Conquering Construction Contract Disputes: Strategies for Construction Attorneys to Consider

Wed, Apr 3rd, 2024 | by Miles Mediation and Arbitration | Article | Social Share

John looked at Sandra across the table, with passion in his eyes: “So your answer is, yes?!”
Sandra smiled as she gazed back at him, her face equally alive with excitement and resolve.

“I think we are going to do beautiful things together. I haven’t been able to stop dreaming about this since we met,” she replied. “After your stunning proposal, and all that you have shown me in these last few months, I am confident that you are the one for me, and that you will help me make all my dreams come true.”

An engagement scene from a chick flick? Or could it be a conversation about entering into a construction contract? At the beginning, the atmosphere around a construction project is not unlike a budding romantic relationship. Big dreams and plans are sketched out — and then put on paper. Owners, general contractors, subcontractors, and design professionals make long-term commitments made to work together. The expectations are often very high for all involved, as are the stakes.

As an attorney and longtime mediator of construction disputes, I’ve noticed numerous similarities between construction projects and romantic relationships. When disputes arise on the job, attorneys often end up serving as the equivalent of a marriage counselor for the parties involved. We frequently try to bring an objective, practical approach when passions are rising high. At our best, we function as problem-solvers who can help restore healthy communication and a spirit of collaboration to a volatile situation.

But on the flipside, if we are not careful, sometimes when we get involved in construction disputes, we may unwittingly pour gasoline on the few initial flames that have erupted. And the consequences can be costly.

With that in mind, here are the four most common non-technical, non-legal causes of construction disputes, along with some thoughts about how construction law attorneys can help their clients avoid them, instead of inadvertently making them worse:

Problem #1: “What We Have Here is a Failure to Communicate …”

Often when we are called in to help with a simmering dispute, step one is to trace through countless emails, texts, and other communications. Witnesses attempt to recount phone calls and reconstruct on-site meetings. Frequently, we notice that the communications trail off as the dispute comes to a head, and meaningful communications has ceased altogether by the time the client brings in the lawyer. Often, a client may demand that we “get their attention” by sending a letter threatening to terminate the agreement or to seek further legal relief.

Communications experts have observed that one of the most accurate predictors of divorce is when a couple ceases all meaningful communication. Similarly, in the construction context, poor communication is a bad thing, but zero communication is even worse. Questions go unanswered, and doubts begin to take root.

There are countless issues to communicate about on a construction project: payment, scheduling, staffing, conformity to plans and timetables, etc. A large percentage of disputes and lawsuits can be avoided when parties communicate clearly and thoughtfully about these issues as they arise. Open lines of communication can not only facilitate potential resolution; they can also provide documentation of a party’s good-faith efforts to comply with the contract and applicable laws.

Problem #2: “That’s Not What I Said!” Poor Recordkeeping and Accounting

Construction projects ideally have a paper trail (these days most likely a digital trail, on larger projects) of pay applications and payment receipts or transfer records, scope-of-work revisions, change orders, plans and specifications, and communications concerning disputed items or punch lists. However, many cases that I have worked on have involved disputes that arose due to inadequate, incomplete, or even misleading record-keeping.

Written records can help establish a more objective timeline of important events. What may be viewed initially as mere inaccuracies or incompleteness in these records may, combined with other circumstances, lead to an atmosphere of mistrust.

Emphasize the importance of clear, accurate record-keeping to your clients throughout the construction process to prevent mistrust from festering and growing.

Problem No. 3: “What I Really Wanted You to Do Was …” Divergent Expectations

The expectations and hopes at a wedding are stated in simple terms like “to love, honor, and cherish,” “in sickness and in health,” and “’til death do us part.” Similarly, the parties to a construction contract attempt to reduce their commitment to a writing, the words of which are designed to guide and govern their long-term relationship. Words such as “workmanlike manner,” “best efforts,” and “timely notice.”

These words are all attempts to record the expectations that each party has regarding the other’s performance. Unfortunately, there is only so much that can be proscribed and laid out in a finite written document. Drafters of construction contracts are often attempting to anticipate all reasonably foreseeable contingencies, while taking care not to over-regulate the relationship.

