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Strategies to Recoup Unpaid Contract Payments for Construction Projects

Contracts are the basis for how construction companies do business. Every project should have a well-defined contract reviewed and signed before any work begins. Although many projects are completed without a problem, collecting the value of that contract can prove problematic. For some reason, the client may not have paid the contract in full or at all. As a construction company or contractor, you do have options to try to get what you are owed. In this editorial, a Nashville construction dispute attorney discusses strategies to recoup unpaid contract payments for construction projects. 

Reminders

The first step that you should always take is to remind the other party that the contract has not been paid in full. It could be something as simple as a mistake in the way that it was paid, or the client forgot to send the payment. Many construction companies and contractors are afraid of causing a problem with the client. This is the simplest and most non-confrontational way for you to address the situation. It may even prevent the need to hire a Nashville construction lawyer to help you handle the situation. 

When you do send a reminder, make sure that you phrase it in a polite and non-confrontational way. Be specific about what is owed. Include the invoice number and a copy of the invoice that was not paid. That way, the client can verify with his or her records and clear up any discrepancies that exist. 

Demand Letter

If you have taken the first step with no results, then it may be time to take a more stern approach. Before you hire a Nashville construction dispute lawyer and take legal action, you can take a slightly lighter approach: the demand letter. A demand letter is a document that you send to the client that “demands” payment. This is different from an informal reminder in that it is a legal document that warns the client of your intentions if the invoice is not paid. 

Your demand letter is, essentially, a more aggressive and stern letter than the one you used in the first step. Demand letters are usually successful since they are more aggressive and the recipient usually sees it as the first step in a legal process that they don’t want to be involved in. 

If your demand letter is not successful, then it will likely be time to resort to serious legal action. You can have a lawyer write a demand letter for you if you are not sure how to write one. This may work in your favor since the lawyer will be available to help you if you need further legal assistance if your demand letter is ignored.

Lien

Before you take legal action, be sure that your actions are justified and that it is what you want to do. Nashville construction lawyers will tell you if a case is worth pursuing or not. Some cases can be more expensive than the amount that you could recover. Still, if you find that your case is worth pursuing, then you do have legal options. One of your legal options is a lien.

Filing a lien is a serious decision since it could be the end of the relationship with that contractor, subcontractor, or client. It places a legal hold on the property until the complaint is dealt with. That means that a developer would not be able to sell the property or similar problems for other parties. Consult with a Nashville construction dispute lawyer for guidance on how to file or deal with a lien. 

Arbitration

A less serious but equally as important option is to file for arbitration through a lawsuit. Arbitration is increasingly popular since it lets parties find an amicable solution without a full-scale lawsuit. Many companies prefer arbitration to a lawsuit, partly because it gives them the option to negotiate the outcome. It is also a faster process than a lawsuit and many arbitrations end without damaging the relationship between the parties. 

In arbitration, both parties meet with an independent third-party, a mediator, or arbitrator, whose job is to help the parties find a solution. Both parties get a chance to state their case and negotiate with the arbitrator helping with the process. In some cases, the arbitrator can determine the acceptable solution and it is final in the way that a judge’s ruling is. For arbitration to be an option, it is usually included in the initial contract. However, it is possible to enter into arbitration without a clause in the contract stipulating it. 

Civil Lawsuit

If all else fails to deliver a solution, you can file a civil lawsuit that will go to court. At this point, you may be offered a chance for arbitration, or already tried arbitration. If this is the case, then you may not have other legal recourse depending on how the arbitration ended. However, discuss your case with a Nashville construction lawyer to see what your legal options are. Take your case to court where a judge will rule on the matter. 

When you file a lawsuit, know that your relationship with the other party is probably over. Once you end up in a lawsuit with them, they probably won’t want to work with you again. However, failing to pay you is as much of a reason to end the relationship anyway. Choose a good lawyer to represent you since it can affect the outcome of the case. 

Trying to recover unpaid contracts can be stressful. However, you do have options that you can rely on. If you have questions about how to handle unpaid contracts, contact a Nashville construction dispute attorney from Cotney Construction Law.

If you would like to speak with a Nashville construction dispute attorney, please contact us today.

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.