Documentation

Construction clients frequently ask: “How can we avoid litigation?” Obviously, there is no complete answer.

However, experience teaches that the single most important step in avoiding construction-related litigation is documentation.

Astute contractors and subcontractors understand that they must build two things:

(1) the project itself and

(2) a complete record of all facts concerning construction activities which may later become necessary in the event of some dispute or legal problems.

Documentation should begin with the preparation of a written profile of the job itself and continue through daily logs, correspondence and memoranda concerning questions or disputed items, accurate time and cost bookkeeping records and timely notifications. Several of these items are now reviewed in detail.

Project Information. A simple one-page form identifying the project, its ownership and other characteristics should be prepared at the beginning of the job. The legal name of the customer and whether it is a sole proprietorship, partnership or corporation should be included along with the name of the customer’s principal representative.

A careful identification of the project ownership is important because remedies available on public construction projects differ significantly from remedies available on privately-owned projects. The correct address and correct legal description of the project would be necessary if mechanic’s lien remedies become necessary. The name of a construction lender or other construction-money disburser may likewise become important if collection procedures become necessary.

Whether and by what company the general contractor and the customer is bonded is also important information. The name and mailing address for the project architect-engineer and its principal representative should be included, along with a brief summary of the contract terms. Recitation of the price, any significant contract provisions relating to change orders, time extensions, payment procedures and similar information will provide a quick reference sufficient to alert those responsible for contract ad ministration.

The general contractor and subcontractors should likewise prepare similar information sheets for their subcontractors and material suppliers, adding relevant provisions of subcontracts and purchase orders necessary to provide quick references. Daily Logs. Both management and field personnel should maintain records of progress and problems. Daily logs reflecting details concerning the stage of progress, subcontractors working (including the number of workmen involved), job weather conditions, unusual problems experienced and verbal instructions received should be maintained by on-site personnel. The individual charged with the responsibility of subcontractor scheduling and material procurement should maintain records sufficient to document when subcontractors were directed to commence their work and when materials were ordered and delivered. Any problems en countered with deliveries, any unusual instructions received from other parties involved or other problems experienced should also be recorded.

Correspondence. If troublesome matters are not documented by letters or other written communication, they should nevertheless be recorded in written memos made immediately during or just following the verbal communication involved.

Written correspondence may become critical in the event of a dispute. Many contractors follow the policy of “write a letter and write the last letter.” Positions taken or facts stated in unanswered letters may be understood as agreeable unless objected to. If you disagree with something someone has written which may later be involved in a dispute, don’t ignore it. Answer the letter at least setting forth your disagreement and, preferably, giving the basis upon which you disagree.

Many contractors serialize their correspondence-particularly letters written to their frequent correspondents. By numbering each letter, it can easily be established that the correspondence is complete.

Financial Detail. Financial matters should likewise be carefully documented to the extent that they may involve later claims, such as change orders, delay, damages, backcharges and the like. It is understandably quite difficult two years later to establish the labor and supervision time expended to perform an additional item of work directed by the owner unless time records for the performance of that work had been adequately maintained.

Obviously, time cards showing only that employees had worked so many hours are not evidence sufficient to establish that the time involved was incurred m connection w1th an 1tem for wh1ch a contract 1ncrease or backcharge is being sought.

At some later trial or arbitration, it may be quite difficult to locate the workman involved and have him recall that during the specific period of time he was performing tasks later involved in a claim or dispute.

Notices. Written notices required under applicable contract provisions, bonds and mechanic’s lien or public works laws should be timely given in a manner that the mailing or other receipt can be proven if necessary. Certified mail (return receipt requested), telegrams and signed receipts will avoid any assertion that the letter or communication was not received.

Preservation. Now that this mass of paperwork has been created, it still remains of little value unless it is preserved and organized so that if later needed it can easily be retrieved. An organized system of document preservation should be established.

Although it may appear that the above suggestions are aimed toward trial or arbitration, they actually are not. Settlement with out legal proceedings and related expenses is far more likely when at least one of the parties can sit down at the bargaining table and fully document his position. His adversary’s claim of surprise can be short-lived when he presents letters which placed his opponent on notice. Documentation substantiating hours worked and tasks performed, labor rates and supervision time may be irrefutable. Written notices required under contract provisions or applicable laws with proof of receipt by the other party are usually mandatory.

Reports of investigations concerning problems are likewise important. Those reports should also include written statements of employees and other witnesses who have personal knowledge of the circumstances.

The first step to avoiding a dispute, lawsuit or arbitration is documentation. If carefully accomplished, it may even be the final step.

In summary, DOCUMENT-NOW!