Common Issues that Lead to Lawsuits Suing your contractor is generally the last thing on your mind when you hire them. Unfortunately, construction projects, big and small, can end in a lawsuit. Let’s examine why.
Breach of Contract
When your contractor deviates from the contract’s terms, they’ve breached the agreement.
Contract breaches happen for many reasons:
- Botched craftsmanship
- Excessive delays
- Exceeding the budget without approval
How do you prove the contractor breached the contract?
- Establish a contract exists
- Demonstrate you met your obligations in the contract
- Prove the contractor/handyman did not meet their duties
- Show there are damages as a result of the breach
A breach can be difficult to prove if there isn’t a written contract.
If you breach your duties without justification, you may forfeit rights to a claim.
There’s a breach. How much money can I recover?
The amount of damages you recover depends on the nature of the breach. Is it a material or non-material breach?
Non-material breach – Minor in nature. It does not hinder the project’s outcome. If your contractor carries out a non-material breach, you’re obligated to the contract.
Example: A plumber installs pipe brand X. The contract calls for pipe brand Y. Brands X and Y are made of the same materials and have the same quality.
Material breach – It is a serious breach that significantly affects the contract and the project’s outcome. If there’s a material breach, you are not obligated to meet your contractual responsibilities because the other party breached the contract.
Example: The contract states the plumber must install copper pipes. Instead, the plumber uses PVC piping. This may be a material breach.
You can recover damages from both kinds of breaches.
Before you take matters into your own hands, speak with an attorney. Robinson & Henry’s litigation lawyers can help you assess what kind of breach may have occurred. They can advise you on the next steps to protect you and your assets.
Unreasonable Delays
Most construction projects experience delays. Unexpected situations can create delays beyond your or the contractor’s control.
Setbacks can have significant financial consequences to both parties. As a result, many contracts define how to remedy a delayed project.
- Contractors and owners receive compensation for delays (liquidated damages)
- Contractor gets an extension based on based on delay beyond his control
- Contractor must accelerate work to meet deadline
- Termination of contract for significant inexcusable delays
Excusable Delays
Most contracts limit the contractor’s liability for certain delays. Excusable delays generally give a contractor more time to finish the project. Here are some examples of excusable delays:
- Act of God – e.g. extreme weather event
- Labor issues – e.g. unprovoked worker strike
- Owner delay – e.g. design change
- Other unforeseen issues – e.g. acts of terrorism; sink holes
Inexcusable Delays
A delay created by an avoidable action is considered an inexcusable delay. Most of the time, someone working on the job causes them. The owner may be entitled to damages.
A contract may note how the owner is to be compensated for an inexcusable delay.
Inexcusable delays can include:
- Poor planning
- Not obtaining proper materials/equipment
- Late project start
- Quality failures
No Damages for Delay Clause
A “no damages for delay” clause allows one party to escape damages in the event of delay. For example, a contract may absolve the contractor of being financially responsible if they create a delay.
Some states have outright banned “no damages for delay” clauses.
Colorado still enforces this provision in private contracts.
If this provision is in a contract, there are exceptions to its enforcement.
- Active interference by a party
- Delays outside of the scope of the contract
- A contractor who acts with fraud or bad faith
A Robinson & Henry attorney can assess whether you could recover damages as a result of a delay. In extreme circumstances, you may be entitled to terminate a contract altogether.
Poor Workmanship
Workmanship is the skill and quality put into a project. Whether a toilet installation or tile work, the caliber of the work – good or bad – is the workmanship.
A construction contract lays out many elements of the job. Workmanship is not always one of them. Oftentimes, craftsmanship expectations are implied or expressed, instead of written down.
If a handyman skips vital steps, the finished product may lack the quality you expected.
Examples of Poor Workmanship
- Loose railing on a deck
- Gap between hardwood flooring and baseboards
- Uneven kitchen cabinet doors
If the contract does not address quality, it can be difficult to prove poor workmanship. But it’s not impossible.
