January 10, 2011
By Bob Incollingo
Even when a home improvement contract is as detailed as New Jersey law requires, disagreements between homeowners and their contractor can still arise in the course of construction. With the parties speaking past one another for the most part, amicable resolution may be hard to reach. One evergreen area for disagreement comes up when the draw schedule hinges on percentage of completion, another when minor punchlist items give the homeowner leverage to hold off mid-point or final payment and force attention to quality issues. Even the most honest homeowner concerns can result in delay, and even interference.
How then to proceed? Arbitration and mediation cost money. Litigation costs money and lasts a long time and, given its nature as a zero sum game and risk of countersuit, should be considered a last resort. The under-used New Jersey Alternative Procedure for Dispute Resolution Act (P.L. 1987, c. 54; C. 2A:23A-1 et seq.) is a great way to go for larger residential projects, if you have an attorney to explain it to you, in which case you can make reference in your contract to that statute as the primary method for alternative dispute resolution (ADR). If you go that way with the assistance of counsel, be sure to limit the scope of the umpire’s authority – there are some issues (like consumer fraud, for example) that ought to be placed before a judge.
You can also agree on a method for resolving minor disagreements in advance. Here is a specimen clause to handle the smaller bumps in the road:
|12. Resolution of Minor Disputes. The Contract Price includes a 60-minute meeting per week with Owner or Owner’s representative. Any additional meetings shall be invoiced at Contractor’s hourly rate of $_______, payable immediately upon presentation of invoice. Contractor reserves the right to complete, repair or replace any deficiencies in its work, both during the construction process and thereafter. Failure by Owner to provide Contractor with an opportunity to complete, repair or replace such deficiencies shall excuse Contractor from any obligation to pay for repairs or replacements incurred by Owner. At any stage in the progress of the Work where the degree of completion (including any workmanship issue) is contested, before final completion of the Work, Owner and Contractor shall submit such dispute to non-binding determination by an inspector/umpire authorized by (1) any lienholder in receipt of undisbursed construction loan proceeds, or (2) the local Construction Code Official, or (3) any third party agreeable to both Owner and Contractor, and in such event the parties shall share evenly the cost of this inspection/inquiry. If either party disputes the determination of the authorized inspector/umpire, or where no authorized inspector/umpire shall have been identified from the three foregoing categories and/or consulted following demand by either party, the contract shall be deemed in breach and the parties may pursue their legal remedies in any court of competent jurisdiction in the State of New Jersey.|