Contracts to build, add to, or remodel homes frequently lead to construction disputes. This is often because the contractor agreement for a project wasn't clear enough. (See Contractor Agreements for more information on drafting clear agreements.)
Types of Disputes
A few different areas of dispute arise in these situations:
An owner may object to the quality of workmanship, either by the general contractor or by a subcontractor hired by the general contractor, or to the quality of materials used. It will be much easier to resolve this kind of dispute if the contractor agreement is very clear in specifying what materials to use and how the project is to be done. If the construction contract is vague, and says something like, "good quality materials," the owner may find that his or her idea of good quality is not the same as the contractor's and it will be very difficult to prove what the contract meant.
If the contractor agreement specified an approximate time for the completion of the project, the general contractor negligently failed to complete the project on time, and the owner suffered damages because of the delay, the owner may claim compensation. An amount of damages can be agreed upon at the time the contractor agreement is signed to cover this kind of breach on the part of the contractor. (This is called liquidated damages.)
A contractor may cause damage to the property while doing the project that isn't covered by the contractor's insurance. This is why it's important to make sure the general contractor has up-to-date liability insurance.
Type of Claim
When an owner brings a lawsuit or other claim for breach of a construction contract there are two different ways of determining construction contract damages. The first, and most common, is that the owner can recover the amount of money it will take to repair defects or make the structure conform to the original plans and specifications for work and materials. In other words, the owner recovers damages in an amount needed to fix the home and make it the way it was supposed to be under the contractor agreement.
There's an exception to this rule, however. If the contractor can prove that to tear out work and repair defects would be unreasonable economic waste, the owner's damages are calculated another way. In that situation the owner is entitled to recover the difference in the value of the property as it exists and the value it would have had if the work had been done properly.
Alternative Dispute Resolution Several states have dispute resolution programs for conflicts between owners and licensed contractors. Some states also have funds available to compensate owners who have been injured by contractors. Contact your state's licensing agency to see if your state has such a program.
You may want to include a provision for resolving disputes in your contractor agreement at the beginning of the project. For example, you can require that disputes be resolved in arbitration, which is usually faster and less costly than litigation.
Using an Attorney
If you think you have a legal dispute with a contractor, consult an experienced construction litigation attorney about your case as soon as possible.