Property owners and developers, contractors and subcontractors are bound together on a construction project by mutually binding contractual obligations. Contracts between these parties include important responsibilities such as deadlines, construction specifications, terms of payment and standards of workmanship to be upheld. When contractual obligations are deemed to have been breached, the resulting delays and financial losses can result in disputes and potential legal action.
Owners and contractors involved in construction projects in Massachusetts do need to know how to handle a breach of contract by a subcontractor so that their business interests can be protected. Legal remedies appropriate to the perceived breach of contract may be necessary to minimize further disruption.
How to recognize when there has been a clear breach of contract
Parties in a contractual relationship are said to have breached a contract between them when one party fails to carry out a duty as specified in the contract without a legally valid reason.
Typical examples of breaches of contract by a subcontractor that may be experienced during a construction project may include any of the following:
- abandoning work on a project before it has been completed;
- failing to complete work by contractual deadlines;
- failing to provide required insurance certificates or performance documentation;
- falling behind on deadlines without justification;
- not having correct insurance documentation;
- refusal to correct substandard work;
- safety standards not being met;
- standards of workmanship failing to be of expected standard;
- use of substandard materials or components.
Review the contract with the subcontractor carefully before taking any legal action
If a breach of contract is thought to have taken place, the details in the contract should be thoroughly checked before any legal action should be taken.
These are the most important components of a contract which should be checked to ensure that hasty action results in a protracted and costly dispute.
- work expectations;
- payment schedules;
- project deadlines;
- notice requirements;
- cure period provisions;
- termination rights;
- mediation and / or arbitration procedures;
Some disputes that occur during construction projects occur because developers or contractors have failed to follow the procedures established in the contract. Failing to follow the contractual obligations may weaken any legal argument against the subcontractor following a breach of contract.
A perceived breach of contract should be notified in writing to the subcontractor
If there has been a breach of contract, contractors should notify the subcontractor in writing of what they have identified as a violation of the existing contract between them. Disputes can often be resolved without need for further action if a formal notice is given to the subcontractor and the subcontractor acts on the perceived faults. Copies of all correspondence between the contractor and subcontractor should be kept in case they are needed as evidence in the event that the dispute results in litigation.
These points should be included in the notification:
- The contractual provision that has been violated.
- The facts supporting the claim.
- The work requiring correction.
- The deadline for curing the breach.
- The consequences if the breach is not corrected.
The subcontractor should be given a “right to cure”
Most contracts between contractors and subcontractors contain a “right to cure” provision. These “right to cure” provisions provide subcontractors with a period in which they can correct any failures or defects in their work or provide justifiable reasons for the problems that have been identified.
The right to cure period is normally specified as a time limit in the contract.
In some cases, the contractual failure may be so serious that not time period for correction of the failures or defects can be allowed and therefore termination may be a justified step.
Be careful to avoid too hasty a contract termination
It would be a mistake if a contractor is too hasty responding to a breach of contract, especially if they terminate the contract without legal justification. If this happens, the subcontractor may argue that it is the contractor that has breached the contract between them, not the other way round.
Mediation or arbitration should be considered before litigation
Alternative dispute resolution (ADR) is normally a sensible course of action before litigation and may in any case be specified in the contract with the subcontractor.
Mediation is normally the first option and involves a neutral party acting as mediator who listens to both parties and helps them to resolve any dispute without actually enforcing any decision.
Arbitration is a more formal procedure in which an arbitrator reviews the dispute issues as well as the details of the contract and then makes a binding decision which both parties are expected to accept.
Both mediation and arbitration, if successful, are far less costly than proceeding to litigation too early.
When litigation becomes the last resort
If a subcontractor fails to address a notification of a breach of contract, or mediation or arbitration fails to resolve a dispute, then litigation may be last resort. An attorney with experience in Massachusetts construction law should be contacted for advice and advocacy before and legal action is taken.
Avoid future contract disputes
Many disputes during a construction project can be avoided in the first place by careful project planning as well as the details of any contractual obligations with the subcontractor.
Carefully constructed contracts with effective and proactive management of the construction project are less likely to lead to disputes and costly legal action.
Seek help from a Boston construction attorney
An experienced Boston construction attorney can help contractors with any breach of contract by discussing legal options available after reviewing the contract itself and the issues involved in the dispute, including alternative dispute resolution and possible litigation. Construction attorneys will understand how state construction laws and other applicable laws such as the Prompt Payment Act apply to any breach of contract dispute, so that costly mistakes can be avoided.