After much disagreement, the Owner, Designer, Insurer(s), and Contractor(s) have agreed to resolve their differences through a settlement. Do these things to help avoid future angst:
Written: All settlements should be written. A settlement is a new contract among the parties, so treat it as such. Besides, memories are fading faster than ever as we use more electronic media.
Essential Terms: Warranty, Indemnity, Confidentiality (detail all duties that end vs. those that continue).
Essential Documents: Don’t just reference other essential documents; attach them to the written settlement agreement (e.g., final lien/claim release, final change order, and/or tax forms).
Payment: Timing and Method. (If there will be damages for delay of settlement payment, consider adding a liquidated damages clause. Will payment be by wire transfer, physical check, credit, other?)
Enforcement: Include a liquidated damages provision if damages will come from delayed payment. And, since it’s a new contract, will you have to file another lawsuit to enforce the agreement? If so, consider a consent judgment where all parties pre-agree that if the terms are not met, a Court can efficiently and expeditiously enforce.
Closeout: Detail how, who, and when other issues will be closed (e.g., dismissal of all litigation or completion of outstanding work).
Keep a Pass-Thru Claim Burning, Don’t Extinguish Liability
Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with government?
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
Are We There Yet?
Next time you close a deal, get the essential terms on paper and signed by all parties before it’s Miller Time.
