Tuesday, June 28, 2011

Construction Contracting in Vermont – Part 2

I am back in Vermont and had a very pleasant golf game with Jim Mills at the Woodstock Country Club Golf Course with its narrow fairways, tight greens and plenty of streams crossing fairways and protecting greens. The setting is beautiful and Sunday afternoon was sunny with temperatures in the low ‘70’s – perfect golf walking weather. I took the opportunity to discuss with Jim the unpleasant experience he had with a customer that required him to bring a lawsuit for collection of monies owed under the construction contract. Yes, as you may recall from my prior article,  Jim was my constructon contractor who had told me that he had worked all his life without contracts with his customers and felt that if he needed a contract with a particular person then it was not the kind of person he wanted to work with.   

Basically the amount owing was Jim’s profit and when he sued the customer counterclaimed. The controversy involved alleged delays that Jim argued were due to change orders.  Jim had not been able to obtain signed approvals of the change orders but proceeded to implement them in good faith.

In Vermont mediation is a mandatory process in all civil litigation cases.  Mediation does not necessarily result in an agreement since the essence of mediation is for the neutral mediator to facilitate a voluntary settlement of the controversies.  In mediation, any of the parties can at any time decide that he or she does not want to continue and terminate the process without any obligation whatsoever. The mediation normally is undertaken over a one day period and in this case, according to Jim, things were moving well after some 8 hours when the customer decided that he did not want to continue having lost faith in the mediator. Obviously, the customer felt that he would come out better in court then under the mediation as it was developing.

The matter continued to be litigated in court and after a three year process, the counterclaim was dismissed, but so was Jim’s action for damages.  Another factor that may have been crucial was that there was no arbitration clause. Arbitration is usually quicker and less expensive and permits one to have more control of who will be deciding the matter which is particularly important in cases requiring special expertise such as construction contracts.

Jim had not followed his basic principle of refusing to deal with someone requiring a written contract.  He explained that he knew the person had a reputation of being litigious, but the construction of a newly designed large home in a prestigious resort was very tempting, and he felt that his people and construction skills that had served him so well over some 35 years without a claim would also allow him to resolve any issues that would come up. Jim recognized that he compounded the problem by also proceeding with change orders without obtaining the customers signature.  If you are going to work with a written contract then one needs to be consistent in obtaining signed amendments.   It has never ceased to amaze me how very sophisticated clients with in house attorneys uniformly fail to document changes and required renewals, not to mention not enforcing the normal contractual conditions.     

I mentioned to Jim that the CEO of our family businesses, Eggie Navas, has a saying that I feel is so true, “ You can never have a bad contract with good people nor a good contract with bad people.”  In other words, no matter how well a contract is written, litigious persons will one way or another find a way to litigate something in order to improve at the end their monetary position. I am sure you can think of a person in your community who fits this picture to the tee.  On the other hand, with good people a handshake will do, and if there is a written contract (which is something I always recommend), problems will be worked out in a mutually satisfactory way without either side taking undue advantage of the other.

Contracts, and diligence in following up with their terms, help prevent conflict, but even more importantly, dealing with good people is the best way to prevent conflict and facilitate the resolution of conflict if one arises. 

Saturday, June 11, 2011

Construction Contracting in Vermont

Construction Contracting in Vermont

I am presently at our vacation home in Vermont and yesterday as I was finishing my three hour bike ride (how pleasant it is to have the drivers be so respectful of bikers and to have so many pave and unpaved roads to choose from) I thought of how different and special was the experience of remodeling our home in a contracting area that can be so stressful and conflictive.

Back some five years ago my wife Pinky “suggested” that we start looking to move from our Sugar Hill Condo in Vermont to a home that would accommodate our growing family of children, in-laws and grandchildren. When we visited our real estate broker Carol Dewey Davidson, she pointed us to what she described as a “very funky house with plenty of rooms and living spaces, a great location and exceptional views.” She did not have the keys but said no one was living there and we could take a peek through the windows.  Carol knows how to create curiosity – she was being absolutely candid but tweaking that candidness with colorful images that made us desire to immediately see this property.

Carol’s description was perfect. The house was ugly brown with a multi-level and long narrow porch to the right leading to a screened room with a rug that was in very bad shape.  From this screened room one entered the house. The rest of the front consisted of a mechanical room with the oil tank and water heater, the two car garage and another smaller mechanical room with the water pump and electrical/telephone equipment. One long windowless roof came down from the third floor to these three rooms. Not a pretty first impression!

