SUING CONTRACTORS FOR DELAYS

Delays damages can be tough to recover for a homeowner. A common scenario for delay damages (and construction defect cases) that we see is a homeowner may have a remodel in mind and all he or she now needs to do is find a contractor who will agree to build it. Or, the homeowner may have the plans for their dream house already drawn up by an architect, and he or she just needs someone to build it.

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In this modern environment, even finding a contractor can be challenging for a homeowner as it seems like there is more work for contractors out there than they know what to do with. As a result, a homeowner can feel lucky when he or she has a contractor that is interested in the project, and the contractor fits the budget.

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As a prudent homeowner, he or she may meet with the contractor at the site. The contractor shows up, talks the talk, says he or she does amazing work and can complete it for the homeowner.  So, the homeowner gives it some thought and decides to hire the contractor. After all, the homeowner is ready to begin construction! 

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The builder presents you with a contract for construction. The homeowner doesn’t  have an attorney review it and doesn’t really make any changes. But this can be a huge mistake. This proposed contract was likely drafted by the contractor’s lawyer, so it should probably now come as no surprise when there isn’t a single provision in the contract that is in the homeowner’s favor (or even fair). 

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The homeowner signs the contract anyway and hands over a hefty deposit. He or she believes that construction is imminent! But then the contractor doesn’t show up. The contractor says he is tied up on other projects, says he is waiting for permits, or some other excuse. The contractor may someone over to do a very small portion of the work. But then you sit. And you wait. And the homeowner starts to wonder if they have been had.

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For a delay claim, homeowner friendly provisions in a contract can make or break your case. In an ideal situation, you will have a contract that sets forth the timeline required by your builder. A delay clause in a contract will set forth that a party who causes delay in the completion of that project must pay to the aggrieved party damages that result from that delay. The delay clause in the contract will define what constitutes “delay” and generally will govern the parties’ rights and responsibilities with regard to delay.

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You will have a schedule that establishes certain milestones to have the strongest case with respect to delays. Your contract would describe whether the type of delay is excusable, non-excusable, and/or whether the delay is compensable. A provision in your contract that would allow you to recover damages from your contractor is usually called a "liquidated damages" clause. For a delay, the “liquidated damages” represents the cost that a party who is responsible for the delay agrees to pay if he or she fails to substantially complete the project by the end as promised in the contract. The point of a liquidated damages clause it to fix the amount to be paid instead of the promised performance of the contract.  This helps the aggrieved party in proving the damages that resulted from the delay.

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But for a typical homeowner, you are not going to have these helpful provisions where you can easily hold a contractor’s feet to the fire. Compare this with a scenario involving a commercial property like a hotel, where both the ownership group and construction group are sophisticated parties represented by professionals in the industry who negotiate the terms of the contract. In a sophisticated commercial context, you better believe that the contract incorporates schedules, milestones, and enforceable claims against contractors when they don’t meet the schedule and therefore delay the whole project.

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In a residential context, homeowners usually just sign whatever contract that the contractor has given them. It is not likely to have provisions entitling you to compensation for their failure to meet milestones. However, even when you don’t have these provisions, a contractor does have a duty of good faith and fair dealing, which requires the contractor to meet a reasonable schedule in some cases. 

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The general measure of damages for a breach of construction contract is the amount required to place the owner in the same position as he would have occupied had the breach not occurred. However, with respect to a construction defect claim, the Colorado Defect Action Reform Act (“CDARA”) limits the recovery of damages to actual damages, loss of use, costs of suits, and other non-economic damages. You should consult with an attorney to see if pursuing an action against a contractor for a delay claim is an option. A homeowner may have more going on with the project than they are aware, and an attorney can help move the project along. 

Sometimes, when contractor is just completing not working out and you don’t have the ability to realistically get delay damages through contract or at law, rescinding the contract or terminating the contract may be an option. 

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The above summary is just an overview of possible options and should in no way be considered legal advice in deciding how you want to move forward with a project. You should set up a call with Sweeney Construction Law to get the firm’s impressions.