Friday, January 12, 2007

Mediation of a Construction Contract Dispute

In a construction contract dispute, the homeowner and the contractor who was hired to update the kitchen end up having a disagreement over the terms of the contract when the bill comes in $50,000 over what was promised and the work fell far short of the homeowner's satisfaction.

What were the homeowner's options when a solution could not be reached through direct discussions and tempers were starting to escalate the dispute even more?
The homeowner did not want to hire a lawyer and deal with a breach of contract lawsuit he would have to commit more time and money to, since he was short on both. And $50,000 was too much money for a small claims case. (Filing a small claims case is often a good "quick and dirty" solution when the amount in dispute is under $7,500 because resolution is just 30 days away).

So what did the homeowner do?

The homeowner contacted the Bar Association's Mediation program, got the contractor to agree to the plan since it was in his best interest to have this resolved too. Both paid small administrative fees to be assigned an experienced and qualified mediator whose hourly rates they could afford; A four hour mediation meant each would only pay for two hours of the mediator's time (although Bar Associations often provide the initial one or two hour of mediator time free).

Mediation was scheduled within two weeks, the mediation took half of one day and both parties were able to express their frustrations and consider a notepad full of solutions. As is often the case, the solutions to this dispute were found in the expressions of frustration from both parties.

The contractor agreed to re-do certain specific items (the ones that caused the homeowner the most frustration) at no additional charge. The homeowner agreed to pay almost the full amount of the contractor's bill.

Will the homeowner hire this contractor again? Probably not. Is the contractor upset at losing this homeowner as a repeat customer? Again, probably not, although the contractor may be more upset at losing a potential source of referrals, which is likely part of the reason for the free repair work.

Both parties were able to walk away with their pride intact, their interests satisfied with the solutions in hand and the relief of having put one big problem to rest without a lawsuit.

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