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Construction Contract Breach and Payment Disputes

Construction Contract Breaches

Disputes in construction projects are not inevitable, not matter how well-crafted the contracts are. Unfortunately, many construction projects will involve some type of dispute. In the best case scenario, these disputes are settled efficiently through open communication between the parties. If not, many are settled through out of court through mediation. When material disputes can't be settled, one party may have to sue the other in court or arbitration for breach of contract.

Common Construction Disputes

  1. Delay in Performance. The contractor or subcontractor failed to start the project on time, missed deadlines, or failed to complete the work within the terms of the contract or a reasonable time.
  2. Delay in Payment/Failure to Pay. One of the parties failed to make a scheduled payment or failed to pay as provided in the contract.
    • Failure to pay may result in a mechanic's lien, which gives the unpaid party a financial interest in the property.
  3. Materials Issues. The contractor or subcontractor used substandard materials or materials of poorer quality than called for in the contract.
  4. Poor Accounting/Civil Theft. A contractor or subcontractor failed to keep adequate accounting of funds, improperly used funds in trust, or otherwise misused funds.
  5. Defects in Construction/Workmanship. The structure that was built contains significant flaws resulting from substandard workmanship by the contractor. This often leads to a negligence claim and Construction Defect Action Reform Act (CDARA) litigation.

Breach of Contract

To establish a claim for breach of contract, the injured party must prove:

  1. The existence of a contract.
  2. He or she performed his or her side of the contract or was excused from performance.
  3. The other party failed to substantially perform under the terms of the contract.
  4. Damages or losses as a result of the failure to meet the terms of the contract.

The failure to perform must be material to sustain a breach of contract action. Minor deficiencies are not necessarily breaches of contract.

Remedies or Damages for Breach of Contract

  1. Money Damages. These may be compensatory as to the loss, or, may result from other consequences of the breach. The type and amount of damages to be awarded in case of breach of contract are sometimes specified in the contract itself as liquidated damages. Punitive damages are typically not allowed in contract-only claims.
  2. Rescission. This terminates the contract, rendering its terms null and void and freeing all parties from liability.
  3. Reformation. The court may alter the terms of the contract if it finds the damages were the result of a mistake or unforeseen circumstances.

If you are in a construction dispute, it is vital to find experienced counsel before negotiations begin. Call the construction lawyers at Volpe Law, LLC, or contact us online to request a free consultation.

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Volpe Law is committed to answering your questions about Civil Litigation, Real Estate, Construction, Business Litigation, Breach of Contract, Tort Litigation, Mechanics' Liens, and Contract Review & Drafting in Colorado.

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