Managing Payment Disputes in Construction Projects: Legal Options for Contractors

As a contractor, helping others build their dream home or construct a striking new piece of architecture for the public to enjoy is an exciting and rewarding experience. But payment disputes can easily complicate your career, especially when they result in construction delays, frustrated clients, and unexpected expenses. Filing a lawsuit is always an option, but most contractors would prefer to avoid spending time in a courtroom if they can. 

Dealing With Payment Disputes

The first step in handling a payment dispute is to review your contract. Before proceeding with any options, make sure to refamiliarize yourself with all provisions. In particular, pay special attention to clauses that outline the following factors:

  • Time frames
  • Payment schedules
  • Scope of work
  • Arbitration

If your contract specifies how disputes may be resolved, you must stay within the parameters of that agreement. Once you are clear on which legal options you may pursue, consider starting with the least aggressive choice first. 

In such an order, your options may include the following:

Arbitration

Arbitration involves a neutral third party that will hear arguments much in the same way a judge or jury would. Both parties must agree to follow the decision of an arbiter, and there is no option to appeal their final decision.

Mediation

Mediation is similar to arbitration, but a mediator does not hand down a binding decision. Instead, a neutral mediator helps the two disputing parties come to an agreement. 

Both arbitration and mediation can save time and money. The primary difference between the two is that mediation is primarily used in business disputes to help maintain working relationships and avoid costly legal fees. 

Small Claims Court

If the pay dispute ranges between $2,000 and $25,000, a small claims court suit may be sufficient. Going to small claims court does not require an attorney. You may file a claim by filling out the necessary paperwork in your county and paying a minimal filing fee. In court, the defendant and plaintiff both plead their cases to the judge, the decision of whom is legally binding. 

Civil Court

It is advisable to hire an experienced attorney if you wish to pursue civil litigation, as there are a multitude of deadlines and different phases of the lawsuit to contend with. Without legal representation, you can easily become overwhelmed with navigating the legal system. An attorney won’t have to play catch-up figuring out where and how to file all the necessary forms; they can focus their time on winning your case. 

What if they still don’t pay?

If you’re successful in small claims or civil court, but the defendant still doesn’t end up paying in accordance with the judgment, you still have options. A court cannot collect the money on your behalf, but you may be able to seize assets or cash or have the defendant’s wages garnished. Consult with an attorney to understand all the options available to you in your county. 

Get Legal Support

Disputes in the business world are common and not always malicious. If there’s been a misunderstanding or a company is temporarily low on funds, it may be easy to resolve the dispute without taking legal action. 

However, when legal action is required, you shouldn’t go it alone. Hire an experienced civil litigation law firm to ensure your rights are protected, and you get paid the money you deserve. Kohan Law Group is a civil litigation law group providing legal services throughout New York, including the five boroughs, Suffolk and Nassau County on Long Island, and both Westchester and Rockland County.