Top Ten List for When a Lawyer Can Help You in Your Construction Business

By Jon Powell

Part of running a good business and being a good businessperson is recognizing when you need the assistance of lawyers, accountants, financial consultants or other professionals. Advice from these professionals can help you to start-up and maintain successful companies in the most advantageous corporate form; to add to the profits earned by these companies; to help grow and safeguard the assets of the companies and to protect the assets of the individual investors in the companies; and to avoid liability problems for the companies and their investors. This article will start with a top ten list of when a lawyer can help you in your business.

Top Ten List
  • Forming a partnership or corporation;
  • Drafting a partnership agreement or shareholders agreement;
  • Drafting contracts for labor and materials;
  • Collecting on unpaid invoices;
  • Prosecuting claims for unpaid change orders and delay damages;
  • Prosecuting claims against materials suppliers for defective materials;
  • Drafting settlement agreements and releases for resolving business disputes;
  • Prosecuting claims for breach of the partnership or shareholder agreements;
  • Defending against claims made against the company by owners, general contractors, subcontractors, material suppliers, or creditors; and
  • Submitting insurance claims under builder’s risk, commercial general liability, commercial property, officers and directors liability, business interruption and other types of insurance policies.
The Assistance Provided by Attorneys
  • Forming a partnership or corporation

There are various types of corporations and partnerships available and the particular form you choose can have tax and liability consequences for the business and the owners of the business. An attorney can advise you as to the most advantageous corporate form for your business and an attorney can complete the necessary paperwork to provide your business with the proper corporate form.

  • Drafting a partnership agreement or shareholders agreement

 

I am constantly amazed at the number of phone calls I receive wherein an investor in a construction related business has invested a considerable amount of money and only afterwards calls me to ask what his or her ownership percentage is as compared with other investors; what his or her rights and responsibilities are in the partnership or corporation; and other matters that should have been addressed up-front and in writing in a partnership or shareholders agreement. Partnership and shareholder agreement put it in black-and-white as to what each investor will invest in the business; what each investor’s ownership percentage is; and what each investor’s rights and responsibilities are. Partnership and shareholder agreements can also address future matters such as buying out partners or shareholders or what will happen if a partner or shareholder becomes incapacitated or dies. I am of the belief that a negotiated and well-written partnership or shareholder agreement is the foundation for successful business.

  • Drafting contracts for labor and materials

Written contracts for labor and materials are good for several reasons. Your customer will realize that you are a good businessperson if you are willing to make your commitments in writing and stick to them. With a well-written contract everyone will know what is expected of them – when the project will start and end; what specific tasks the project entails; what to do if something unexpected comes up that creates a delay or another problem; when payments must be made; and protective language such as limitations on warranties and damages or an arbitration clause.

  • Collecting on unpaid invoices

This is one of the most important areas in which an attorney can provide assistance. In order for your company to survive it must be paid for its labor and materials. Attorneys can send out demand letters, make claims against bonds, file liens, and file lawsuits in order to collect on unpaid invoices.

  • Prosecuting claims for unpaid change orders and delay damages

Potential clients sometimes contact me after their businesses have been ruined when a project or two has gone bad and it was not the potential clients fault. Attorneys can prosecute claims against those who are responsible for the problems on the project. Owners and general contractors that have not paid on change orders can be sued. Owners, general contractors, architects, engineers, and subcontractors that have created delay on projects can be sued for delay damages. Such lawsuits and the recoveries obtained can help companies get back on their feet or at least provide assets that can be used to pay legitimate creditors of the business that remain and that were not at fault for the problems experienced by the business.

  • Prosecuting claims against materials suppliers for defective materials

I receive calls from homebuilders and others who have received defective lumber, paint, stucco, equipment or other supplies. Believe it or not, sometimes materials suppliers want to be paid even when their materials are defective. Attorneys can defend against claims for payment of invoices from materials suppliers where the materials supplied were defective. Further, these defective materials can become incorporated in construction and result in serious economic consequences for homebuilders who have to fix the problems associated with the materials. Homebuilders can assert claims against the suppliers of defective materials for repair or replacement costs and delay damages.

  • Drafting settlement agreements and releases for resolving business disputes

Some disputes can be resolved fairly quickly. To make sure the dispute stays resolved an attorney can draft up a settlement agreement and release.

  • Prosecuting claims for breach of the partnership or shareholder agreements

Sometimes investors or shareholders do not live up to their obligations. Other times investors or shareholders take business for themselves that belongs to the company or even inappropriately make use of company assets. When a partnership or corporation has problems due to the action or inaction of a partner or shareholder claims can be asserted for, among other things, breach of contract and breach of fiduciary duties. Asserting such claims might get the errant partner or shareholder back on track and if not might allow the innocent partners and shareholders to recover for the economic consequences to them of their partner or fellow shareholder’s misconduct.

  • Defending against claims made against the company by owners, general contractors, subcontractors, material suppliers, or creditors

No matter how hard you try to do what is right there is always the possibility that claims will be made against your company. These claims run the gamut from claims for not completing work on a project to claims for wrecks involving company vehicles. You will need an attorney to represent your company and defend against such claims.

  • Submitting insurance claims under builder’s risk, commercial general liability, commercial property, officers and directors liability, business interruption and other types of insurance policies

This is another one of the most important areas in which an attorney can provide assistance to your company. Companies and their investors or employees pay premiums to insurance carriers on various types of insurance policies in order that if the need arises there will be funds available to pay for claims. It is only fair and right that when claims have arisen for property damage, delay damages, lost profits, and other types of losses incurred, that insurance carriers from whom the requisite coverage has been purchased pay for such claims. An attorney can help you to search and make sure that all potentially available insurance funds have been addressed.

Jon Powell is an attorney who can be reached at The Powell Law Firm, 314 East Commerce, Suite 710, San Antonio, Texas 78205, Phone: (210) 225-9300; Fax: (210) 225-9301 and E-mail: jon@attorneyjonpowell.com