Resolving construction contract disputes

Whether people are hiring a company to build a home, a commercial building or to do a remodel project, it is important to have the proper paperwork to memorialize the construction agreement. Individuals and businesses in Louisiana will enter into a contract with a construction company or contractor to help protect and enforce the agreement. However, it is important to consider the terms and information included in a construction contract, when it comes to avoiding construction contract disputes.

Because standard form construction contracts are readily available and less expensive to obtain, more and more contractor turn to these commercially available contracts to form agreements with their customers. While these contracts can work well and provide the basic necessary information needed in these types of agreements, the provisions of the form contract may not meet all the needs of the parties involved and could include terms the parties overlook or do not understand.

While a form contract will likely address key information, such as the scope of the work, time of completion, who will perform what work, costs, who will pay for the work and when payments will be made, it may also include provisions that provide indemnity, insurance or consequential damages. Additionally, these form contracts frequently provide a method to resolve construction contract disputes.

Dispute resolution provisions are often included in these form contracts, and most use a three-tiered approach. The first tier involves the parties attempting to resolve the dispute on their own and in good faith. If that fails, the parties move to the second tier approach, which is commonly mediation. Lastly, if mediation does not work, parties will turn to litigation nor some variation of arbitration to resolve the dispute.

While this three-tiered approach could be an effective method to resolve a construction dispute, this is not always the best approach for certain disputes. Because of that, parties to a construction contract should consider terms and provisions in a construction contract before signing because they could greatly impact how the parties are able to reach a resolution if a dispute arises.

Source: Wenatcheeworld.com, “Construction contract dispute resolution: One size does not fit all,” H. Lee Lewis, March 3, 2016