Contractor fraud occurs when a contractor commits illegal acts independently or under the guidance of a firm. This type of crime can manifest in countless ways, but contractor fraud is typically characterized by deception, a breach of contract, or substandard work performed intentionally or arising out of inexcusable negligence. In the past, contractors have even worked in conjunction with construction companies to commit “construction fraud.”
The general public typically associates fraud with high-profile cases like 2001’s Enron scandal in which the company artificially boosted their worth through a series of accounting schemes, or Bernie Madoff’s infamous Ponzi scheme that was uprooted by lawmakers in 2008. However, fraud can occur at any economic level, which means contractors should be careful when trying to cut corners and save costs. In this two-part series, our Miami construction lawyers will explore contractor fraud and explain how you could unintentionally be committing a fraudulent act.
Why Do Contractors Commit Fraud?
Cases of contractor fraud are as varied and numerous as the people who commit this crime. From substandard repairs to offering services that intentionally mislead or cheat the owner, contractor fraud typically occurs when less-than-savvy owners are targeted by contractors who think they can “get one over” on them for personal gain or when contractors fail to perform their duties diligently. Whether a contractor works primarily in residential construction or commercial construction, contractor fraud can lead to increased expenses for the owner because properties tied to fraud are usually damaged or poorly built which results in higher bills.
Common Causes of Contractor Fraud
Contractors who actively try to defraud individuals utilize a myriad of tactics including threats and intimidation to accomplish their goals. Nonetheless, well-intentioned contractors can also commit fraud accidentally. Some of the most common techniques used by fraudulent contractors include:
- Demanding full payment up front
- Utilizing written contracts that exclude information on verbal agreements
- Performing work with an unrelated permit
- Requesting payment for additional work without providing evidence of a problem
- Attempting to use their own extra materials and perform the job for a price below market value
To learn more about contractor fraud and how to avoid being embroiled in a dispute related to fraud, read part two.
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.