Construction laws include all aspects of building, from the initial bidding process to the negotiation and drafting of construction contracts. Construction law is also used to resolve disputes between the parties to a construction contract.
What are Bids for Construction Projects?
Bids are different offers that contractors provide outlining how much it will cost to complete a project. Typically, an owner receives offers from contractors through a Request for Proposal (RFP) or a Request for Qualifications (RFQ).
A contractor typically publishes the RFP or RFQ during the design phase of a project, and includes specifications of what the owner wants. After the owner chooses a contractor, that contractor will advise on pre-construction matters during the design phase.
What is Negotiation of the Construction Contract?
The negotiation of the construction contract occurs prior to the beginning of construction. At a specific time, such as the end of the design phase, the contractor will offer a contract price for the construction of the project. After the negotiations, the owner and contractor will be able to agree on a price and the contractor will continue construction. If an owner and contractor do not agree on a price, the owner may negotiate with other contractors.
What are Construction Contracts?
On occasion, a contractor and an owner will use a form contract for their agreement to construct a project in exchange for payment. The contract can either be a contract the parties draft on their own or it can be a form contract. No matter which type is used, the following clauses will typically appear in a construction contract:
- Changed conditions clause;
- Termination for convenience clause;
- Termination for convenience clause; and
- Site investigation clause.
A changed conditions clause is used to shift the risk of loss or delay from the contractor to the owner. This clause applies when a contractor encounters unforeseen conditions.
A termination for convenience clause applies if a project becomes extremely difficult, dangerous, or expensive. If any of those conditions apply, the owner may stop the project and rescind a construction contract without being liable for damages.
A site investigation clause requires a contractor to investigate the site. This is done in order to prevent a contractor from arguing that the conditions of the site are different than what the contractor expected.
What are the Duties between the Contractor and Owner?
The law implies duties between a contractor and an owner when they enter into a construction agreement even if the contract does not explicitly state the duties. Courts have held that both a contractor and an owner have duties related to the construction. Essentially, the parties are required to act in good faith in the performance of their contractual obligations.
A contractor owes an owner a duty to perform their services in an appropriate workmanlike manner. Pursuant to this duty, the contractor is required to warn the owner if a design or construction specification may have damaging results.
An owner has a duty to cooperate with a contractor. This duty requires the owner not to interfere with or purposefully delay a contractor’s performance.
When Can I Sue a Contractor?
When an individual is hiring a contractor, such as for a home repair, they typically sign a legal contract that specifies the terms of the agreement. This usually includes work that is to be completed, the amount that the owner will pay for the work, and a time frame in which the work should be completed.
Lawsuits filed against contractors commonly occur when a contractor fails to follow the contract that was agreed upon by the owner and contractor. Examples may include the contractor missing a deadline or failing to perform all of the work required.
Other grounds for lawsuits against a contractor may include:
- A contractor completes a job in an unsatisfactory manner;
- A contractor completes the job but the work violates safety standards;
- A contractor took advantage of a homeowner, which may include accepting a deposit or payment but then failing to complete the agreed upon work; or
- A contractor that overcharges, which may lead to a breach of contract claim.
If a homeowner enters into a contract with a contractor that fails to meet their obligations, or performs subpar work, they may have a legal claim against the contractor. A lawsuit filed by a homeowner against a contractor is filed in civil court.
What Types of Legal Claims Can be Filed Against a Contractor?
Once a homeowner determines they will file a lawsuit against a contractor, they must determine what grounds they have for their legal claim. It is always best to consult an attorney who can advise which claim is likely to be successful. The most common grounds include:
- A breach of contract claim;
- A fraud claim; or
- A defective construction work claim.
A breach of contract claim is available when one party fails to follow through with their obligations under a contract. A breach may occur when a party has not delivered in the specified time frame or if a party fails to perform at all.
A contractor can be found liable for breach of contract in the following situations:
- The project is not started;
- Deadlines are missed;
- The project is partially completed; or
- The contractor fails to utilize construction materials that were previously agreed upon in the contract.
There are four main categories of breach of contract, including:
- A minor breach;
- A material breach;
- A fundamental breach; or
- An anticipatory breach.
A minor breach occurs when a party fails to perform part of the contract, but is not in violation of the entire contract. This type of breach may also be referred to as an impartial breach.
A material breach occurs when a breach is so substantial that it impairs the whole contract. Additionally, the core purpose of the agreement must be rendered completely defeated by the breach in order to be a material breach. This type of breach is also known as a total breach.
A fundamental breach is similar to a material breach. A fundamental breach, however, is considered more egregious than a material breach.
An anticipatory breach occurs when one party notifies the other that they will be unable to fulfill the terms of the contract. This type of breach may also be referred to as anticipatory repudiation.
A breach of contract claim typically allows a homeowner to recover damages, which may include a refund of payments made to the contractor. A homeowner may also be awarded the difference in cost of hiring a new contractor to complete the contract.
A contract fraud claim occurs when one party knowingly makes a false claim with the intent to trick or deceive the other party into signing a contract. A homeowner may also sue a contractor for fraud if the contractor told the homeowner that the completed project would look a certain way, but the result is vastly different. Another example may be if the contractor promises only to use high grade materials but then uses less costly or lower quality materials after accepting payment.
A defective construction work claim includes construction defects which lessen the value of a home. These may include:
- A design deficiency such as a roof not being built to code, which may result in water intrusion or inadequate support;
- A material deficiency such as inferior sheetrock in damp areas;
- A construction deficiency that results from poor workmanship, including plumbing or electrical issues; or
- A subsurface deficiency such as a home being built on hills or other unstable conditions.
Should I Consult an Attorney Experienced in Construction Law?
Yes, it is essential to have the help of an experienced real estate lawyer for any construction law issues. Construction contract negotiations are often complex and difficult. An attorney can assist you with contract negotiations so your needs and requirements are met.
Your attorney can assist you with drafting a construction contract, explain your duties under the contract, and ensure your rights are protected. An attorney can also represent you in the event that a dispute arises and during any court proceedings, if necessary.