Settling With All the Right Parties
A college hired a general contractor to renovate one of its residence halls. This included some bathrooms and shower stalls. After completion of the project, the school discovered a number of leaks caused by defective work in the bathrooms. The college sued the general contractor for breach of contract and the plumber for breach of its warranty, alleging improper installation of shower pans and drains in the bathrooms. The plumber quickly settled. Eventually so did the general contractor. However, the general contractor then cross claimed against the plumber, seeking payment from the plumber of the monies the general contractor paid to the college.
The plumber cried foul saying it had been released from claims for improper work when it settled with the college. But the plumber was wrong. The court concluded that just because the plumber settled with the college, didn’t mean it was released from claims for indemnification being made by the general contractor. A tough lesson for the plumber who had forgotten to make the general contractor part of its settlement with the college.
Three Parts of Every Construction Settlement
When settling any type of construction dispute, make sure to formalize the settlement in a written document. Have it signed and dated, and include the following:
1. The names of all the parties who may be involved or have anything to do with the dispute;
2. A description of the what, when and where of the incident that led to the dispute, and
3. The consideration for the settlement – what are the parties giving and getting to obtain a release and settlement of the dispute.
Had the plumber answered these three questions, he would have realized that to be totally and fully released on this job, he would have to include the general contractor in his settlement with the college.