By: Brian P. Deeb
Over the years, I've compiled a list of statements from clients and friends in the industry which are the type of statements that make most lawyers wince and make some lawyers rub their hands together with a sense of joy because they know litigation is about to follow (I'm not one of those - by the way). The list of my ten favorites are as follows:
1. "COULD YOU REVIEW THIS CONTRACT THAT I'VE JUST SIGNED?" This one happens to me too many times. The commentary almost goes without saying. Remember to get contracts reviewed BEFORE you sign them and not after you've already signed it and sent it off. There are many nuances in today's contracts, even in the widely accepted forms used today, that bear explanation and may affect your price or even your decision to do the job. Check it out FIRST.
2. "WE JUST USE AIA DOCUMENTS" Form contracts are used often in the construction industry. Many of the form contracts, including the AIA contracts, have been time-tested over many years and serves a good and useful purpose between contracting parties on certain types of projects. But it is a rare instance when the form itself covers all of the particulars of the project or all of the terms and conditions governing the parties' responsibilities, the payment terms, the remedies for default, etc. Again, have these contracts checked out BEFORE they are signed, so that if amendments, clarifications or addenda need to be added, they can be prior to the commencement of the project.
3. "I DON'T KNOW - MY ASSISTANT TAKES CARE OF THAT" Many businesses have key personnel that are charged with the responsibility of lien notices, billing, receivables and other assorted administrative tasks. There is no substitute, however, for business owners remaining fully advised, at all times, in all aspects of the construction project paperwork. This includes time deadlines for notices all the way to understanding the contractual relationship of all parties to the process. It's what you don't know that usually results in litigation.
4. "I SIGNED IT BECAUSE IT WAS THE ONLY WAY TO GET THE JOB" This is another one that happens too often. There are many contractual provisions out there that, if understood, would make it clear that you are better off walking away than taking the job under the proposed terms. The time to know and understand such terms is prior to signing the contract, not when the problem arises - which usually happens when they point to the term that you shouldn't have agreed to in the first place.
5. "NO, I DIDN'T GET A WRITTEN CHANGE ORDER BECAUSE THEY NEEDED IT DONE IMMEDIATELY" You must be very careful with written change order requirements. Parties that insist on strict written change order requirements have to be willing to live with the delays caused by complying with such requirements. Therefore, how far these requirements go must be negotiated at the outset so that if a contract says "NO extra work is done until a written change order is procured" then such a term is understood by all parties, including the consequences of such a term.
6. "WELL, THAT'S WHO THEY TOLD ME OWNED THE PROPERTY" This one comes up when someone finds out that they named the wrong entity in a Claim of Lien or served a "Notice to Owner" on the wrong party. There are certain accepted and acceptable statutory sources of information for notices (ie. Notice of Commencement or, in some instances, the Uniform Building Permit Application). However, something that your customer "told" you regarding the ownership of the property is NOT an accepted source of information for you to rely on in complying with notice or lien requirement.
7. "I PULLED THE PERMIT FOR HIM......" Can't emphasize enough the dangers of pulling a permit for an unlicensed contractor. The penalties and liabilities created are enormous, ranging from administrative, civil and criminal. In short, DON'T DO IT!!
8. "I THOUGHT IT WAS 90 DAYS FROM THE DATE PAYMENT WAS DUE......." This, for some reason, is a common misconception regarding the deadline for the filing and recording of a Claim of Lien. The time period is 90 days from the date of the last furnishing of materials or labor under the contract. This does not include warranty or punch list work to repair already completed items. The date payment is due is irrelevant to this particular time standard. Be care of this deadline - it is "jurisdictional", which means that if it is late - it is too late and there is nothing the Court can do to "revive" an invalid lien that has not been timely recorded.
9. "I HAD TO PAY THE GUY USING THE DRAW FROM ANOTHER JOB" This is another area which sometimes gets people in a tremendous amount of trouble. Taking draw money and leaving unpaid suppliers and subs on one job, in order to pay others from another job, could result in civil AND CRIMINAL penalties for improper disbursement of construction funds. There are dangerous statutes out there with dangerous penalties. As I said in paragraph 7 above, DON'T DO IT!!
10. "NO - I DIDN'T FILE A LIEN, THEY TOLD ME I'D GET PAID" Many of you have had this experience before, so this one is directed to the ones who have not learned this one the hard way. Promise of payment is no defense to filing a timely Claim of Lien - so to agree to hold off is to eliminate the one statutory security you have for payment.
There are many more on this list, but I thought I'd just highlight the top ten. Maybe Volume II of this list will have to appear in a future issue - but I hope not.