Details, details

By Steve Schultz

In an ideal world, construction companies would be able to cooperate with owners, suppliers and others to efficiently complete projects.

But ininevitably, contractors will encounter difficult situations on jobs or even in their own businesses that could involve litigation. Knowing when to consult attorneys could mean the difference between a costly, protracted legal battle and a quick settlement.

"There are a lot of legal issues in this business," said Thomas F. Martin, vice president of Appleton contractor Hoffman Corp. "What attorneys do is take the gray away. They essentially help define black and white. And if there is an issue down the road during a construction project, if it's black and white, you typically won't end up with needing an attorney."

Many legal problems originate with contracts, often because contractors were not aware of specific provisions and how they would be applied.

"Obtain counsel to review your contract before you sign it, because once it's signed, you're committed," said Kenneth E. Voss of the Milwaukee law firm Suran & Suran. "Oftentimes, people look at the scope of work, the price, the completion date, the manpower required to perform the job, and go ahead and sign it without really carefully evaluating all the terms and conditions of the contract documents."

Construction attorneys say that after contractors consult them a few times, the clients often learn enough to get by in some situations without an attorney.

"What I've tried to do, through the times I've been put in a situation where I need to seek legal advice, I've tried to learn from those experiences and prevent that scenario from ever happening again," said Cheryl Honeck, president of J.F. Cook Co. Inc. in Oak Creek.

"You've got so many different factors coming to play," added Jeffrey P. Aiken of Whyte Hirschboeck Dudek S.C. in Milwaukee. "A lot of times those concerns are at least at financial odds with one another. What we try to tell our clients is that if you can get a system set up where you're managing by exception, that's what you want to do. You don't really want to run to your lawyer every time you want to sign a contract."

Lawyers should review contract clauses, especially "pay when paid" and "attempted pay if paid" conditions, lien and termination rights, indemnification and hold-harmless conditions.

There are also differences between public and private projects. "Particularly in public contracts - they are very specific about what needs to be done and when," Voss said. "If you don't follow those rules, you could be left without a remedy."

Risky business

"Contractors by nature undertake risks," Aiken said. "But they shouldn't be taking an unanticipated kind of risk that sort of snuck in there because somebody was cutesy with contract language. Unless they have a skilled contract negotiator - someone that can work with this stuff day in and day out - they really don't know the extent of the liability exposure they're chewing off when they enter a contract."

Even reviewing standard agreements occasionally can be beneficial.

"We're working with a couple general contractors just rewriting their standard forms and what we see is a lot of times, they may not understand completely how they have to administer the projects under the contract," said Joshua B. Levy of Beck, Chaet, Molony & Bamberger S.C. in Milwaukee. "A lot of the standard form agreements will have waivers, time limitations and other types of provisions that if they're not aware of, (contractors) can blow deadlines." Levy added that even standard forms should be reviewed when they are used outside Wisconsin.

Attorneys also can help with simply dealing with trouble on-site.

"Often, just a letter from an attorney will get things moving where I don't care how many letters and phone calls you may be making," Honeck said.

Though attorneys may often be appropriate, seeking outside expertise can also complicate issues. Working sensibly from the start can minimize the potential for court time. "The first thing you do is avoid bad actors and usually there's some dance that happens before parties get together," said George Beyer, president of Beyer Construction of New Berlin.

"There's a lot of things you can avoid by saying no up front and not getting into that relationship," Beyer said. "Make sure that you're treating everybody fairly from the get-go on both sides."

Bring in a middleman

Arbitration and mediation have become popular among contractors because they are considered faster and cheaper than court fights. Many contractors hope that conflicts do not reach a formal setting like arbitration.

"With lawyers, even if you win, you still don't win," said Craig Johnson, president of Hudson-based Madsen Johnson Corp. "Basically, it's to the attorneys' benefit not to get something settled. because more normally, they're working on an hourly basis. They're the only ones winning. Sometimes, you have to put your pride aside and just settle things and get them beyond you."

Honeck recalled a case in which she sought payment from a general contractor through court and ended up spending three times what was recovered as a judgment.

"I'd rather spend the money, give it to my attorney and make this guy pay out of his pocket than just let it go," she said. "A lot of it is personal. When is it worth it you?"

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