Contracts in Construction: How Breaches Impact the Construction Industry

The construction industry is fertile ground for many different types of breach of contract lawsuits. This post will discuss different ways a construction company or contractor can be held liable in a breach of contract case.

Oftentimes, when entering into a contractual agreement, you expect the other party will work accordingly within what is expected of them under the contract. Unfortunately, this does not always happen; and, cases involving instances of contract breach occur more often than you think. In the case of Mark Lapidus and Mary Frances Lapidus vs. Herb Petticord, et al, CV-0084558, one family found this out firsthand.

In July of this year, Mark and Mary Lapidus filed a complaint in Galveston County District Court against Herb Petticord, both individually and doing business as DFW Builders Inc., and DFW Texas Builders Inc. The petition alleged the defendants breached the contract between them and the Lapiduses and then failed to pay any damages. The petition also alleged fraud, negligence, and negligent misrepresentation.

According to the petition, the Lapiduses hired DFW Texas Builders to perform various construction work on the first and second stories of their Galveston property. It is alleged the defendants’ work was done so poorly that the plaintiffs had to sue them. The Lapiduses allege they reported the damages to DFW Texas Builders back in March, and the defendant inspected the property.

On May 6 and 13, the plaintiffs sent the defendant demand letters, while the defendant allegedly asked to meet in person instead. The suit, however, claims DFW Texas Builders received the plaintiffs in an aggressive manner, cursed at them, and failed to take responsibility for the alleged breaches of contract.

This is just one example, but it’s clear that breach of contract cases can often be complicated, especially when they involve the construction industry. To better understand this, let’s take a look at a few common situations in which a breach of contract could occur in construction.

Common Cases for Breaches of Contract in Construction

  • Delayed Performance

As we all know, time is money. Both parties that enter into a construction contract are required to perform their respective contractual obligations in a timely manner. Though disputes over workmanship are fairly common, when a party fails to perform one or more material obligations under a contract within a timely manner, the other parties involved may have the right to terminate the contract and seek damages after providing notice.

  • Defective Work

Contractors are expected to perform their work in accordance with the plans and specifications of the construction project. When a contractor’s work is deemed defective, the property owner may demand the work be corrected, terminate the contract and retain a replacement contractor to correct the work, or seek monetary damages. It’s important to note that not all defective work is caused by the contractor and may instead involve a design or product defect.

Typically, a contractor’s general commercial liability policy will cover any consequential damage caused by the defective work, but will not cover the cost to replace the defective work.

  • Failure to Pay

Property owners and contractors have an obligation to pay their contractors, subcontractors, and material suppliers in a timely manner. Under the Texas Prompt Payment Act, property owners must pay their contractors within 35 days from receiving a payment application or invoice, and contractors and subcontractors must pay their subcontractors and suppliers within seven days of receiving payment for their work.

A failure to pay within the required deadlines is a violation of the Texas Prompt Payment Act and subjects the violator to 18% interest on the unpaid amount on an annual basis and the potential reimbursement of attorneys’ fees and costs. An exception to the Prompt Payment Act allows the property owner, contractor, or subcontractor to withhold the amount owed if there is a “good faith” dispute as to whether the money is in fact actually owed.

Houston Breach of Contract Attorneys

Contracts form the backbone of any business. Contracts are especially important for construction projects because the work can be complex and timelines can be critical. In order to have a successful construction project, you must rely on other individuals and companies to adhere to their agreements. A well-drafted contract that addresses all of the issues that can come up can prevent a lot of disputes. Where disputes cannot be avoided, a well-drafted contract can make litigating breach of contract claims more likely to be successful. At Adair Myers Graves Stevenson, our experienced breach of contract attorneys have successfully handled contract drafting and contract disputes both in and out of the courtroom. If you need a well-drafted contract or if you believe a contract involving your business has been breached, contact us today to discuss your case.