Civil Litigation: Contracts - An Ounce of Prevention is Worth A Pound of Cure
Earlier this week we provided alternative dispute resolution services to help resolve a wholly avoidable contract dispute. The fact pattern would be familiar to any attorney who regularly represents clients in the construction matters. Owner hires Contractor to work on Owner's Property. It's a handshake deal, or as we lawyers call them, an oral contract. The relationship starts off with a lot of trust and good feelings. Then, as the project moves forward, Murphy* shows up. There are unexpected conditions found on the jobsite, materials are harder to source than expected, change orders are requested, and a host of other unforeseen circumstances arise. Some may be the fault of the Owner. Some may be the fault of the Contractor. Some are nobody's fault. Regardless, as a result, the project is delayed, or the cost has increased exponentially, and all that trust and all those good feelings that were there at the start are long gone and its time to call the lawyers.
Having formerly been in the U.S. Army, and now being an attorney, I joke with my friends that I went from the most respected profession in the country to the least respected profession in the country. No one ever says, "Oh, great, the lawyers are here!" But, as the folks in the above case found out, you'd much rather see the lawyers at the start of the project than at the end. As I sat in the courthouse trying to sort out the facts of the case, all I could think of was how a two-page contract would have saved months of protracted litigation and legal fees, not to mention a lot of frustration for the Contractor and the Owner.
Contracts should be thought of as the rules for the game. When you go watch a baseball game, it moves along without much controversy. The batter hits the ball and runs to first. The throw gets there at the exact same time, and he is ruled safe. While teams may argue about whether or not it was actually a tie, the fact that a tie goes to the runner is accepted because it is in the 192** pages of Major Leagues Baseball's Rules where it states:
5.06 Running the Bases
(a) Occupying the Base
(1) A runner acquires the right to an unoccupied base when he touches it before he
is out. He is then entitled to it until he is put out, or forced to vacate it for another
runner legally entitled to that base.***
Because that rule exists, it doesn't need to be argued over in the middle of the game. Imagine how impossible it would be to play (or watch) a baseball game if, when the game started, there were no rules. The batter hits the ball and runs to first and gets there at the same time as the ball. The umpire has no idea what call to make, and the game stops for 45 minutes while they try to figure out what the heck to do. The runner is eventually called out, and the batter's team is infuriated and walks off the field in protest.
Back to our Owner and Contractor, imagine how much simpler their lives would be if, when a delay occurred, they could look to a contract and see if it amounted to a breach. Or when there was a dispute about what was or wasn't in the scope of work, they could simply point to the contract. So instead of the Contractor walking off the field in protest, they see the rule book requires the Contractor to do "X" or the Owner to pay for "Y." Someone is going to be unhappy, but there are no hard feelings because that is what everyone agreed to in advance. The game goes on, and the project goes on.
Sure, nobody likes to get the lawyers involved, but the time to do it is before the game starts when everyone is still full of good feelings. One of the best ways to avoid litigation in business relationships is a good solid contract. The word "good" should be emphasized there. The contract your buddy the landscaper uses is probably not going to be a great fit for your plumbing business. The one-size-doesn't-fit-all contract you got from an internet legal service also isn't going to be a great help either as it is not tailored to your situation and probably written so broadly in an attempt to cover all situations that it is ambiguous to the point that it provides no real guidance on whether the runner should be safe our out.
As a litigator, I guess I should not be giving this advice since, if you listen to it, you will greatly decrease the need for litigation! The truth, however, is the truth. A relatively simple and inexpensive contract can save you thousands in legal fees and nights of lost sleep. In other words, and ounce of prevention is worth a pound of cure.
*"Murphy" is military slang that generally refers to Murphy's Law. The core component of Murphy's law is that "anything that can go wrong, will go wrong," or, as we would say in the Army, "no plan survives the first contact intact."
** Yes, they are really 192 pages long. You can see for yourself at: https://img.mlbstatic.com/mlb-images/image/upload/mlb/hhvryxqioipb87os1puw.pdf
*** I though about using the NFL's what-is-a-catch rule for this analogy, but that rule is so ridiculously complex that I feared this post would go on for pages and pages. I never feel like I am back in law school more then when the broadcast's "rules expert" starts explaining what is and isn't a catch!