While no one wants lawyers involved in a construction project, when disagreements arise, it pays to be prepared. Many disputes center on written contracts, and having a good contract in the first place is very important.
Regardless of what the contract looks like, however, knowing how to deal with what’s not in a contract may be just as important as knowing how to deal with what is.
A contract is simply an enforceable promise, and like ordinary promises, contracts can in many cases be formed with or without writing them down. Courts sometimes enforce oral agreements the same as a lawyer-drafted contract, so just because something is not written down in the formal “contract” doesn’t necessarily mean that it is not enforceable.
Sometimes written contracts include “incorporation clauses,” saying that nothing else that anyone said or wrote before signing the final contract can modify the contract. However, when the contract is silent on that issue, the parties’ emails and conversations can form part of the promise that a court will enforce.Therefore, it’s wise to be careful about what is both said and written and to review relevant correspondence before filing suit.
Assuming that everyone agrees on what the contract says, parties still often disagree about what the contract means, and deciding that often leads courts to look beyond the written contract itself. The basic rule for contracts is that judges enforce “unambiguous” terms of a contract exactly as written, no matter what the parties thought the terms meant. If the judge senses ambiguity, however, a whole range of additional information becomes fair play. This includes what the parties said to each other before signing the contract (even if there was an “incorporation” clause in the contract), earlier unsigned drafts of the contract and how the parties acted after the contract was signed.
That last element—how the parties acted after the contract was signed—is called “course of performance,” and can be particularly important. If a contractor senses that a relationship with a subcontractor or a customer is headed toward a dispute, he is probably smart to talk to a lawyer early on. However, it is not necessarily smart to start off with a threatening letter from that lawyer. The parties’ “course of performance” is ongoing, and the period after a relationship starts to sour but before there are threats of litigation can be key to shoring up a case. Sometimes this is as simple as having a mid-level employee email the other party to confirm a basic understanding of key terms the contract—something on which it may be hard to get honest answers from an adversary once lawyers are involved.
Finally, think about who should be involved before filing a lawsuit, because there may be appropriate or necessary parties who did not sign the contract. If the person who signed the contract for the other party is someone else’s agent, a contractor may be able to sue that third party. If there are sureties involved, it’s wise to name them in any lawsuit at the very beginning, lest there by any risk that they cannot be sued later because of limitations on the period in which a contractor can assert claims.
All of this law will vary some from state to state. Contractors should always speak to a lawyer about specific situations, but knowing some basic information can help navigate this otherwise tricky terrain.