10 / 17 / 2016

4 Potential Claims for Breach of Construction Contract

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Pick your party: buyer, seller, general contractor, subcontractor, builder, architect, consultant, broker, etc.  There is always some form of contract developed between at least two parties.  Should something go awry before, during or after the construction process, the damaged party may have meritorious claims for breach of contract.  The following are some popular claims one might encounter.  Note, not every claim we provide below is strictly breach of contract; some are more accurately categorized as an “equitable claim,” which is another way of saying to the court: “What happened to me was not fair and I demand fairness.”

Owner Delay

This is a fairly straight-forward claim.  Let’s assume a General Contractor enters into a contract with a Sub Contractor to complete the roofing on a building.  The contract defines the time limit the Sub Contractor has to complete it.  Furthermore, the contract specifies that in order for the Sub Contractor to be adequately paid and in order for construction on the rest of the building to commence, the roof must be completed by Month X.  Should the Sub Contractor complete the roof late—one day, one month, one year, it doesn’t matter—he and his team could be precluded from getting paid the full amount they would have received had their project been completed on time. 

More importantly, the Sub Contractor may actually be liable for damages more severe than simply not getting paid the full amount for their work.  If this delay affects other events like grand openings or client engagements for the purchaser, there could be extended damages the Sub Contractor may be required to pay. 

Subsequent Purchasers

Generally speaking, a subsequent purchaser, not the original purchaser of the building or home, but the person who purchased the building or home from the original purchaser later on down the road, is not considered a beneficiary of the original construction contract.  This means that a subsequent purchaser does not necessarily have the same standing as the original purchaser to bring a claim against the general contractor or actual builder.  However, this does not stop a subsequent purchaser from potentially making a claim against the original purchaser if the original purchaser did not properly disclose or contract away all potential deficiencies of the building or home.  Such claims against the general contractor, builder or original purchaser are not easy claims to make as a subsequent purchaser.

Substantial Performance

This is the equitable doctrine we alluded to earlier.  A claim for substantial performance is something a contractor or builder may bring to a court if the buyer refuses to pay because the entire project is not completed.  Returning to the roofing example, a Sub Contractor may sue a General Contractor under substantial performance if the General Contractor refuses to pay the Sub Contractor because only a certain percentage of the roof is completed.  Unless their contract explicitly states otherwise, this type of claim will advantageously serve the Sub Contractor and hopefully allow him and his team to recover an amount that matches their substantial performance.

Tort

This isn’t specifically a breach of contract claim, but it can certainly arise with a breach of contract claim.  Typically, a tort claim will be identified as negligence in a construction contract issue.  This means the claimant is telling the court that the damaging party did four things, thus causing negligence:

  1. The damaging party had a duty to carry out for the claimant.
  2. The damaging party breached this duty.
  3. The damaging party caused the breach of duty.
  4. This breach of duty by the damaging party merits damages (money) for the claimant.

final note     

One final note, there is a time limitation on bringing forth a cause of action to a court.  By default, one has four years “after the accrual of the cause” to make some type of claim for breach of contract.  There is an exception to this default rule.  Parties have the freedom to change this amount of time in the contract to any time they wish, so long as the minimum period of statute of limitations is not less than two years.

Construction contracts are no walk in the park.  Just like what was said above, pick your party because no matter who you are, it will very helpful to you to reach out to construction law attorneys.  Their expertise will help you better understand, proactively, what to expect under any contract; and, reactively, what exactly happened to cause the breach of contract.

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