When contractors work on projects, much of their work is based on educated guesses. It’s difficult to know exactly how much a project will cost until it’s been finished. Once a final invoice has been paid in full, both parties have technically completed the contract. In rare cases, the contractor will add additional charges onto the last invoice in an effort to be paid.
Trying to charge additional fees after a contract has been finished raises ethical and legal concerns for both contractors and clients. In this editorial, we’ll discuss the legalities, professional issues, and ethical concerns of trying to charge additional fees after receiving full payment. If you have any further questions, reach out to a Colorado Springs contractor lawyer with Cotney Construction Law.
The Simple Answer Is No
The simple answer to this question is, no, the contractor cannot charge additional fees after receiving full payment. This boils down to a contract issue. The final step in completing the contract is for the contractor to send the final invoice and for the client to pay the invoice in full. Once that has happened, the contract is complete, and there is no more room for negotiations or changes to the contract.
As a contractor, it’s your obligation to make sure that all of the applicable charges are on the final invoice. If there are any changes that need to be made, you must make sure that they are accurately represented and addressed before the contract ends. It is illegal and unethical to try to add charges after the fact, even if they are legitimate charges. From a professional standpoint, it also makes you look bad at the end of a project. You may have a different way of collecting those additional charges, but there are a few things to consider before you act.
Overages Should Be Professionally Reasonable
There are two kinds of overages involved in a project: profit markups and cost increases. Profit markups are the amount that you add to a project to make it profitable. The markup should be something reasonable. Otherwise, you risk pricing yourself out of the market.
Contractor markups for projects are generally 10 to 20 percent, depending on the project. Cost increases are the type of overage that develop when the cost of materials or labor increases. They usually happen when a contractor begins a project and runs into a problem that needs extra time or materials to fix. If you are confused about what amount of overages is right, ask a member of our team of Colorado Springs contractor attorneys for help with your compensation structure.
An Obligation to Ask First
Overages that happen because the project is more complicated than you originally thought are common. In specific types of construction, they may be expected. However, there is a proper process for dealing with those overages.
Before anything is changed on a project that will impact the cost that you estimated at the beginning, you are obligated to discuss it with the client first. When you estimated the project, you told the client that you could do that project for a specific amount of money which the client agreed to. The client should be notified that the amount for the project has changed. This gives the client the chance to approve or deny changes, which count as changes to the project’s contract. If you are not sure how this will impact your project, call a Colorado Springs construction attorney to discuss your case.
Prevention is the key to avoiding this problem, and there are several methods that you can use to help you when a problem like this arises. Asking for an itemized invoice can help you see exactly where the charges come from. It forces the contractor to justify what the price increases pay for, and it also makes it easier for someone to take legal action if any of the charges seem out of place. Take the invoice to a Colorado Springs construction lawyer for help determining an appropriate legal approach.
Liens and Breach of Contract Lawsuits
Construction companies are often involved in legal proceedings at the end of their projects. Two of the most prominent legal problems that come up on projects are liens and breach of contract lawsuits. A lien can be placed on a property if a contractor fails to pay the subcontractor for the work they performed. The construction company will then have to take legal action to resolve the matter. Filing a lien is a big step towards serving the relationship between a contractor and subcontractor and often leads to further legal issues.
Breach of contract lawsuits are also filed regularly when the subcontractor fails to do the work that they were contracted to do. Once the contract is signed, the subcontractor must complete the work in agreement with the contract. Contractors use breach of contract lawsuits similar to how liens are used to recoup costs or force compliance with the contract so that they can get projects finished without major interruptions.
Whenever a legal issue comes up in a construction project, it is always a good idea to work with a lawyer to resolve it. He or she can provide the support that you need to resolve issues quickly and protect your company from problems that can impact your work. If you have any questions about contracts for construction law, contact a Colorado Springs contractor lawyer from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.