How to Avoid Construction Lawsuits and Disputes

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If you follow any construction businesses, contractors, or field service companies on social media, you're sure to turn up posts about payment disputes.

The client isn't paying up. The contractor went out of business before paying the plumbers. The subcontractor is saying they painted 200 rooms when they only painted 180.

In disputes, getting paid what you're owed—or avoiding having to pay for incomplete or subpar work—is all about documentation. We talked with construction lawyer Rebecca Morjaria, an Associate for Charles Russell Speechlys LLP, about how to protect yourself through detailed, accurate record-keeping.

Read also: Is your company winning tender contracts? 

Why should a contractor, such as an M&E business, take the time to keep documentation on jobs?

Keeping records is a cheap process if you do it as you're going along—but it can be very expensive down the line if you don't and lose track. When there's a dispute, if you don't have the documentation beforehand, you're in a position of needing to get, for example, witness statements from people rather than just saying, 'Here's the email to prove it.' Also, if you keep good records, you're not paying for a solicitor's time to dig through information because you already have it ready.

 

What if a business is too busy to bother with documenting every aspect of a construction job?

It's all about having the process in place. It might take you five minutes a day—but then it won't take you two weeks to get it all together if you get into trouble. And those two weeks are two more weeks of a situation that's already stressful.

 

How much risk is there for larger construction businesses if they don't keep proper documentation?

There's a lot more at risk for bigger businesses and that's why, by good practice, you should have a documenting system.

I had a dispute last year where I was acting for a house builder and we took it all the way to the high courts—so not a small dispute. Their subcontractor was the painting and decorating guys, small guys. They had been employed on five projects, and it was about £3.5 million worth of painting and decorating over the five projects.

The employer - in this situation, the house builder - decided that they didn't agree on what the painting contractor was trying to claim for payment due. So they terminated the contract.

You've got two elements here: What is the painter actually due? And then, did the employer have a right to terminate? If you don't have a right to terminate, the painting contractor's got rightful damages. The actual dispute, in the end, came down to what did they actually do? Did they paint this wall? Were there defects on that wall?

The painters said, "Well, I painted 200 houses, so I'm due 200 houses worth of payment." Our client came back and said, "I don't think you painted 200 houses. I think you painted 180—and actually, of that 180, 50% were defective."

In the meantime, the employer had brought in a third-party contractor to finish the works. So who painted what? The biggest difficulty that we have in disputes is a paper trail.

 

Wouldn't it be easy to verify how many rooms they had painted just by looking?

No. No one had records, so it was a guess. Half the people who worked for either company had left.

 

How well do photographs work for proving what work was done when?

Even if you've taken photographs, how do I know the photograph is of that wall? Did you label them?

 

So how can you document all the work you did, where and when?

You can have electronic photographs. Electronic data is as good as hard copies—if not better because you can't lose it. Also, if you take a photo, say, on your hard drive, it's date stamped. As part of our job, we will pull all of the data out of those. Next we pull data off letters and emails to prove when they were sent.

Tender writing checklist for field service businesses 

Does the GPS in your phone in combination with the photos work to prove you were there working at that time?

Yes, to a point. But if you're onsite and you've got 3,000 homes, you could probably narrow it down to ten—and within that ten, which wall was it?

In terms of an office building, or if you've got a smaller contractor that is doing a house renovation and every room is a different colour, that's fine. GPS is going to tell you, 'I was there at this time. That wall was grey. You know it's the master bedroom.'

Otherwise, you need to label the photos: 'Third house, master bedroom, west-facing wall.'

 

Do videos work as part of the paper trail?

Videos are great. You can talk to the video: 'I have just entered the master bedroom of house number one. I'm going to start on the left corner.' And then you go all the way around.

 

How about using drawings to document work completed?

Drawings are really helpful because you can demonstrate where exactly you are and what you're doing. We do a lot of work where we will look at the plans and the markups on the plans. That's really helpful.

 

What types of documentation does a company need to hold onto in case of a construction dispute?

 You should keep these:

  • Time-stamped photos and videos.

  • Blueprints and markups.

  • Hard-backed notebooks or diaries, which you can then either have hard copies of or you can take photos of.

  • Site diaries and site notes.

  • Surveys.

  • A record sheet.

  • A day worksheet.

  • Drawings and specifications.

  • Measurement records, which is a measure of the work you've done.

  • Programs, instructions, and variations.

  • Minutes of meetings.

For proof of what has been done, a lot of people also use checklists and send them in via email so they're time stamped.

 

What should a contractor keep in mind when creating and keeping records?

There are three main things:

  1. Your records should be sufficient to enable a third party to rebuild the job on paper.

  2. They should clearly identify the resources required for each part of the work.

  3. They should also demonstrate any effects of events, and any delay or disruption caused.

Those are what you need to be sure your records are useful and complete.

 

 Some older contracts require you to serve papers via post. Are there any other times where you have to have paper over digital documentation?

No. It's not been tested whether if you serve something by email and not by post, that would make it invalid. If you want to cover your back, you would do both.

 

How long do you need to keep documentation?

It's subject to the contract and to GDPR. You need to keep records for the length of the liability. If the contract was executed under hand, that's six years for the completion of the works. If it was executed under deed, it's twelve years.

 

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Digital documentation systems help construction and field service businesses easily create, track, and manage important records. According to The Telegraph and the Laws commission, E-signatures hold up in a dispute and are as valid as paper ones.

Be sure to ask your field service management provider if their solution has any features that can help you do all this—and get paid what you're owed, every time.

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