Litigation-I Win, You Lose vs. Mediation-Win/Win

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  Litigation is a zero-sum game.  It destroys relationships and fosters enmity between the parties.  Parties rarely walk away happy.  Even if they win, the expense of litigation is enormous, and collecting on judgments is difficult. Disputes ultimately resolve, but the focus on winning at any cost can lead to prolonged legal battles.  Living with a lawsuit causes ongoing stress, which can distract you from your business and even have an effect on your health. In a courtroom, the final decision lies with a judge or jury who may not fully grasp the complexities of the case. Parties relinquish control over the outcome, potentially leaving them dissatisfied with the final judgment. Mediation has the opposite effect.   Rather than polarizing people, it enables the parties to attack the issues and not each other.     The process promotes open communication, collaboration and problem-solving, which enables parties to actively participate in crafting ...

How to Get Paid

It seems as though clients' disputes come in waves.  The latest pattern that has emerged is contractors are finding that they are having trouble getting paid.  As usual, the best way to deal with this problem is by preventing it entirely.  The two tools in your arsenal are your contract, and written change orders.

Prior to starting any job, a contractor or construction company should negotiate a clear-cut payment schedule that makes payment conditioned upon milestones. The work should never get ahead of the payment and vice-versa.  Payments should be broken down into numerous, frequent payments.  That way if either side is having money trouble, it will be discovered before huge receivables accrue.

The contract should also have a clause that the contractor is entitled to stop work if payment is not made within a certain time period.  That way the contractor will not be accused of breaching the contract or abandoning the job if he refuses to work due to nonpayment.

Contractors should not allocate all of their profit to the last payment.  They should also also not cut their margins so close in order to be able to win a bid that any failure to get payment in full results in a loss on the job.

Finally, as always, all change orders must be in writing and reflect the change in price and any extension in the date of substantial completion.  Oral change orders are frequently not honored, and memories conveniently fade.  At minimum, confirm all change orders through email.

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