Common Subcontractor Disputes & How To Avoid Them

It’s unfortunately, but the days of trusting a mans word have become something of the past. In this day and age, you can never just blindly trust a person’s word; you have to get EVERYTHING in writing. As tedious as this may be, documentation becomes extremely important once faced with problems & errors resulting in disputes.

For example, a common situation that occurs in the construction industry is a dispute resulting from undocumented change orders. If a client requests changes from the original agreement, before work occurs, you must document the change order to create a binding legal document. A known case, Crawford Construction & General Contractors Inc. v. Kemp, highlights this prominent problem. The case describes how Kemp refused to pay the additional $605,694 in change orders, after verbal agreement from by both parties.

Marilyn Klinger, of Sedgwick Deter Morgan & Arnold LLP, believes that electrical subcontractors are often prime targets of pay disputes. “Keeping in mind that the inherent nature of the construction process often fosters disagreement, electrical contractors (as subcontractors) are often caught in the middle “(Marilyn Klinger). The main concern becomes the subcontractors being unable to communicate with the owner themselves, and has to use the general contractor as a lifeline. So it’s especially important for electrical subcontractors to meet these construction challenges head on, by being knowledgeable in the different disputes that often arise between key players in a project.

The following are two main disputes that electrical subcontractors are frequently confronted with:

Plans, Specifications and Scope of Work – Unfortunately, these types of errors are all too common in construction contracts. The problem is it’s often no ones fault when a similar mistake occurs. The contracts are commonly misinterpreted, creating disputes in the long run. So short and simple, it is very important that the contract is clear and concise. Every clause should be wholly accepted, and have a clear meaning with no possible misinterpretations to avoid these types of conflicts.

Change Orders, Extra or Out-of-Scope Work – As many may know, the most common dispute over change orders and extra work boils down to the pricing. “Frequently, the owner requests pricing for the changed work buy then disagrees with that price and time extension request – ordering the work to proceed as scheduled. This situation leaves the parties to fight over the amount and time at project’s end“(Marilyn Klinger). This should simply never be the case. Do not begin work that you have not yet documented. Again, this is how legal battles begin, and will cost you more time & money in the end.

The list may easily go on to include things such as disputes among construction defects, subcontractor substitution, differing site conditions, and other common problems, but the answer will be the same. It all comes down to proper documentation. Whether before, during, or after the completion of the project, with proper documentation, you can sleep easy at night. The key is insuring the completion of a clear and concise document, instead of contracts that may be interpreted in multiple ways. This is no easy task. It will take a lot of time and consideration. A smart course of action is to consult with a lawyer about documentation wording before your final agreement.

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Posted in Best Practices.