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Lawsuits are unfortunately all too common in the construction and contracting industry. Disputes can arise about billing, project completions and even the price customers are charged. When these disputes cannot be resolved in a friendly way, the offended party will often resort to a lawsuit to get what they want. The end result is protracted litigation, costing both parties thousands of dollars with no end in sight.

Contractors wanting to avoid this scenario can take the following precautions: 

Be Specific About the Work You Will Be Doing

When making a job bid, be sure that the client knows exactly what they are getting. Have the job details in writing including all projected labor and material costs. The client should read these materials in full before the contractor accepts the work.

Exercising this diligence will lessen the chances of miscommunication. Most lawsuits stemming from unsatisfactory work or unfulfilled contracts were actually the result of one party having totally different expectations than the other party.

Have a Plan for Resolving Problems

Some contractors will put a warranty on their work or set up a way to address any concerns the customer might have. For instance, saying something like “We will fix any problems the homeowner finds with the work free of charge for the next six months” or having a set discount for projects that go a week over schedule can give customers a means to address their concerns without having to resort to legal action. Even if the customer does sue, such provisions can help demonstrate good faith practices and strengthen cases in certain instances.

Be Familiar with Code and Have Work Inspected Upon Completion

One surefire way to bring legal trouble on your company is to make a mistake with building code. Review the local, state and federal ordinances relating to the type of job you will be performing before starting to be certain you will not miss anything. Keep up with code changes as well since they can happen on a yearly basis or even more frequently.

Keep Your Prices Competitive

Higher quality work should earn higher quality pay, but if your customers can prove that you are charging rates well above your competitors, then they can potentially sue for price gouging. Contract work after a natural disaster in particular will be placed under scrutiny since many states are trying to “crack down” on sub-par contractors taking advantage of hapless customers.

Form a Limited Liability Corporation and Purchase Liability

Nearly every contractor in the industry should incorporate their firm to protect their personal assets from being jeopardized during a lawsuit or settlement. Having a standard contract drawn up and reviewed by a law expert can keep personal assets off the table when creditors or lawsuit settlements come looking to collect.

Job site liability insurance can also protect workers and business owners from having to pay the bulk of their legal costs. These policies are often an extension of other business owner’s insurance needed to prevent devastating incidents from sinking an entire business financially. Liability insurance can also protect contractors from other expenses, such as medical costs for outside parties should an injury occur as a result of walking on the site.

Because many customers will not hire contractors who are not insured, the potential benefits of contractor insurance policies make them practically necessary for working in the industry.