Consider the following scenario.  In a dispute between an owner and contractor, neither party can locate a copy of the signed construction contract in their files.

Without a signed contract, can the contractor still compel arbitration?  As it turns out, in certain circumstances, yes.

In Ladymon v. Lewis, the court of appeals addressed this scenario.   Some homeowners sued their builder, but no one could locate a signed version of the construction contract.

The builder filed a motion to compel arbitration.  The first step, however, in compelling arbitration is to establish the existence of a valid arbitration agreement and show that the agreement covers the claims that have been asserted.

So how can you establish the existence of a valid arbitration agreement if you don’t have a copy of the signed contract?  Well, like most things in a lawsuit, you make the best argument you can with what you have.  So that’s what the builder did.

The builder submitted an affidavit that basically said: (i) we can’t find the signed version of the contract but here is an unsigned form contract; (ii) I remember signing this form contract when we built this home; and (iii) I remember getting a copy back from the homeowners with their signature.

Not the strongest evidence you would like supporting a motion to compel arbitration.  Not surprisingly, the homeowners did not think the evidence was sufficient and filed their own affidavit saying that they did not remember signing any documents with the builder prior to construction except for financing documents.

The trial court denied the builder’s motion to compel arbitration and the builder appealed.   On appeal, the builder argued that its affidavit established that there was a valid, enforceable arbitration agreement between the parties.

[T]he absence of a party’s signature does not necessarily destroy an otherwise valid contract. . .

And the court of appeals agreed.  The court said:

[T]he absence of a party’s signature does not necessarily destroy an otherwise valid contract and is not dispositive of the question of whether the parties intended to be bound by the terms of a contract. If a contract is not signed by a party, then other evidence may be used to establish the nonsignatory’s unconditional assent to be bound by the contract, including any arbitration provision.

The court of appeals said that the builder had sufficiently established the existence of a valid contract between the parties that contained an arbitration provision.

And what about the homeowners’ testimony that they did not recall signing the contract?  The court of appeals basically said that saying you do not recall doing something is really no evidence at all.

So if you find yourself in a situation where you cannot locate a signed copy of a contract, all hope is not lost.  Use what you have and make your best arguments.  There’s a still a chance you can enforce an unsigned contract.

 

Like most sports fans in the Dallas area, I’ve spent the last couple of weeks paying attention to the countdown for one our local sports heroes, Adrian Beltre of the Texas Rangers, to reach the magical baseball milestone of 3,000 hits.  Even at the age of 38, Beltre is still playing at a high level and all season long there was never any doubt about whether he would reach the 3,000 hit plateau, it was just a question of when.

The “when” was answered on Sunday, July 30th, when Beltre became the 31st player in the history of baseball to amass 3,000 hits.  I was fortunate enough to be at the ballpark Sunday to experience it live.

 

 

Thankfully baseball is a game that acknowledges some milestones are so rare they should be celebrated.  So after the hit, the game was stopped down for several minutes as Beltre’s family and teammates all came onto the field to congratulate him while a banner commemorating the achievement was unveiled on the outfield wall.  The opposing players that were on the field at the time also made it a point to personally congratulate him.

It was a great moment to see.  And I don’t think that the cheering and congratulations were just because a player reached the 3,000 hit milestone.  A lot of it was due to the fact that the player reaching that milestone was Adrian Beltre.

Adrian Beltre is one of those players who by all accounts, does it the right way.  He is respected by players whether they play with him or against him.

Any time I’ve heard his teammates talk about Beltre, they all say he the consummate teammate.  Everyone can see that he plays hard, but it is also obvious that he enjoys playing the game. And you also don’t accumulate 3,000 hits unless you treat every at bat with the same intensity regardless of the score or conditions.

In addition to his performance on the field, Beltre is also a good person off the field.  He gives back to his community through donations to charitable organizations and giving his time to participate in events hosted by charities.  It’s no wonder he has been a fan favorite in Texas since arriving a few years ago.

