ST&A Construction Law Bulletin:
The details of contracts are easy to overlook. At the outset of a project, everyone is on good terms, and the fine points of a contract can seem like more of an annoyance than a necessity. However, paying attention to details can help avoid disputes that lead to costly litigation down the road.
In general terms, construction disputes turn on one of four questions: (i) did the contractor do the work it was supposed to do? (ii) was the work completed within the time it was supposed to be completed? (iii) are there defects associated with the work? and (iv) are any payments owed to the contractor?
The first of those questions – whether scope of work was completed – is one of the most common sources of disputes. At the same time, it is relatively easy to significantly reduce the associated risks.
Often, even very complex projects describe scope of work as, for example, “construct new building,” or “build addition to existing structure,” with little attention to finer details. It is easy to see how this can lead to disputes. To use a hypothetical that may seem extreme, but is all too similar to real life events, assume a contractor constructs a building, but does not install finished flooring, or other interior finishes, and says that it has completed the work. The owner believes interior finishes were anticipated by the contract. The contract only says the contractor was to construct a new building. Who wins? It may take many, many months, and tens of thousands of dollars in attorney’s fees to find out. A small investment of time at the contract stage could have prevented the dispute.
The aim should be to describe the scope of work with as much detail as possible. Referencing drawings and specifications, and incorporating them into the contract, is one relatively easy way to put a fine point on the scope of work requirements and leave little doubt as to the contractor’s obligations. For projects without drawings or specifications, more detailed narratives may be necessary. In either event, even a small investment of time can go a long way toward avoiding an expensive headache.
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