5 Ways to Protect Your Construction Business From Lawsuits

Construction businesses all work in an environment where disputes and arguments arise quite easily. Materials, labor, construction protocols, and myriad other details are under scrutiny every day a project is underway. 

Construction Business

With so many things happening, it’s inevitable something somewhere won’t be right and someone is going to be unhappy. The important thing to remember is a well-written contract can help head off a lot of problems at the pass.  Also things like looking at details and having your certification, licenses, insurances in order will help in the legal aspect of projects.

1. The Devil is in the Details

As always, getting everything included in an agreement can be challenging but it is worth the effort. Think of the agreement contents as an insurance policy. You want everything covered by the insurance policy included in the coverage details and the same is true for a construction agreement. 

It may be a bit exasperating getting everything into the documents, but in the long run, you’ll be glad you did it. Owners, contractors, subcontractors, vendors, and laborers should all be working with an agreement in place that specifies responsibilities as well as remedies if things aren’t as they should be.

One of the biggest challenges in the construction industry is producing accurate and detailed quantity take off.  This is the first step when a contractor is bidding a job, and its followed by the preparation of the estimate.  The final contract price is dependent on the accuracy of these initial takeoffs.

2. Start With a Solid Agreement

There may be significant differences between constructing an entire building and replacing a defective water heater for a homeowner. However, the agreements signed by all parties in each case are just as critical as the work being done. 

Small size jobs can turn into extra-large problems if the documents detailing responsibilities aren’t clear or are confusing. Smart construction business owners and managers know it’s worth the cost to have an agreement drawn up by a construction attorney. Constantly changing laws, codes, and licensing dictates the need for utilizing legal counsel with specific experience in the construction industry.

3. Keep It All in the Family

When coordinating the documentation and agreements relating to a construction project,, the documents must have commonality and refer to each other as appropriate. This forms a paper trail that can be easily followed in the event of disputes or disagreements. 

Purchase orders, completion sheets, and other affiliated paperwork should refer to the main contract and contractor’s agreement clauses and stipulations whenever possible. By tying all the peripheral documents and agreements together, a construction business builds a defensive wall around their company to protect from external damage.

4. Stay Up-to-Date

Construction is a constantly-evolving environment and keeping pace with legal changes, construction codes, and other areas subject to updating or modification can be more than a construction company can deal with. Keeping agreements, documents, and other important paperwork in compliance with changes isn’t a construction company’s main focus. 

Due to the importance changes may cause to contractual relationships, construction company owners and managers need to have their documents and agreements reviewed regularly. One minor mistake in the wording of a contract could cost the company a lot more than the expense of having the document reviewed and updated.

5. Certifications, Licenses, and Insurances Too

All too often, a company involved in litigation or a dispute finds out a license has expired or a certification must be renewed or they are out of compliance. Being out of compliance is often perceived as a significant event and might void contracts and agreements in place. 

Maintaining proper licenses, certifications, and insurance coverage can be a full-time job, particularly if a construction business works in multiple jurisdictions or across state lines. At a minimum, administrative functions that work with these important concerns should top the list of “to-do” items monthly. 

Other Areas For Reducing Liability

A lot of steps can be taken by construction business owners and managers that will help reduce the company’s exposure to lawsuits and litigation. Construction company owners, managers, and supervisors should have training in the following areas:

  • Education and practice of safety protocols with records kept of attendance and subject matter covered.
  • Use a commercial construction estimator to increase bid accuracy.
  •  Updates and classes on proper construction basics and routine activities.
  •  Adequate time spent under supervision to determine operator skill levels.
  •  Review of proper methods to move equipment and materials, communications protocols, and working with subcontractors, vendors, and laborers.
  •  Maintain awareness of subcontractor activities and compliance with job specifications.
  •  Proper document handling and notations for submission to administrative offices.

Talk, Talk, and More Talk

Perhaps one of the best ways to avoid lawsuits in a construction business is communication. Information gained from conversations with contractors, subcontractors, vendors, and laborers can head off problems before they become issues. 

By communicating, reviewing the stipulations and caveats contained in agreements with the others involved, and sticking with the originally agreed contract, many lawsuits can be easily avoided. When disagreements occur, they can be more easily remedied at the early stages of conflict as opposed to later on when problems may be compounding.

Take the Lead

Lawsuits occur because two parties disagree. Waiting for someone else to file a lawsuit against your company isn’t always the best way to deal with the disagreement. Many times, it is advantageous to be the initiating party of any legal action that is necessary. 

Legal advisers may say it doesn’t matter who files the lawsuit, but there is still a certain stigma attached to being the receiving party and not the filing party. Being named in a lawsuit can lead to many other issues. Complications with insurance companies, licensing boards, and certification agencies can ensue, creating a perfect storm for company owners, managers, and supervisors.


Veterans in the construction industry frequently say it’s not a matter of “if” your company might be involved in a lawsuit, it’s a matter of “when”. Preparation for that event is crucial to emerging from the experience as intact as possible. 

With the large amounts of money that can be included in a dispute, it’s critical to have as many ducks lined up in a row ahead of time as possible. Retaining legal counsel before the event, review of all contracts and agreements, and establishing a plan of action in the event a lawsuit is filed will help reduce the financial, operational, and emotional impact a lawsuit can cause. 

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Article Author Details

Daniel Quindemil

Daniel has a passion for architecture and design. He graduated with an architecture degree from Florida International University in 2010 and since then he has been committed to helping homeowners with their home improvement needs.