A case decided in Indianapolis last week makes the point once again: Any time there's a dispute on a construction project, the contractor better have a good contract. Jim Dorey didn't and paid the price. Here's what happened.
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Most construction disputes begin with a surprise. And no job can astonish better than rehab work. So how do you stay out of disputes on repair jobs? Maybe you can’t. But a case decided earlier this month in Maine may be a good model for contractors on residential and light commercial repair jobs.
Chris Bond agreed to have Riley Woodwork remodel the Sebego Lake Rowing and Sailing Club in Standish, Maine. Before taking the job, Riley warned that the clubhouse was an old building – rotted floor joists and subfloor and outdated electrical system. Riley wrote what he called a “baseline” bid and added a caution about unforeseen problems. The job scope might change once work started. Riley estimated the baseline cost at $26,781. Bond signed a written agreement to pay more for approved extras. Continue reading
Tom and Denise Ambrose wanted to add a pool to their home in Carmel, Indiana. They selected Dalton Construction to do the work. Dalton’s plot plan for the pool was approved by the city. Just to be sure, Dalton laid out the pool outline on the ground using metal stakes, string and orange paint.
When Dalton’s excavation crew arrived on site to begin work, Denise had a problem. The pool layout was wrong. Dalton re-staked the pool where Denise wanted it. And that’s where the pool was built. Tom and Denise monitored the work almost every day and never said anything more about location of the pool. But when a subcontractor began making stress cuts in the freshly poured concrete deck, Denise turned irate. The cuts were not like a neighbor's pool deck! And the concrete was the wrong color. Denise told the subcontractor to stop work.
Nearly everything you buy at a store or online is made before it’s sold. Construction is different. The job gets sold before work starts. That’s why an owner’s first question is likely to be about price. Experienced contractors anticipate the cost question and are ready with an answer that helps sell the job.
There’s no single best answer to the cost question. But quoting a price off the top of your head is a mistake. Even if you have a ballpark figure in mind, keep that number under your hat. Better answers include:
Nineteen states have changed their construction contract law in the last few months. Some of these changes are trivial. Others will affect contractors throughout the state. In several cases, legislatures are simply falling in line, writing new statutes to mirror law adopted recently in other states. Highlights are below.
Why do so many construction contractors use lame contracts?
Builders who know better continue to use agreements that don’t comply with the law. That’s no way to run a business. And I think the day of reckoning is not too far off.
If not renewed, the 30% solar tax credit expires on December 31, 2016. Solar leases will be out. Solar loans will be in. Right now, the major residential photovoltaic leasing companies are ramping up loan programs to replace their lease deals. A solar contractor I know predicted what’s going to happen when installations start under these new loan programs. I’ll let him explain.
Every contractor and subcontractor has to deal with warranty – a claim that something wasn't done right and should be fixed at no cost to the owner. If you haven’t had a warranty claim yet, stand by. It’s going to happen. Nearly all states either require an express (written) warranty or impose an implied (understood) warranty on residential contractors. See my blog post of June 12, 2014.
For owners, warranty is simple. Just complain to the prime contractor. For contractors, warranty can be anything but simple. It’s a blame game. Who’s at fault? The subcontractor? The designer? The material supplier? The inspector? Lawsuits can resolve finger-pointing problems like that. Join everyone on the job as a defendant and let the jury decide.
Have you heard those words from an owner? Last week I got a call from a contractor who had been told exactly that. He still had tools and equipment on the job. He was owed money. His crew and subs expected to be paid. Now what?
A contractor terminated for good cause could be liable for both the extra cost of finishing the job and the cost of fixing everything the owner didn't like about the original work.
What would you do?
Pick up a contract for any good-sized commercial or industrial project and you’ll be holding 50 to 100 pages. I’ve never seen a contract for a significant public works project shorter than 50 pages. Even the most popular A.I.A. model contract (A201) is 40 pages.