Contractors: Your Blueprint to Avoid Being Sued

Like most people, contractors don’t like being in a lawsuit as a plaintiff or as a defendant.  Here are a few suggestions on how to avoid litigation if you’re in the construction industry.

  1. Contracts are kinda important. If you have a contract read it–all of it–before you sign it.  Don’t read it after a problem has arisen and you’re trying to find your responsibilities under the contract. Arkansas law provides that if you sign a contract , then you’re deemed to have read and understood the language.  Carmichael v. Nationwide Life Insurance Company, 305 Ark. 549, 810 S.W.2d 39 (1991).
  2. There are many pitfalls in construction contracts. Are you required to provide project safety or safety training on site? Are you required to ensure that your subs have added the other party as an additional insured on their insurance policy? Are you required to obtain a waiver of subrogation from your insurance carrier? Does the contract state that you accept the terms of the contract by commencing work even if you haven’t signed the contract? Does the contract require you to perform engineering services even though you’re not a licensed contractor?

    If something is vague, get it cleared up before the problem arises. The only time to ask for changes to the contract is before you sign it.

  3. Read all of the bidding documents. Never bid on a job without reading all of the documents. Typically, a contract will include a copy of documents and incorporate them by reference or will simply refer to and incorporate unattached documents.  As above, you’re deemed to have read it and agreed to it if you sign on the line. Don’t think you can argue that you didn’t have access to all of the documents. If they are listed or referred to in the contract and you sign it, then you’re bound by the terms of such documents.

  4. Consult a lawyer before you have to. You're probably not saving the money you think you are by not consulting an attorney prior to signing a contract. If you’re dealing with an owner/general contractor from another state there will probably be an issue regarding a choice of law clause (which state law applies to interpretation of the contract). Don’t be fooled–Texas law isn’t the same as Arkansas law. You can save some money and problems by negotiating the terms of a contract after its reviewed by your attorney to avoid a problem rather than trying to solve a problem later. Indemnification and insurance provisions vary significantly and could require you to indemnify the other party even if it is solely at fault.
  5. If a problem arises, consult an attorney before the problem gets out of control. Many times your lawyer can perform crisis control and give you advice to limit the problem by reaching a solution short of litigation.

  6. Put stuff in writing. The written word is a record of an agreement which is more precise, and better remembered than the spoken word. Make your best effort to get written acknowledgment from the other party if there has been a change from the plans before doing the work. An email will probably suffice if the other party confirms that the work you will be doing is a changed condition (change order).  Remember, after you’ve done the work you have no leverage. Oh yeah, take photos of all work that is a change from the original plans and specs.

  7. Take photographs of everything. Hey, film is free now! Take advantage and photograph the project at regular intervals as each stage of work is completed. Always take dated photos of any locations where a potential problem is pointed out before and after any repair. This will limit any exaggeration of a condition that is inaccessible now. The person with the best photos and documentation has the best chance of avoiding and/or winning litigation. Don’t forget to keep the photos in your project file for later use. A date stamp on a photo can be the best proof as to when a project was substantially completed, which is important as to application of the Arkansas Statute of Repose ACA Section 16-56-112.

  8. Don’t try to provide services you’re not qualified to perform. Perhaps during the project there is a problem with the architectural or engineering plans. The other party wants you to “make it work.”  In an effort to not delay the project you take on work which really isn’t within your abilities. You try, it doesn’t work and you get sued. The other party says you should have requested an engineer to advise as to possible solutions and you weren’t qualified to do the work. Don’t go there. 
  9. Even if you do all of these things, you can still get sued. But by following these suggestions you can reduce exposure to litigation.