January 23, 2012

Litigation-avoiding Behaviour

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Issues arise with every construction.  But what separates the projects that complete successfully from those mired in litigation?  Whether it is early intervention to nip catastrophe in the bud or proactive management before problems arise, there are some easy guidelines you can follow to minimize risk.

  1. The parties should agree. As irresponsible as it sounds, people regularly commit to projects without knowing what is expected of them or what they expect themselves.  The traditional way to record obligations owed to each party is by contract.  You may question whether a contract is necessary for your project, but ask yourself some specific questions: when it comes to scope of work, scheduling, interruptions, payment schedules, changes, or substantial and final completion, what does my contractor / supplier / owner expect, and what am I expecting?  The contract lays out expectations from what should to be done, to what happens when things are not done.  While no two projects are exactly alike, standard form documents have evolved that can reasonably apply to most situations. Though they may be standard, these documents still have to be carefully reviewed. Many clauses seem tedious, but all are there for a reason.  If you do not understand a provision, make sure it is clarified to your satisfaction.  Ask your lawyer to review and discuss the document with you to determine whether it accurately reflects what you believe you have agreed to do. This will avoid having to explain later that you did not appreciate what you had contracted to do.

  2. If the project starts to derail, communicate how to get things back on track.  Resolving problems sooner rather than later will prevent them from mounting, creating adverse relationships along the way.  If possible, schedule a face-to-face meeting of individuals who can speak to specifics of the incident, the bigger picture, and the options to move forward. Keep in mind that communications should not be stalled pending the meeting; impacts are most often minimized when the responsible party can correct the issue quickly.  Often a creative change can resolve the issue, but when it cannot, try to stay objective and focus on what should be considered a business problem that usually only involves dollars.  Unless your specific circumstances dictate, try not to approach the problem as a moral issue as it rarely leads to a practical resolution.  Responses focused on options for remedy are generally more productive than those seeking to lay blame, and again expectations (including impacts on costs, timing, and the end product) should be clearly communicated.  Be open-minded to creative solutions and avoid unnecessary rigidity.  Formalize contract changes with a view to sign off on all impacts of the change.  Evaluate whether you are better served by reasonably contributing to an unforeseen expense or maintaining a firm position that can grind progress to a halt.

  3. Expect the unexpected.  Insist on insurance.  Agree upfront to mediation.  To the extent possible, try to have a contingency plan: What happens if delay takes us into winter?  What happens if non-completion by another trade frustrates when work can proceed?  Try to plan for the worst but, if flexibility is not an option, ensure that everyone recognizes the impact of the issue from the earliest possible moment.  Again, open communication lines facilitate opportunities to work through an issue or to best minimize losses. 

  4. Get help early.  If you have a construction issue, you’ll need an engineer. But if you have a legal issue, you’ll need a lawyer familiar with construction.  Understanding competing rights and obligations is critical to determining whether options and strategies are reasonable and do not create more issues than they resolve.  Beyond legal fees, the full costs of litigation include delay to the project or payment, reassignment of resources to tasks which do not generate income, injury to reputation, and diminished ability to secure bonding and other projects.  Early retention of professional assistance can be an investment as much as a cost.

Litigation is frequently unavoidable, but should always remain your last alternative.  Keep expectations clear and communications open, keep an open mind to reasonable solutions and engage help from an early stage.  If legal action cannot be avoided, in many cases the fallout can be managed and overall impacts minimized.  Contrary to what some may complain, at the end of the day, most people are simply trying to figure out how to get the job done.

For more information contact author Richard Gosse or a member of our construction team.

Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.