Construction Disputes and Damages

Contracts drafted 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

Different areas of dispute arise in the following situations:

• Poor workmanship or defective materials.

An owner may object to the quality of workmanship, either by the general contractor or subcontractor hired by the general contractor, or to the quality of materials used. It would be much easier to resolve this kind of dispute if the contractor agreement was clear in specifying the materials to use and how the project would be done. If the construction contract was vague, saying something like, “good quality materials,” the owner and contractor may diiffer on the idea of what is good quality, It will then be very difficult to prove what the contract meant.

• Failure to complete on time.

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. The amount of damages could 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.)

• Damage to the property.

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 to determe 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 how it was supposed to be under the contractor agreement.

However, there is an exception to this rule. If the contractor can prove that to tear out work and repair defects would be unreasonable economic waste, the owner’s damages are calculated differently. In that case, the owner is entitled to recover the difference in the value of the property as it exists and the value it would have been 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.

Case Studies: Construction Disputes and Damages

Case Study 1: Quality of Workmanship

John, the owner of a property, hired Sarah as the general contractor to remodel his home. However, upon inspection, John was dissatisfied with the quality of workmanship provided by both Sarah and Mark, a subcontractor hired by Sarah. The contractor agreement lacked clarity in specifying the materials to use and the project requirements.

Case Study 2: Project Delay and Damages

In this scenario, John entered into a contractor agreement with Sarah, which included an approximate completion time for the remodeling project. However, Sarah negligently failed to complete the project on time, causing significant inconvenience and financial losses for John. The contract did not have provisions for liquidated damages to compensate John for such delays, leading to a dispute between them.

Case Study 3: Property Damage and Insurance Coverage

During the construction project, Mark, the subcontractor, accidentally caused damage to John’s property that was not covered by Sarah’s insurance. This left John with the responsibility of repairing the damage and seeking compensation. The lack of proper insurance coverage by the subcontractor raised questions of liability and resulted in a dispute between John, Sarah, and Mark.