Many construction firms and industry professionals invest a lot of effort in navigating contract negotiations as effectively as possible. They look for ways to mitigate the risk that comes with taking on a new client. The dangers include the risk of a client not paying for the work performed or taking issue with the work done on the project.
Establishing clear standards for paying for the work provided and also clarifying the client’s expectations regarding the timeline and the finishing touches on the construction work is crucial for organizational protection. Having the right professional support is also important.
Successful construction professionals and businesses often outsource some of the labor performed for clients to subcontractors. Hiring outside professionals can be more cost-effective than keeping a variety of skilled professionals on staff. Unfortunately, using subcontractors might lead to a scenario in which a client might take legal action against the construction firm. How can working with subcontractors influence the risk of construction litigation?
The possibility of substandard work
Contractors do not all adhere to the same professional standards. Some people are likely to cut corners on certain types of work. If a client takes issue with the finished product, they might initiate a construction defect claim against the construction firm they hired, not the subcontractor who did the specific work. Particularly when the construction firm does not micromanage the work of subcontractors, issues with the work performed might go unnoticed until a client expresses their disappointment. Litigation might lead to financial setbacks or even requirements to redo certain elements of the work.
The risk of construction liens
The law allows anyone involved in work on real property to potentially request a construction lien in civil court for delayed payment. If a contractor or material provider does not receive payment in full from a construction company, they may take legal action against the property owner rather than the organization that hired them. Some subcontractors might even try to secure a lien when they didn’t receive payment because they did a poor job that did not meet contractual standards. A client could then take legal action against the construction firm because of the actions of the subcontractor that the company hired.
It may be necessary to address both performance standards and construction liens, as well as payment disputes, in a contract with a subcontractor. Being more thorough in those written agreements can help prevent construction litigation in many cases. Organizations may also need to prepare to go to court to resolve disputes related to a subcontractor’s performance or legal actions if less contentious approaches fail.