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Lessons Learned from a Construction Contract to Help You in Any Legal Dispute

June 21, 2023

Contracts are so commonplace that we don’t always give them the attention they deserve until there is a problem. While the details of a particular contract may be unique, certain issues tend to come up often regardless of what kind of agreement is involved and the size of the transaction. For example, our client’s experience with a lawsuit over a construction contract has lessons that can help you in any legal dispute you may have.

The Construction Contract Dispute

Our client contracted to build a custom home and worked to source materials and products personally. He worked with a local building supplier who urged him to source the materials from a manufacturer that was new to the area. However, upon arrival, the supplied products were clearly of inferior quality. After the original manufacturer replaced all of the items, numerous revisions were still needed, and ultimately it became clear that the manufacturer’s product could not be made to conform to the requirements of the project. 

Many of the takeaways from the resulting litigation can apply to anyone contemplating entering into a contract. 

Review All Contracts

Before you sign any contract, you should have an attorney review it and advise you of your rights and obligations. An attorney may also be able to help you negotiate more favorable terms. Once a dispute arises, you should also consult an attorney as soon as possible about how to handle the matter.

Know Your Options and Remedies in the Event of a Dispute

Many contracts contain clauses that limit your options and remedies if a conflict arises. These may include controlling the jurisdiction where the case is brought and limiting monetary damages or alternative remedies. For example, in the construction case, the defendant-manufacturer had a mandatory arbitration clause in its contract. The client was also required to attempt to remediate the supplied products, even though it was apparent that the products were inferior and would not meet the specifications even with remediation.

Understand the Contracts of Related Parties that May Affect Yours

The construction case involved third-party supplier contracts. The client was working with a local building supply company which was then contracting directly with third-party suppliers. This created a situation where parties lacked privity of contract, meaning that the client was not a party to the contract between the building supply company and the third-party supplier. As a result, the rights and obligations between the client and third-party supplier were different because they did not contract with each other. This can also lead to issues where the contracting parties have competing claims.

The problems this type of situation can cause is another reason why it is important to examine your contracts thoroughly and to the extent possible, review contracts for the related transactions as well.

Keep Track of Damages

It is important to retain all evidence of any damages you suffered, even those that may not be obvious. For example, you may have actual damages, including the money you paid under the contract, remediation costs to fix the problem, and replacement product costs.

You may also have consequential damages, such as lost income. In the construction case, the client intended to rent out the completed property but was unable to do so given the condition of the property with the inferior products. The required remediation efforts resulted in both lost time and income, not to mention unnecessary stress and aggravation.

Proving Your Case in Litigation

If your dispute goes to litigation, you will need to present evidence. Generally, this falls into two categories:

  • Documentation. In any transaction, keep all documentation in case you do need to litigate. This includes copies of all invoices, contracts, and communications. When possible, communicate in writing or memorialize conversations in writing as soon as possible after the conversation. Having this information will help craft the narrative of the case and can be useful in rebutting arguments made by the other parties.
  • Expert witnesses. You may need an expert to provide a report or testimony supporting your position and/or losses. The expert will need to review your documentation and any other relevant evidence. This can include physical inspections of the property, analysis of the original specifications for the products or project, performance testing, and assessment of alternatives.

Be Proactive

It’s always best to avoid a dispute when possible. A well-drafted contract can protect your rights and provide remedies in the event of a breach.

Our firm has extensive experience advising clients on contracts and handling disputes involving a wide range of issues. If you are considering entering into a contract or having problems with an existing agreement, contact us today to learn how we can help you with your matter.

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