Construction Contract Issues
Three little thoughts that can save big headaches
By Bill Bennett, Attorney at Law

Some issues are present in any construction contract. They should be kept in mind by any party to the contract, whether owner, general contractor, subcontractor or supplier. Here is a short overview of things to keep in mind if you are involved in any facet of construction.
1. Written Contracts Are Good! If residential construction is involved they are required by state law for any contract in excess of $2,500. They can be very brief or very complex, depending on the size of the project, but common to every project is the need to (a) define the initial agreement of the parties as to the scope of the work, (b) provide the starting point for modifications of the work, and (c) provide the starting point for resolution of disputes.
(a) Details are key. Scope of work, with good plans and specifications, are very important in making sure that the owner understands what he or she wants and is paying for, and the contractor and subcontractors/ suppliers understand what they are expected to deliver for the price agreed upon. When the minimum information is in writing, the work is described, the price, the time for performance, the procedure for payment, process for modifications, if needed, and a provision for dispute resolution is all available to the parties. The inevitable problems associated with the differences in the parties "memory" of what was agreed is eliminated or at least minimized.
(b) Changes happen. It is a rare construction job that there is not some item or detail that the parties decide or want to modify. The contract provides the process for pricing the modification and the starting point for defining the scope of the modification. All changes should be made as a written modification to the original contract, even when trading elements at "no cost".
(c) Disputes happen. A disagreement that cannot be resolved by the parties becomes a dispute. A contract provision for arbitration can be worthwhile. It keeps the dispute a private matter between the parties and not a public record in court. Arbitration may not be less costly than litigation, but it is faster, and final. There is no practical appeal process from the arbitration award. While an owner cannot contract out the statutory lien rights discussed in this article, an arbitration clause may enable the owner to seek arbitration in lieu of a lien foreclosure when there is a dispute.
2. Notices Are Necessary. On all residential construction in excess of $1,000, the general contractor must give the owner a copy of the state Construction Contractor's Board prescribed "Information Notice To Owner About Construction Liens". The law requires this to be given to the owner at the time a contract is signed. This would not be required on a commercial project. The other is the "Notice of Right to Lien". This is required of subcontractors and suppliers of materials to any residential project. It preserves the right to file a construction lien for all labor and materials furnished to the project within eight (8) days of the filing of the notice. This notice is not required if the project is a "commercial" improvement where labor and material is furnished. A supplier of just material is still required to give this notice on commercial work. Some work may be difficult to tell if it is commercial or residential, the best method would be to give the notice no matter what.
3. Liens and Lien Rights. Any party furnishing construction labor and materials, or equipment rentals to a construction site has a right to file a construction lien on the property. Maybe. The lien protects the parties right to payment. But, the Notices already mentioned must have been filed or the law bars the lien right. Owners can protect themselves by a number of procedures. Joint payment can be made to the general contractor and subcontractor/supplier, lien waivers can be obtained. And the owner can post a completion notice at the end of the job to trigger the run of time and insure that anyone that may have unknown claims for payment is either identified before the final contract payment is made, or is cut off from the claim by the time limit. Time is everything for lien rights. A contractor or subcontractor/supplier must file the lien with the county clerk within 75 days of the last work performed, or the completion of the job, whichever is earlier. Warranty work does not extend this time. An untimely lien is no more than scrap paper. After filing a lien, notice of the lien filing must be given to the owner and other interested parties. A suit to foreclose the lien must be filed within 120 days of the date the lien was filed, or it fails for lack of timely filing.
This information is not intended to do more than briefly overview some of the issues in contracts related to construction. The state Construction Contractors Board can be contacted for their publications and information on contractors at 503.378.4621. They have some information on a web site at www.ccb.state.or.us. If you have a specific construction contract question or problem you should consult your attorney.
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William Bennett is an attorney who has been practicing law since 1972 and concentrates on construction law, contract law, and probate matters. He may be reached at 503/436-0382.

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