Builders and Contractors Exchange
Weekly Bulletin: 24 Apr 2006
Top Ten Tips For Dispute Resolution Cost Control. Part 1 of 2
By: Michael L. Sterling
When it comes to fee collection claims, typically one party loses and another party loses more. In other words; there are generally no winners. The smaller your claim, the more true this tends to be. Small to midsize businesses often find themselves in the position of making “business decisions” as to whether or not to pursue rightfully earned fees. Design professionals and contractors are also well aware that filing a fee claim will often times result in a counterclaim for alleged errors and omissions, and need to be sure to consider the possibility and liability associated with such a counterclaim before filing a fee claim.
This article will outline some practical advice to help keep your collection costs down in the event of a dispute. All require (and I STRONGLY advise) you to have a signed, written contract before beginning any work.
1. Assignment of Costs and Attorney’s Fees Incurred for Collections. Include a provision in your contract making the other side liable for attorney’s fees and costs incurred not only as a result of formal collection proceedings, but incurred as a result of any collection efforts you make.
2. Choice of Law Provision. Virginia law is uniquely strict when it comes to prosecuting lawsuits arising out of a contract and limiting damages. If you are a Virginia firm, Virginia law ought to always be your choice of law. Also, include language in the contract that the parties agree that the contract has been formed in Virginia, that payments are to be made to a Virginia address, and that all design and construction services shall be conducted and/or managed from a Virginia location.
3. Choice of Venue. Include a provision in your contract assigning venue to the state and federal courts presiding over the location of your home office. You will save money not traveling and not getting “home cooked” outside of your own jurisdiction.
4. Avoid Arbitration on Large Claims. Avoid arbitration on claims over $20,000.00 and have the parties agree in the contract to appear without counsel on these small claims. This may mean crossing out or amending standard arbitration provisions in AIA contracts. Without such safeguards in place, arbitration generally will cost at least as much as litigation and you lack sufficient recourse when it comes to an opponent who refuses to share documents and respond to requests for information (for which there are no formal rules.) Arbitration often times results in spending more money than you would have spent in litigation in the first place. Plus, arbitration offers little opportunity for the courts to review an unfavorable result.
Next week we will continue with part 2 of this series on the Top Ten Tips for Dispute Resolution Cost Control.
Questions?
If you have any questions about this article or any other related matters, please contact:
This article is meant to bring awareness to this topic and is not intended to be used as legal advice.