So what does any of this have to do with avoiding or minimizing construction disputes?  A lot really.  Sometimes people in the construction world focus on so many things, they overlook the importance of something very basic.  If you want to avoid or reduce construction disputes, focus on doing it right.

  • Show up on time.
  • Work hard.
  • Don’t take shortcuts.
  • Be accountable and be willing to hold those around you accountable.
  • Be honest.
  • Accept responsibility for your actions.
  • Treat every project and job with the same intensity and commitment regardless of the size or fee involved.
  • And commit to doing this day in and day out, regardless of the circumstances or conditions.

You see, a lot of the same principles that allow an athlete like Adrian Beltre to excel are the same principles that allow people to excel in any industry.  So just do it right.  It’s simple to say, but too often overlooked.

 

It is not uncommon for a construction contract to contain a dispute resolution section that typically requires the parties to mediate a dispute and, if mediation fails, they either arbitrate or litigate the dispute.

Chapter 154 of the Texas Civil Practice and Remedies Code outlines various alternative dispute resolution procedures available to parties.  Of the dispute resolution methods in Chapter 154, mediation and arbitration are the most prevalent.

Usually overlooked and seldom used are the following three dispute resolution options:

  • Mini-trial
  • Moderated Settlement Conference
  • Summary Jury Trial

Mini-trial and Moderated Settlement Conference

A mini-trial and moderated settlement conference are similar to mediation in that they involve the use of neutral parties, but the role of the neutral parties is different than mediation.

The Mini-trial

  • Conducted under an agreement of the parties.
  • Each party and their counsel present the party’s position before selected representatives for the parties or before an impartial third party.  This allows the parties to define the issues and develop a realistic basis for settlement negotiations.
  • The impartial third party may issue an advisory opinion regarding the merits of the case.  The advisory opinion is not binding unless the parties enter into a written settlement agreement.

The Moderated Settlement Conference

  • Is a forum for case evaluation and realistic settlement negotiations.
  • Each party and their counsel present the party’s position before a panel of impartial third parties.
  • The panel may issue an advisory opinion regarding the liability and/or damages of the parties, but the advisory opinion is not binding on the parties.

Summary Jury Trial

  • Intended to provide a forum for early case evaluation and development of realistic settlement negotiations.
  • Each party and their counsel present the position of the party before a panel of six jurors unless the parties agree to a different number of jurors.
  • At the conclusion, the jury panel may issue an advisory opinion regarding the liability and/or damages of the parties.

The summary jury trial is different than a mini-trial or moderated settlement conference because it is conducted in a courtroom using jurors from the jury pool.  Summary jury trials typically last one day, and each party has a predetermined amount of time to submit their arguments and evidence.  The rules of evidence are generally loosely enforced so as not to bog down the proceeding.

After the parties present their arguments, the jury is given a predetermined amount of time to deliberate, and then the jury provides its “verdict,” which is just an advisory opinion.  This allows the parties to have some idea of how a group of jurors will perceive their case.

The Benefits

There are many benefits to getting the perspective of a neutral third party through a mini-trial, moderated settlement conference, or summary jury trial.  It allows you to see what arguments or facts were well-received or were confusing to the neutral.  And it also allows you to see how a neutral will react to your opponent’s arguments and facts.  But most of all, it will hopefully give the parties a framework for settlement negotiations so that the case can be resolved.

Almost any type of case can be appropriate for a mini-trial, moderated settlement conference, or summary jury trial so keep them in mind for helping you get a case resolved.

 

 

When I was (much) younger, I recall hearing a preacher in church one Sunday say (multiple times), “The road to hell is paved with folks with good intentions.”

I had no idea what he meant, but I was pretty sure it was bad.  I want to borrow his words to describe something I’ve noticed about construction projects:  The road to project hell is often paved with folks with good intentions.

In other words, the seeds of many construction disputes and unprofitable projects often begin with good intentions by the people involved.

At the beginning of the project, everyone has good intentions.  I have never represented a client who started a project hoping there would be conflict.