Nevertheless, a peek through the windows indicated that the insides were not luxurious, but quite nice, and the views from house and the two and a half acre site was indeed spectacular – one could see the ski hill, Lake Pinneo and part of the golf courses as well as the mountains beyond. Most properties in our resort are hidden among the trees with little or no views. In addition to the great view, the property, located at the end of a short unpaved road high on one of the mountains, was very private and quite.  

Suffice it to say that after closer scrutiny we ended up buying the house for a very good price, but with knowledge that some serious remodeling would be necessary, primarily to improve the frontage and entry points to the house, as well as moving around some rooms internally so as to create a decent laundry and pantry. Carol recommended the architect, Art Garges, and contractor, Jim Mills, and the experience of construction contracting in Vermont commenced.

As a former corporate attorney of some 42 years working with contracts and convincing clients to put things in writing (I even put things in writing with my children), the first shock came with indications that these professionals gave estimates, but did not negotiate and sign contracts. Jim flat out stated that he had worked all his life without contracts with his clients and felt that if he needed a contract with a particular person then it was not the kind of person he wanted to work with.  Mind you, this remodeling job ended up costing over $250,000 and not once was there a moment of conflict with either the architect or the contractor or between the two of them.

The second surprise was that we left the keys to the house with both of them knowing that there would be multiple subcontractors over more than a year and during all this time not one item was ever taken, including food, wine, beer or liquor that were not under lock and key. It has always amazed me that over 10 years nothing has ever been taken despite the multiple persons who have access to the condo and the house for maintenance and repairs.  

The third pleasant construction contracting experience was that we became best friends with both Art and Jim. From the outset, the tone and ambience of our meetings were very professional and trusting, but just as importantly, there was a desire to develop a relationship beyond the professional-client relationship.  Our meetings to discuss the design and construction issues were almost always with both of them and in a relaxed mood around the kitchen table.

We also had a very good experience in Puerto Rico with the architect and contractor who remodeled our penthouse, but we did have contracts and the meetings/communications were more on a professional plane.

As a giver and receiver of professional advice, my take is that there needs to be respectful dialogue from beginning to end, that friendship is a real plus, that budgeting is critical and upfront discussions need to take place regarding developments that will impact the initial budget, that it helps immensely to respect and express appreciation for the professional’s advice, and finally, that it is very counterproductive to complain about the billings that fall within the budgeted parameters.  Some clients feel that these complaints will lead to lower billings in the future, but in the large scheme of things wherein a strong professional relationship is often so critical to one’s business or physical wellbeing, these complaints may well diminish the professional’s enthusiasm and thereby often end up costing the client more in the long run, including the loss of a good professional and friend.   

Wednesday, June 8, 2011

New Career/Blog Announcement

On July 1st I will formally launch my new career as conflict prevention and resolution consultant. Today, in preparation for that launching date, I commence my blog – Business Resolutions.  

Let me start off by explaining how my past career as an attorney with McConnell Valdés brought me to where I am.  Future articles will explain where I am going with my new career, interspersed with articles on conflict prevention, management and prevention for business and professional persons to which my future endeavors as consultant will be devoted. 

It has been 44 years since I first joined McConnell Valdés, initially as a summer law clerk during my  years of Law School, and then as a lawyer immediately after graduating from Harvard in June of 1969.

The professional and varied experience has been truly outstanding. I started in the tax department under Bob Van Kirk and after some 18 months moved to litigation under Fernando Ruiz-Suria. In 1973 I joined the corporate department under Bob Griggs, which is where I remained until my retirement from the Firm.

I served over different periods of time on the Executive Committee, and its successor, the Policy Committee, and in this additional role helped lead and grow the Firm. I joined the Firm because it was the leader in terms of size, the quality of its clients, the calibre of the legal services, and the professionalism and high ethical standards of the lawyers and staff.  Throughout my career the Firm continued to be the leader in all these categories.   

The Firm always supported my role as a volunteer in philanthropic and professional organizations, starting with the YMCA in the early ‘70’s. My role as President and/or Board member throughout all these years provided managerial challenges and incredibly satisfying moments as I strove with other volunteers and the professional staff to help develop and meet each organization’s respective mission and strategies.  

The Firm has a mandatory retirement policy respecting one’s position as capital member, although those who wish to remain with the Firm can continue as counsel. That mandatory retirement age as capital member is the end of the fiscal year in which one turns 67, which for me was this fiscal year ending May 31st.

I had given the Firm notice a number of years ago that I wanted to start a new career as an independent consultant in the prevention and resolution of conflicts. Our Firm policy calls for the announcement of such a decision at least 2 years prior to one leaving the Firm in order to implement a two year transition, which in my case was also completed on May 31st of this year.

I want to take this opportunity to thank the Firms’s present and former clients, attorneys and staff members for their support and for helping me prepare for my second career.  God bless them all.