There is always room for something to go wrong. That’s the nature of this industry. It could be something you or your crew does, something one of your subcontractors does, or something the client does. It does not matter how it gets started, when things go really wrong, they often end up in mediation, arbitration or worse. For this reason, it is important to have a good attorney on your team. Some one who knows you, your commitment to excellence, and your basic business practices.
Hiring a random attorney from the yellow pages is not a good idea. As much as I expect my word of mouth advertising to get me my next job, I listen to the opinions of friends, family, and professional contacts as they relate to attorneys and other professional contacts. From here, I conduct interviews and ultimately decide on my attorney. As long as they perform well for you, consider staying with the same attorney for the long term. The longer you build your relationship, the easier it will be for them to defend your position should that become necessary.
Of course, the ultimate goal is that you never have to use your attorney to defend you. In line with that, the best way to avoid lawsuits and arbitration is to have a solid contract between you and your client and/or subcontractors. Your contract should spell out all of the details of the job leaving little or no room for interpretation. That said, it is all but impossible to think of everything ahead of time and there is always room for a wiggly client or subcontractor to get past your contract. Do your best to tighten up any holes by working with your attorney.
Personally, I think most people are honest; however, some are not. The biggest disappointment I have seen in the construction industry is the pointing of fingers and pushing the responsibility onto someone else. As the general contractor, that finger usually ends up pointed at you. Sometimes a client or subcontractor is responsible for damage but will find a way to wiggle out of that responsibility. This is where the attorney comes in.
The first thing your attorney will ask for is any and all written correspondence between you and the other party. This is the best way to protect yourself from the start: write everything down. In Working with Clients I suggest weekly meetings and forms that summarize everything discussed in those meetings. This is a great way to document your correspondence with the client. If a subcontractor is involved in those meetings, they too should receive a copy of the form. This begins to build a paper trail that supports your position.
The use of email is also very powerful. Conversations in this medium are automatically time and date stamped and you can request the recipient send you a confirmed receipt upon the delivery of your message. This is helpful when things start to go sour between you. You will either receive the receipt or you can contact your client or subcontractor again and request them to send the receipt. If they refuse, that is cause for concern; however, if they respond to the email, even without the receipt, it will show the time and date of delivery of the original message which can also act as a delivery confirmation.
Because you are acting professionally and responsibly, you will have a consistent paper trail that reveals your consistent position from the start. This is invaluable when debunking someone’s false accusations. Couple this paper trail with your solid and clear contracts, and it will be hard for anyone to challenge your position. That does not means they won’t try though.
Once you are involved in an arbitration, mediation, or full blown lawsuit, it is too late to start creating a clear record of what happened. Because you cannot know what someone may sue you for, you must keep solid records of everything that relates to your job. Because of this, I suggest you put together a team to help you stay focused. The team that you gather to run your company must be professional and thorough. With your books in order, your communication documented, your insurance papers in order, your contracts tight, and your meeting notes delivered weekly, you will be prepared to respond to any attempted suit. In fact, such documentation can sometimes help a potential plaintiff see the truth of the situation before you spend any money on attorney fees.
Make no mistake about it, attorneys, especially good ones, are expensive. You need to consider this cost in your overhead even if no lawsuit is on the horizon. Build your nest egg on each job so that when you need to hire your attorney, you will have the funds to do so. If you win the case, you will be compensated by the losing party and, in most cases, they will be required to pay your attorney fees as well. If you lose, you will have to compensate the winning party so building that nest egg is important. A typical arbitration can cost you upwards of $10,000 in fees for your portion only. Imagine that doubled and you can see why building the nest egg is important. This is why contractors charge profit and overhead. They are not the same thing and should never be considered interchangeable.
As a contractor, you may find yourself dealing with an absolutely lousy client or subcontractor. It may not go to arbitration or mediation, but the headaches will be endless. Be sure to listen to your “gut feeling” when you first meet a potential client or subcontractor. This will help you avoid a large number of potential problems. When you do end up with a terrible client or subcontractor, you only have a few options to work with.
The first and most important option is to enforce your contract. If your client or subcontractor is not paying on time or is not upholding their end of the deal in some way, you have the right to step away from the contract and cancel your business relationship (as long as you remembered to put that clause in your contract). In a contract with a client, you will lose the profit and overhead that the job would have provided; however, staying in a contract with a terrible client is a losing proposition and you will probably never receive the profit and overhead anyway. In fact, you will more likely overwork yourself just trying to scrape something out of the contract. Get out while you can and don’t look back.
Another option is to address the situation and make changes to the relationship as a result of new conditions. This would be an addendum to the original contract and would require agreement by both parties. Perhaps the client is willing to acknowledge that they have been slowing down the job by visiting the site during working hours. In this situation, you can enforce an addendum that required the client to stay off the jobsite during working hours, without exception. Other addendums can be created to address specific conditions.
Another option, and I’m sure there are others not addressed here, is to simply tough it out. Hold a firm line that is supported by your contract and just get the job done quickly and professionally. You may not get the referral you want, but bearing down and persevering may be the easiest and fastest way out of an uncomfortable situation. Be sure to stay on track with your contract and document everything as you complete the job. This is usually a good choice when you are close to the end of the job and where you wouldn’t have to work under bad conditions for much longer.
No one wants to end up in a lousy client or subcontractor relationship. Furthermore, no one wants to go to court; however, it does happen from time to time in the construction industry. Protect yourself by keeping solid records and document your communication. If you track your jobs the way I suggest and keep tight records, any attempt to unfairly accuse you of wrong doing will fall away quickly. Should you not be able to wash away attempted lawsuits with your records, be sure to have a strong attorney on your team who knows you, your business, and the level of commitment you have to professionalism and quality. If the attorney knows you are in the right, they will be able to passionately defend you. Plan for the worst, be financially prepared for the worst, and get the best outcome as a result.