I think most people want to trust the people they do business with (why would you do business with them if you didn’t trust them, right?).  As a result, as a project moves along, participants discuss scope change, payment, pricing, and ordering materials, among other things.

Instructions are given and agreements are made.  However, sometimes the parties do not diligently document the discussion and agreement.

This results in disagreements about what was discussed and agreed to once someone gets around to preparing a document, or worse, it leads to a surprise (some would call it ambush) claim at the end of the project.

Next comes payments being withheld, liens being filed, litigation or arbitration, people having to talk to their lawyer way more than they want to, and you find yourself in project hell.

You’ve probably heard the old saying, “trust but verify.”  When it comes to a construction project, however, you should adopt the approach of:

Trust but Document.

Any time there is a discussion about any type of change or any kind of agreement is made, the main points should be documented immediately.  Technology makes this more achievable than ever before.

Use Smartphones and Tablets

When a discussion takes place onsite, it can be documented quickly and easily with a smartphone or tablet.

  • Smartphones.  Put the terms of a discussion and agreement in an email, which can be copied to all parties participating in the discussion so that they have a chance to speak up immediately if they disagree with any information in the email.  If you don’t have time to type out an email (which should be rare), then use your smartphone to make a quick video or audio recording to record everyone agreeing on what was discussed and what actions will be taken.  It would be very difficult for someone to later deny they agreed to something if you have them on video agreeing with the terms.
  • Tablets. Not only can you use a tablet to prepare a note or email, but certain tablets allow you to write with a stylus.  This allows parties to quickly put the terms of their discussion or agreement in a document (even a prepared form stored on the tablet or in the cloud), and then sign it using it the stylus.

Once you have documented the main points of a discussion, the information can later be included in a change order proposal or change order.  The suggestions above are not the only ways to use technology, but the point is that you should make technology work for you and decrease the number of potential disputes.  TRUST BUT DOCUMENT.  Because remember, the road to project hell is often paved with folks with good intentions.

I recently wrote about the WannaCry ransomware attack that crippled companies around the globe and recommended that cyberattacks be addressed in the force majeure provision of a construction contract.

Last week, there was another global cyberattack that was first believed to be another form of ransomware known as Petya, but it turned out that the attack was something more sinister.

Instead of being ransomware, which (usually) results in the victim getting their files and information back at a later date, experts have concluded that last week’s attack was actually malware that was a “wiper,” which prevents the user from ever accessing their files.  In other words, a hacker that unleashes a “wiper” on a system is not trying to make money by demanding some type of ransom payment for the information – they just want to damage and destroy.

In addition to adding cyberattacks to the force majeure provision, you should also consider including a contractual provision addressing other potential remedies in the event of a cyberattack.   For instance, parties may want to consider a termination provision that is triggered by a cyberattack.

Every project is different, so there is no “one size fits all” approach for addressing a cyberattack in a contractual provision, but here is a framework that you may be able to customize for your project:

Cyberattacks. The term “cyberattack” in this Contract shall mean, “an attempt by hackers to damage or destroy a Party’s computer network or system.”  In addition to any other remedy available under the Contract (including any extension of time under Section _____), either Party may terminate the Contract upon _____ days written notice if either Owner or Contractor is the victim of a cyberattack that: (i) substantially deletes or destroys Owner’s or Contractor’s electronic files related to the Project such that Owner or Contractor are unable to continue performing their obligations under the Contract; or (ii) prevents Owner or Contractor from being able to access their electronic files related to the Project for more than _______ days.  If Owner terminates the Contract under this Section _____, Contractor shall be entitled to recover (insert remedies, i.e., treated as termination for convenience, or payment to Contractor of a termination fee). If Contractor terminates the Contract under this Section _____, then Contractor shall (insert remedies, i.e., limited to payment for properly performed work, or payment to Owner of a termination fee).

Cybersecurity is an issue that is not going away.  Whether you use a provision similar to the one above or draft your own provision, make sure you address the issue in your construction contracts.