You get the work in, you get the work out, you get the bill out … but you don’t get the money in. So now what?
Legally you’re probably in the right and your client in the wrong, and you have the legal right to commence a lawsuit, perhaps in conjunction with lien rights. Occasionally this works fine … occasionally. Typically, however, a lawsuit becomes an exercise in damage control, with the righteous recovery being lost to attorney fees, lost billable time and negative karma. And all too often, a fee action is countered with a professional negligence cross-complaint. To the uninitiated, a lawsuit is the first thought; to the sophisticated, the last.
If you represent a construction professional who has been sued as a result of injuries sustained on a completed job, then you should be aware of California’s “completed and accepted” rule.
A significant, potentially firm-threatening, problem for every A/E firm is that governmental agencies and private owners seem compelled to use their superior bargaining power to require unlimited and uninsurable project risk allocation provisions in their professional services agreements.
As the party drafting the contract, and the party typically with the most leverage, the subcontracts drafted by a general contractor are one-sided affairs prepared to ensure that the subcontractor(s) bears all potential risks and liabilities. This often includes terms whereby compensation that should otherwise be owed by the general contractor to a subcontractor is withheld or denied because of disputes with the project owner.
California’s legislators and governors were busy in 2016 adopting 900 new bills into law, many of which take effect on January 1, 2017. The new laws include many that relate directly to the construction industry. Other new laws, while not construction industry specific, will also greatly impact employers in the construction industry as California has adopted a significant number of new labor laws. For an article specifically on new labor laws adopted in 2016, see MMNT’s “New Employment Laws for 2017”.