Whether you are a project owner,
contractor, subcontractor, supplier, design professional or engineer in the
construction industry, you expect to get paid for your work. What happens when
there is a dispute or you do not get paid? You can pursue litigation, but before taking your claim to court, there
are many factors to consider.
Q: I finished constructing a homeowner’s porch and received no complaints – and
no payment. Won’t the court automatically rule in my favor and make the
homeowner pay me?
The law does not automatically award damages to the filing party if another
breaches a contract, even if the breach is intentional. In more complicated
cases, “legally recoverable damages” may not be enough to make you “whole”
again. If, for example, the homeowner has no money, you may not be able to
recover what is owed to you, even if you are in the right.
I’m a subcontractor. If a project owner or company fails to pay me and I
sue, can I expect to get paid if I win my lawsuit?
Not necessarily. Project owners and companies often protect themselves against
any form of liability. They may put property in trust or in the name of a
limited liability company. For example, if you agree to do subcontract work on
a building owned by a limited liability company, that company may purposely
operate with minimal assets to avoid being forced by a court to pay you.
Q: A small company hired me to remodel its office space. Before I was
completely finished, the company went out of business. I want to get paid for
time and materials. Should I sue?
A: You must fully satisfy the contractual
duties in the project. You may also be legally responsible for other parties
such as a subcontractor, so make sure those parties also complied with the
terms of the construction project. If not, you may not win your suit. Even if
you have been wronged, anything you may have done wrong will affect the outcome
of your suit.
Q: How do I know whether or not I should sue?
A: Ask yourself why you want to pursue your
case. Is it a business decision, or do you feel you have to stand up and make a
point in the industry? Also, you must determine whether enough money is in
dispute to make it worth paying your lawyer to pursue litigation. Will the potential
award outweigh the emotional burdens and resources spent on litigation and a
possible wait of one or more years for a trial verdict or settlement?
Q: How can I prove my case?
A: Consider these questions: Is there documentation
to back up your story? Are witnesses available who will testify in your favor? Do
you know who and where all of the potential defendants are? What causes of
action can you pursue in court? Even if you are sure you have been wronged, you
still have to prove your claims before you can recover any damages through the
Q: Could I be risking my business if I sue?
A: If you intend to have a future business
relationship with the potential business(es) you want to sue, ask yourself if
it’s worth risking future loss of business for this one lawsuit. You may also be risking future business from affiliates
of the business you want to sue.
Q: Is there an alternative to bringing suit?
A: Arbitration and mediation are two forms
of dispute resolution to consider in place of litigation. Check your construction
contract. Some contracts require the parties to pursue mediation or arbitration
before any suit can be filed.
Mediation is a voluntary dispute
resolution process, meaning all participants must consent and work toward a
mutually agreeable resolution. Mediation is not binding.
In arbitration, a neutral party (i.e.,
the arbitrator) hears a dispute between the parties, and after considering all
relevant information renders a final decision in favor of one of the parties.
Arbitration decisions may be either binding or non-binding.
Q: Do I need an attorney?
A: When considering whether or not to
sue, you should know as much as you can so you can make the best decisions, and
protect and defend your rights. It is a good idea to contact an attorney who
has knowledge of and experience in construction law matters.
This “Law You Can Use” consumer information column was provided by the
Ohio State Bar Association. It was prepared by Andrew L. Smith, a senior associate
attorney in the Cincinnati office of Smith, Rolfes & Skavdahl Company, LPA.
Articles appearing in this column are intended to provide broad, general
information about the law. Before applying this information to a specific legal
problem, readers are urged to seek advice from an attorney.
Labels: construction, construction industry, contractor, design professional, engineer, subcontractor