Construction projects often come with unexpected delays, performance issues, and sometimes payment disputes. As the contractor or developer, it’s imperative to deal with payment disputes before the project begins. You can do so by adding specific provisions and protections in the contract to address payment issues before any arise.
Everyone involved wants a construction project to go smoothly. However, that is not always the case. If during development there are payment disputes, follow these steps to mitigate the problem.
First, review the initial construction contract and determine what provisions exist within it for remediation of any payment issues. Then, be sure you remain in strict compliance with the contract’s provisions to protect your claim if litigation becomes necessary.
One way to protect yourself against any payment disputes is to obtain a payment bond and/or performance bond depending on the size, scope, and financial risk associated with the project. Often this type of vehicle can protect you if the initial contract does not include payment dispute clauses.
When drafting your initial construction contract, regardless of whether you are the contractor or owner, it’s crucial to include a provision mandating that progress on the project is discussed in regular intervals, especially in the event of a payment dispute.
If you are the contractor and you have not received payment, and the project is incomplete, you must decide whether you will consider moving forward to complete development without payment. However, if you do, keep in mind, you will continue to incur expenses associated with the general conditions of the project or potential delays.
Similarly, if you are the owner disputing payment, you will not want the project to stop or delay because you may have deadlines to meet, and it could impact bank loans, investor distributions, and other parties. Therefore, including a provision in the contract to iron out any payment disputes early in the process will benefit and protect both sides.
Neither party wishes to see a payment dispute end in a lengthy legal battle during a construction project. Therefore, it’s essential to hammer out all these details beforehand in a well-documented contract protecting all parties. If you need help crafting your next construction project contract, call Haber Law for help.
About the Author: Franchesco Soto is a Partner with the firm and Chair of the Construction Department handling matters involving construction litigation and real estate litigation. Mr. Soto has represented owners, contractors, and sub-contractors in various construction disputes in State and Federal Courts throughout the State of Florida.
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