In the high-stakes business of production home building, houses are constructed on a foundation of well-written documents as much as wood and nails. As many builders know, documentation drives a successful project from beginning to end. Here, BUILDER talks with Adam Knight, a member attorney with the Nashville office of Dickinson Wright PLLC, about the importance of contracts, change orders, field notes, and other documents in the home building industry. 

Attorney Adam Knight cautions builders against the use of boilerplate contracts.
Attorney Adam Knight cautions builders against the use of boilerplate contracts.

Why is proper documentation so crucial for home builders?
The original contract, subcontracts, change orders and field memoranda – among scores of other documents – describe and establish the important relationships between parties involved in the project. These documents outline what individuals and companies are responsible for and can also outline essential liabilities. Documentation that includes plans and specifications used by contractors and subcontractors also becomes the backbone of the build itself.

Additionally, often times during the actual construction process, “site deals” are struck between a general contractor and the owner or a general contractor and its subcontractors. It is imperative that these deals be well documented so that when parties need to reflect upon what their agreement was, there is an accurate recitation readily available. 

Also, let’s say a home has been built and a complaint is made by the owner regarding the quality or integrity of the construction. In this case, it is imperative for the contractor to be able to produce completed and accurate documentation of each step of the process. This gives the contractor or subcontractor a much firmer foothold in defending their work in the event of arbitration or litigation. 

What are field notes and why are they important?
Field notes are the daily memoranda that are typically kept by superintendents or foremen on the job site. These are usually kept by everyone in the process, including the design professional, contractor, subcontractors and material men. 

Their roles can be different depending on the creator of the particular field note.  For instance, a design professional will create field notes that will serve somewhat like a diary of the progress of the job.  As the design professional, this individual is responsible for the overall progress of the project, as well as ensuring that the contractor and subcontractors comply with the various plans and specifications. To that end, a field note from an architect or design professional will almost necessarily include photographs, description of the weather, who was on the worksite, what areas of the project were being worked on at a particular time and what issues arose that need to be addressed on a later date.  It is this type of documentation that will help others piece together the puzzle in the event of claims, litigation and/or arbitration at a later date.   

From the contractor’s perspective, field notes also record the daily activities of that particular contractor.  However, in addition to their own internal notations, a contractor’s field notes will include information about subcontractors that were on the job site, what area the subcontractors were working on at the time, as well as work that was individually performed by that contractor. These notes serve as a recorded history of what was taking place on a particular given date and time.   

Subcontractors’ field notes are generally not as specific as an owner’s or general contractor’s notes, however, they serve many of the same functions as the previous two, as they help to answer questions that may be asked of them at a later date regarding what took place, how it took place and what influences were brought to bear, which may have affected the decision-making process at that particular time on the project.

What are the biggest problems builders have with contracts and how can they avoid them?
The biggest problem that builders have with contracts is they often do not use a proper contract in the first place. Each builder has unique goals for each project they serve, so a “cookie-cutter” form contract may not always be appropriate. Boilerplate language can leave significant gaps for specific project circumstances. Also, a project may call for more than one contract, depending on whether or not it is being built in phases.

Another problem that I tend to notice on the back-end of an issue is that builders often have not had conversations with their legal counsel to discuss their desires, their past problems and what their goals are with respect to the creation of a contract for a particular project or a series of projects.  Spending the time and effort with your legal counsel can avoid many, many heartaches and headaches once a project has either commenced or is finished. Often times, one simple sentence in a paragraph can stave off the need for thousands of dollars of arbitration or litigation if planning and foresight are employed by the contractor and its legal counsel.

Please provide a few tips for keeping a project well documented.
--Establish (and honor) a system by which all of the documentation will be created and saved. These can be form contracts or documents created especially for each particular project – but it’s important that you have a solid organizational system and know how to source and find all the documents that you will use.

--Be consistent with the documents that you use. If you are not consistent with your documentation, you will likely yield inconsistent results and possibly inconsistent enforcement of contractually created rights and responsibilities.

--Document, document, document. The crush of the pressure to build whatever structure the project entails often times leads to “hand-shake deals,” “site deals” and “trailer deals.”  These are often agreements that are struck between an owner and contractor or contractor and subcontractor on the job site to deal with a particularly thorny issue that has arisen unexpectedly at the job site.  Be sure to take five to ten minutes to write down the understanding of the parties. Then, follow-up with a more formal change order, memorandum or addendum to the respective contract – which is a crucial step in protecting a contractor from any future claims issues.

--Maintain your documents. Without maintaining adequate copies of records for long enough periods of time, all your documentation work becomes a wasted effort. A good suggestion is to keep both a hard copy file and an electronic copy file in your records in the case that one or the other becomes compromised. It’s also a good idea to maintain a separate hard drive, which backs up the main server on a daily basis and is kept in a remote location from the server in the event of catastrophic failure.

Adam Knight, a member attorney with the Nashville office of Dickinson Wright, PLLC, focuses his practice on construction counseling and litigation, commercial and business litigation, land use litigation, and product liability and personal injury.