Construction Contract Disputes

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Thousands of Americans hire general contractors to build or renovate their homes every year. While any differences that arise can often be worked out between the parties, sometimes a real conflict arises between a construction contractor and a home owner. In such situations, what right does a homeowner have to seek redress in the court system? Whether or not a homeowner can resort to legal recourse is dependent on the situation.

Breach of Contract

As almost every arrangement between a contractor and homeowner is subject to written construction contract forms, a homeowner’s most likely legal option is to sue the contractor for a construction contract breach. In order to be successful, a homeowner must prove the following:

  • A valid, voluntary, and binding contract for construction work existed between the parties;
  • The contractor, through no fault of the homeowner, materially breached the construction contract; and
  • The contractor’s breach of the contract led the homeowner to incur damages for which the contractor should be liable.

Damages to Recover

It is essential to understand the difference between these two types of damages:

  • Compensatory damages are those which stem directly from the contractors breach of contract, such as the cost of repairing shoddy work or the cost of having the construction completed by a different contractor.
  • Consequential damages are those that are less-directly connected to the contractor’s actions, but encompass what the homeowner should have been able to reasonably expect had the contractor completed the construction satisfactorily, such as loss of rental income or higher financing expenses.

Tips on Drafting a Contract Agreement

  • Drafting a Contract that Protects the Homeowner : There are several clauses that homeowners should ensure are included in their construction contract agreement in order to maximize their chances of recovering damages in a case of breach of contract. Some of these clauses are:
  • Liquidated Damages Clause: Such a clause assesses a monetary penalty against the contractor for each day that the contract is not completed. This can help monetize consequential damages in case of a breach of contract.
  • “Time is of the essence” Clause: This clause allows a homeowner to recover damages, provided the property owner can demonstrate an accurate calculation of consequential damages, such as the loss of rental income.
  • Arbitration Clauses: Generally, a clause that mandates that the parties submit to arbitration in the case of a conflict is not in the best interests of the homeowner. If a contractor insists on putting an arbitration clause in the construction contract, the homeowner should seek to use an agreed-upon, impartial moderator.

Legal Help from a Contract Dispute Attorney

If you have been the victim of shoddy workmanship you should seek out a competent contract attorney to advise you of your rights. Don’t assume that you have no legal recourse based on the language of the contract, as contracts that allow a homeowner no right to recovery in cases of breach of contract may be held invalid by the court as unconscionable or against public policy. Hiring a lawyer can prove invaluable to your construction law cases. Gather your contract for constrution and contact a construction law attorney to help you with your case.

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