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Vol. 2007-06 | June, 2007

Construction Controversies – Backcharges and Extras

With greater frequency, controversy, disagreements and claims arising between parties to construction contracts, have given way to increased litigation in the state and Federal Court systems.

Claims between General Contractors (“GC’s”) and Subcontractors (“Subs”), are based on work actually required of subcontractors, but which may have been actually performed by the GC, and for which the Sub is held liable. For example, the cleanup and removal of packaging or protective materials, crates and pallets, etc., in or upon which certain materials are delivered to the site, are customarily the responsibility of the generating trade, subtrade, or supplier, depending upon the construction contract terms and agreement of the parties. Where the required cleanup is not done, the prime contractor may perform such work or services, and then backcharge the sub by deducting the amount of the cleanup costs from the sub’s progress payments. Serious disagreements may result, especially where there is inadequate documentation to support the contentions of each party as to such responsibility, and the calculation of such “costs” claimed.

Still other claims may arise regarding other areas of subcontractor responsibility or benefit, including: acceleration, delay, use of “float time”, completion of work, “timely performance”, final touch-up of punch-listed items, and beneficial occupancy by the Owner or lessee/tenant.

Project disputes and claims can and should be avoided; they rarely result in the complete satisfaction of all parties and almost never engender future trust and confidence. Good business practices require careful preservation of facts by letters, faxes and E-mails confirming (even) telephone conversations, where essential items have been discussed and agreed to by the parties. Verbal agreements, without written confirmation may not be accurately recalled later. Carefully drafted construction agreements, confirming written proposals or bids, should detail complete aspects of the contractual agreement, even providing for the “what-if’s” in the event of such occurrences. Particularly where serious questions of money and timely payment for performance are involved, project disputes can be avoided by proper agreements and project documentation in the form of RFI’s (Requests for Information) and other written, project-documented communications.

While “Extras” have been (humorously) defined as: “.any work, materials, or methods, whether necessary, desired, required, requested, performed or supplied, and not included, defined, or even implied anywhere in the contract documents.”, these items are generally invoiced as “Additional Work” or “Verbal Order”, or “Field Necessity”. The only truly important question is, who pays for it? Clearly, the person or entity authorizing or requiring extra work must pay for it.

When a valid claim does arise, all of the parties concerned must be willing to meet and to resolve all disputes immediately, fairly, and without defamation of any party, to preclude delaying or jeopardizing proper, timely completion of a project in which all of the construction community may, and should, take great pride.

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.