Our firm represented a veterinary clinic owner ensnarled in a dispute over construction contracts. A solo practitioner with a well-established but relatively small practice, he was determined to build a brand-new hospital. He contacted a reputable, sophisticated contractor that held itself out as experienced in such specialized construction. The builder developed a three-part program, with contracts governing each project phase. The owner told the builder his budget was $4 million, signed the contracts and invested over $100,000 in preliminary budget discussions and design concepts.
At first, our client was pleased with the detail in the builder’s proposal. Indeed, the plan calculated the entire economics of the project, from the practice’s projected income from office visits, product sales and grooming, for example, to an analysis of the cost of bank loans, employee salaries and benefits.
Back to Square One
Ultimately, the builder told our client he needed to spend $5 million to get what he wanted. When the practice owner reiterated his $4 million limit, the builder responded that only a lesser building was possible. Not wanting to go over budget by $1 million and feeling duped by the contractor, the owner terminated the contracts and had to start over.
The good news is our client went with another contractor, achieved the hospital he wanted and maintained his $4 million budget. The bad news is the owner spent $100,000 with the original builder and walked away with nothing in exchange. He contacted our firm and asked why he couldn’t at least obtain the design drawings.
Do-It-Yourself Dangers
Unfortunately, the damage was done. The practice owner signed the contracts without an attorney’s review. Had he done so, his construction counsel would have pointed out that the design contract contained language making the drawings the builder’s intellectual property.
A construction lawyer also could have negotiated the terms to ensure the builder was obligated to design a hospital within the owner’s budget or return the initial deposits. Also, the owner would have known that the first $100,000 was for design concepts, not drawings, and that he would forfeit the money if the contractor weren’t the builder.
Lawyerly Benefits
When counsel is retained to represent a client in the negotiation and development of a construction contract, the lawyer will point out all the language that could:
- Hurt the owner’s business.
- Require the owner to spend more money than anticipated.
- Result in an unfair, one-sided contract.
Construction counsel will negotiate the contract, explain the terms to the owner in understandable language, and advise the client whether to sign the documents. The lawyer also will educate the client about the construction process so that if the unexpected occurs, the owner can manage the situation better.
Many practice owners are reluctant to pay for legal advice before construction. However, the reality is that penny-wise is pound-foolish, particularly on construction matters.
Involving a lawyer from the start can prevent unexpected construction delays and payment disputes and create mechanisms for ensuring quality workmanship. It also sets up fair and economical dispute-resolution procedures and realistic budgets and schedules.
STORY ARCHIVE
If you need ideas for building or renovating a veterinary hospital, check out bit.ly/constructive-criticism-TVB for previously published articles.