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Dispute Resolution for Contractors - Settle It Before It Turns Nasty

By: MauiNick How can a lot of cash turn into a little? Litigation!
Your contracts should have a clause for an ADR, or alternative dispute resolution. This diverts any argument from going to civil litigation, meaning instead of the courthouse- and suffering the costs involved in that- you have an alternative means of resolving a solution to the dispute. But before you can even think about your alternatives in this area, you must be sure that this is included in your conditions, and your customers understand it. And, then, hope you never have to use it. But in the case you do, you will be prepared.

There is a course of action you can take that involves several steps to come to terms between contractor and client. The first step can be a casual conversation. Invite the clients to your home and over coffee, listen to their point of view, and also let yours be heard. You each have the chance to be heard, and maybe over the friendly chat, a solution to the dispute can be arrived at.
If not, the next step would be to bring in a third party, in this case,
a mediator. A mediator is a paid professional whose skill lies in problem resolution. They use varied approaches to get both parties to start talking, and consider each other’s points of view. They encourage, and sometimes even push for a resolution.

But, mediation is not binding, which means that either party can call it off when they want. But, a good mediator will usually keep the conversation going, and remind both parties of what the next step could be in the climb of resolution. In addition to money being restored, respect can be as well, since this creates conversation.

The third step, if mediation does not achieve the desired result, is small claims court. A fee does not have to be paid to anyone, but a small fee to the court. You prepare the case and go before a judge, which saves time and money. But, even if you win, you still sort of lose. If you lose, you are out money. And, if you win, there may be some bitterness from the client because you brought them to court. That can be damaging to your reputation. But still, you have a right to what you are entitled, and this may be the way you have to go.

You can go to arbitration as the final step in the process. This is not court per say, but it has the elements of it- a judge, lawyers and cross-examinations. But, it is not as dragged out of a process. You get in; you win or lose, or split, and get out. This is, however, more costly than mediation.

This is something that you may want to point out to your customer prior.

Taking precautions, such as making sure change orders are formalized, and making sure there is an ADR clause, you will have a strong contract. You and your customers will be protected through preventing the most common forms of disputes (unexpected work) and a cost-effective way of dealing with it.