Construction is complicated, and there are numerous issues that can arise. There are contractual issues, design issues, change orders, questions about workmanship quality, and negligence allegations, to name a few. As anyone who has been on a job site knows, construction is controlled chaos. To imperfectly adapt Leo Tolstoy’s opening line of Anna Karenina, problem-free construction projects are all alike, but every problematic construction project is problematic in its own way – that is to say, all problem-free construction projects have no design issues, delays, change order issues, defective work or supplier issues. However, just one of these issues, or any number of other issues, can result in litigation.
While there are numerous ways for a construction project to go sideways, there is one simple way to mitigate exposure in litigation: documentation. While good documentation won’t stop every lawsuit, it will dramatically improve your odds in cases that survive an immediate motion to dismiss. In these cases where there is potential liability or even a questionable claim, good documentation can shorten arguments and help clearly depict the facts of the incident.
The main recurring issue preventing an easy defense or dismissal is the lack of documentation. Generally, contractors have relatively good documentation for pre-project discussions and the start of the project (e.g., contracts, permits, scope of work, supplies and initial communications). However, as the projects go on, documentation becomes less detailed or even nonexistent. Whether this is complacency due to a project going well, a lack of time as the project gets busier, or some other reason, documentation usually dwindles until something really goes wrong. Then a major issue happens, the finger-pointing starts, and documentation returns with vengeance.
Post-issue documentation can help determine damages and delays after the fact but has limited value in documenting the initial cause of the issue itself. Post-issue communications are always taken with a hefty dose of skepticism because the parties are usually trying to shift liability anywhere else. For example, let’s assume that a concrete foundation was poured incorrectly. The foundation was supposed to be twelve inches thick but was poured eight inches thick. The foundation issue is not discovered until the plumbing contractor starts work. To correct the issue, all the framing must be removed, and the foundation must be destroyed, removed, and repoured. This issue will obviously result in project delays, cost overruns and very unhappy contractors.
In this example, there is no contemporaneous documentation concerning why the original foundation was poured to a depth of eight inches. Once the defect is discovered, the finger-pointing begins, and the parties begin sending messages to cover themselves. Carl Concrete emails Builder Bob, saying that Bob’s engineer, Ernie Engineer, told Carl the foundation was supposed to be eight inches thick. Bob replies that the project specifications clearly show that the foundation was designed to be 12 inches thick. Without any contemporaneous evidence and only his word to the contrary, it will be tough for Carl to avoid liability for failing to follow the plans when the error itself was, in large part, Ernie’s fault. Obviously, this is an oversimplification because construction issues are rarely so cut-and-dried, but it illustrates the need for written correspondence and documentation to support your version of events.
Contemporaneous documentation is equally important for the small changes. Contractors generally confirm large charges in writing through change orders or contract amendments. Litigation often arises from the compilation of small changes. One little change might not seem like a big deal or warrant a second thought, but over time, they add up and can affect the whole project and your ability to provide a compelling narrative of events.
The key to success is ensuring that your site supervisors document all the little changes as they occur. It does not need to be anything fancy. A quick email is more than sufficient. The key is having something in writing showing why a change was made. As memories fade, confidence in what someone believes happened tends to rise in inverse proportion to the accuracy of what actually happened. Documentation prevents the fictitious narrative of widespread failure and limits liability from an exceptionally persuasive or compelling opposing party.
Litigation takes place months or years after an issue arises, and everyone will misremember the exact contents of a conversation that occurred months ago (e.g., “You said you would move that cabinet,” or “I said my walls should be alabaster, not eggshell.”). The danger is not the existence of those minor issues but the absence of records disputing the clearly frivolous claims. While complaints about an incorrect paint color may make a homeowner simply come across as difficult when that is the only issue, the trouble begins when the other side can point to ten or twenty minor, undocumented issues where it is only your word against theirs. They may argue a pattern or history of neglect and use it to support a theory of liability on significant issues such as scope of work. A few little issues and you look like the victim of an overly litigious, high-maintenance homeowner. When there are a lot of little issues, the jury will see you as the crooked contractor trying to take advantage of the homeowner. At that point, a jury may believe the homeowner and question whether something was promised that was outside the scope of work.
Moreover, compounding little issues will erode the relationship between the builder and the owner. This relationship degradation makes litigation even more likely. Nobody wants to sue a nice person or their friend, but that same reservation is absent when the person is disliked or a nuisance. If you have a good relationship, even a major issue is likely to be resolved without litigation. Keeping a business relationship healthy is important, and documentation will help with that, too. Simply being able to go back to the documents will often prevent a dispute and preserve the relationship (e.g., “Your walls are alabaster because that is what you approved, and here is your email confirming it.”).
Delays are another common issue where documentation is critical. Without sufficient documentation, it is hard to prove that you were not the cause of the delays. This is especially true of large projects where the owner or upstream contractor assigns delays to the subcontractors for design issues or supply issues that are not the result of the subcontractor’s actions. This happens frequently when a design change during a project causes an unforeseen issue (e.g., switching from system A to system B, only to later learn that system B requires additional structural support that was not included in the original plans). The unforeseen issues are where problems occur. Thus, it is essential that when the events occur, there is a record of who approved what, what you were told to do and by whom.
I have found that the best way to ensure your supervisor documents a project is to require them to fill out daily reports, like this one:
Swift Currie
Going back to our original example, had Carl recorded in a daily log or sent a confirmation email that Ernie told him to pour the foundation eight inches thick, Carl would not be facing the entire cost to repair the project. At the very least, Ernie would be liable for a large portion of the damages.
Most construction cases seem to come down to emails and documentation. Unless someone clearly messes up, more often than not, the party with the better documentation ends up substantially limiting its exposure. It is much easier for an attorney to fight your case when they have documents to work with. Just as you cannot make bricks without clay, you cannot win a construction case without documentation. You need to document your project even if you have been working with the same contractors for years and rely on verbal deals and handshakes. It only takes one bad project to ruin a relationship and bankrupt a company. Whether you do commercial or residential construction, documentation is critical to protecting your company.
