniform, systematic way.
  5. Is there a follow up procedure in place, in case a construction contract or proposal is not returned executed by the client? Someone should be tasked with making sure a completely executed contract or signed proposal is obtained, and that it is filed in an easily accessible location for future reference. One idea: do not open a new client or matter number to bill against until the contract is in place.
  6. Consider whether it is worth getting current verbal agreements translated into written agreements. If you have an ongoing project that is only based on a verbal agreement, consider the potential for risk on that project. It might be worth it to ask the client to execute a new written agreement. Again, you can blame it on the lawyers. This *may* not be possible, or it may simply be too awkward to ask for this in the middle of a project that is going well. But at least consider all of your current projects to see if this is a possibility.

Happy Spring Cleaning!

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Photo “Kane Cleaning  Supplies”  by Collin Anderson via Flickr via Creative Commons License

What is not in your construction contract can be just as important as what is in the contract

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excludedEver wonder why lawyers like to write contracts that seem to go on, and on, and on? By nature, lawyers are doomsayers. We try to minimize risk, and sometimes that takes the form of a contract that “only a lawyer could love”.

We will cover important contract terms in future blog posts, but for now, did you know that what is not in your construction contract is just as important as what is in there? Many times the heart of a construction dispute stems from confusion or mistaken assumptions about what, exactly, was agreed upon.

In addition to having a very detailed “Scope of Services,” in which you specify exactly what you will be doing on a project, you should also develop a standard “Exclusions from Services” list, and that list should be a part of every contract.

Such an exclusion list should include:
— anything you were specifically asked not to perform
— anything the owner indicated was to be provided by others
— anything which involves specific contractor coordination (unless
you are providing this service)
— a listing of anything above and beyond normal conditions (for
example, “attendance at more than X meetings a month”)
— a general “catch all” statement that anything not specifically
specified in the Scope of Services is not covered

Of course, what specific things should be listed in your Exclusions list depends on what field of construction you are in. Design professionals need to focus on coordination issues, duties with respect to other design professionals on a large project, duties relating to oversight of contractor work, and related issues. Contractors should focus on their responsibility to work with and/or around other trades as well as related work that the owner does not intend to pay for which can result in scope creep.

While it might seem like wearing belts and suspenders at the same time to write out a Scope of Services and also include an Exclusion from Services list, the minimal extra effort in developing such an Exclusion list will pay you back in volumes should a dispute on the project ever arise.

Photo (c) Markus Spiske.