Breach of Contract

Breach of Contract

Breach of contract can be a slippery slope in construction disputes. Standard AIA contract instruments have vehicles for the owner to terminate the contract for either convenience, or cause. These are intended to favor and protect the owner, while at the same time indemnifying the architect, whether or not he is at fault.

Breach of contract disputes are seldom simply dispatched, and often require tedious negotiations to settle, if not costly litigation fees. This is because of the complexity of contract execution and action by any or all of the parties. Owners are favored against contractors by virtue of an alliance with the architect – named “agent” of the Owner in the contract documents.

Termination for non-performance is the most frequent reaction to an alleged breach of contract, although there are many other reasons, such as failure to observe safety regulations, failed inspections, failure to pay suppliers, and others. In some cases, the owner may seek monetary damages, in others, the contractor reserves his right to fashion a counterclaim. If the contractor has simply ‘walked off the job,’ the resolution may be one-dimensional: a contractor cedes significant leverage in quitting a job without going through the proper protocols.

However; in my experience, the contractor isn’t always at fault. Indeed, the owner and architect have responsibilities to issue constructible drawings, and pay in a timely fashion. Too often a contractor is hampered by a lack of design documentation such that he cannot build at a profit, or without painstaking fits and starts. Indeed, many delay cases are countered with counterclaims of non-performance by the designer, or non-payment by the owner.

This two-way breach of contract street can create difficulties in the mediation or litigation process, requiring onerous documentation and evidence to justify position. Typically, it is the builder who is pressed to generate or produce accurate documentation. If a project has long been distressed, it can take on a life of its own. Soon enough, it becomes virtually impossible for a contractor to produce the evidence he needs to substantiate his counterclaim (assuming owner sues for breach of contract.)

It is never either party’s prerogative to determine another principal’s breach of contract; they may only assert that charge, leaving discernment to an arbitrator, judge, or jury.