Early involvement of a problem-solving attorney can help mitigate against later conflicts due to divergent expectations. As attorneys, we can provide valuable guidance to our clients concerning the “must-have” provisions in a construction contract. We can help our clients identify what concerns are most important; ideally, lawyer and client both participate in the drafting process: the contractor or owner brings the necessary technical expertise. We then can craft an appropriate provision, with an eye on clarity and ease of administration, but paying attention to the relevant case law and statutes as well.

Problem No. 4: “How Do We Get Out of Here?” Divergent Approaches to Resolving Conflict

Finally, by the time litigation attorneys are typically brought into a construction dispute, often everyone is ready for World War III. Other times, a client may bring us in to help navigate a dispute amicably, but the other side does not seem to want to cooperate. Frequently, the parties are approaching conflict from radically different perspectives. They seem to have lost the ability to communicate, and it may be because they are no longer speaking the same language or operating on the same set of principles and assumptions.

Fortunately, attorneys have several tools to wage war or broker peace with honor. But no matter the strategy, having an awareness of our own conflict resolution styles and those of our clients can provide valuable resources for getting disputes resolved, where possible, and making litigation more pleasant and professional if necessary.

Here are four relational conflict resolution principles that we can use to help our clients navigate construction issues more efficiently.

Focus on the “big picture” and “don’t sweat the small stuff.” A construction project presents numerous opportunities for disagreement — each standard, specification, or invoice may be the subject of bitter contest. A line-by-line battle over 200 punch list items can be exhausting, expensive, and sometimes endless. We can help our clients focus on the goals and objectives that they had upon beginning the contract — usually, something along the lines of getting a project completed, getting what they paid for, or getting paid. Focusing on the big picture is more likely to lead to a cooperative resolution than trying to win every battle that one can, only to lose the war by paying the attorneys more than anyone recovers.
Accept that the parties have different perspectives, instead of seeing every disagreement as an epic battle of right (us!) versus wrong (them!). So much energy that is focused on who was “in the right” on a particular issue could be better spent thinking through creative solutions to a problem that seems insurmountable. Parties who can agree to disagree over details and focus on a forward-looking resolution inevitably spend less time, energy, and money on litigation.
Focus on what you ARE getting instead of what you are NOT getting. If one chooses to focus on the flaw — the disappointment, the standard or spec not met — one can lose sight of the substantial benefits that have been provided by the other party. Focusing on what has been done right not only keeps one in a more reasonable frame of mind. It also shows the other side that you can be reasonable and creates a better chance of working out a solution.
Cultivating a customer service mentality rather than “everyman for himself.” Help the client think through long-term objectives as well as the short-term issue on the table. Good contractors and developers know that they are in the game for the long haul, and word about how they treat their contractual partners will get around.

In sum, as construction attorneys, we should help clients navigate all the relational tensions and communication pitfalls.

We can do that by (a) listening closely to our clients, to better help them determine their objectives and decide whether they need a champion or a counselor, a warrior or a peacemaker; (b) communicating honestly and professionally with opposing counsel, maintaining objectivity where our clients may be struggling to do so due to their understandable emotional involvement; and (c) bringing a solution-oriented approach that is sensitive to the client’s bottom line. Often, we demonstrate our value when we simply step into the process on either side of a dispute and facilitate or reinstate communication that is all but dead.

Equipped with the factual background provided by our clients, a well-honed working knowledge of the applicable legal principles, and a better understanding of the ins and outs of relational styles and communication principles discussed herein, as lawyers we are uniquely positioned to help our construction clients realistically evaluate and choose different courses of action. And occasionally, we may have the privilege of helping a ship that was once headed way off course right itself, patch up the dings and leaks that it has weathered in a storm of conflict, and set sail back on track towards the destination intended by all its passengers from its launch. And that is a good feeling, no matter what the relational context.

** Originally published in the Daily Report and reprinted with permission.

About Chris Osborn

Chris Osborn has more than 20 years of litigation experience and extensive training as a mediator and collaborative lawyer. He is frequently sought out to help mediate complicated disputes involving real estate and construction contracts, construction defects, commercial contracts, employment discrimination, non-compete agreements, allegations of professional malpractice or breach of fiduciary duties, and contested wills and estates.