- Establish the industry standard
- Email conversations may imply a standard of workmanship
- Demonstrate sub-standard materials use instead of premium materials as promised
In a typical claim, a homeowner hires a new contractor or handyman to fix the problem. The homeowner later sues the contractor for the cost of the repairs.
In larger cases where there could be significant damages an expert may be called to evaluate the workmanship.
Poor workmanship can lead to future problems, such as mold, flooding, and electrical issues. A lawyer may be able to help resolve these issues before they worsen.
Unlicensed Work
In Colorado, local municipalities license or register general contractors, including roofers and repairmen. Electricians and plumbers must acquire state licensure before applying for a local license.
Licensing and registration rules vary between municipalities. Some cities require testing, some don’t. In some towns, a contractor must have a current license from another county or city. Some cities, such as Denver, require additional certificates, like a business license.
The homeowner undertakes the most risk when they hire an unlicensed contractor. You may face:
- Little legal recourse against an unlicensed contractor
- Liability for injuries during the work on your house
- No insurance coverage for property damage by an unlicensed contractor
If you aren’t the only victim, you may be able to bring a suit.
The Colorado Consumer Protection Act (CCPA) protects customers from deceptive trade practices.
An unlicensed tradesman can be sued for violating the CCPA.
To mount a successful Consumer Protection Act claim you must show:
- The contractor’s actions constitute a deceptive trade practice
- The action must have occurred while they worked as a contractor
- There must be a significant effect to actual or potential customers
- An injury of a legally protected interest as a result of the conduct
- The contractor caused actual damages to the client
If it’s proven your contractor acted in bad faith when they violated the CCPA, you can be awarded three times the amount of the actual damages.
Civil Theft
If you give a contractor money upfront in Colorado, state law requires them to put the funds in a trust. If they fail to do this or misuse the funds in the trust, you may be able to sue them for civil theft.
The Colorado Construction Trust Fund Statute requires contractors to pay for project costs before settling their own expenses. For example, the contractor must purchase supplies and pay subcontractors before covering their own overhead.
The law was created to deter contractors from robbing Peter to pay Paul, if you will.
Example: You hire a contractor to update your bathroom. He asks for a quarter of the project’s cost up front. Unbeknownst to you, your contractor has not paid subcontractors for other projects. He uses your money to satisfy those debts. But then, he can’t pay the subcontractors working on your bathroom. You’re in the dark until subcontractors file a lien on your property for nonpayment.
If you’re in a similar situation, you may consider speaking to an attorney. Sometimes a letter from your lawyer is all you need to recover your money or get the lien removed.
If the case ends up in court, a judge can award three times the actual damages and attorney fees if the contractor violated the Colorado Construction Trust Fund Statute.
Invalid Liens
State law protects contractors and subcontractors from non-payment.
The Colorado Mechanics Lien Law allows contractors to file a lien against real estate if they are not paid for their work. The property can be foreclosed to recover the unpaid services.
I have a lien. Can I get it removed? The short answer: yes.
Liens can be rendered invalid if a contractor does not follow the filing process.
- Files late. If a contractor supplies only labor, they have two months to file from the last day workers are on the job. If the contractor also provides materials, the deadline is extended to four months.
- Fails to notify property owner. Contractors must provide the property owner a Notice of Intent to Lien at least 10 days before acting.
- Overstates debt owed. The amount of the lien must reflect the balance due, and it cannot exceed the price of the contract.
- Makes technical mistakes. The lien must be notarized, include a sufficient property description, and be signed, among other procedures.
- Misses foreclosure deadline. A lien is only valid for six months. After that, the contractor forfeits their lien rights.
If the contractor fails to foreclose, the lien remains on public record, but it is not legally enforceable. You may need to have it removed.
A quiet title action can remove mechanic’s liens that have expired or a debt that has been paid.
A quiet title action challenges the lien’s validity. Confirming the title rights lifts challenges to the property.
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