In this week’s Freedom Friday blog and email newsletter, I want to talk about a topic that I’ve discussed before, but I get asked about it a lot, and that’s how to enforce contracts, especially if the customer didn’t pay, and especially in the construction industry. Construction disputes are the fastest growing area of litigation in Oklahoma right now. So, in today’s Freedom Friday blog and email newsletter, I’m talking about how to enforce contracts, especially in the construction industry.
First of all, if you’re a general contractor or a subcontractor, you need to consider filing a statutory lien on your work, and you may wish to have an attorney assist you with doing so to protect your interests. Oklahoma’s statutory lien process for construction contracts is really a separate topic and article for another day, but if you’re doing construction work, and your customer isn’t paying the bill, or you’re a subcontractor not being paid by your general contractor, filing a lien is the number one way to enforce your contract because you can foreclose on the lien at the same time as filing suit to collect money damages.
So, what else can you do to enforce your contract, even if it’s not a construction contract? Here are five (5) steps to enforce your Oklahoma contract:
1. Review the Contract
The first step to enforce your contract, even before filing a lien, is to review your contract. Read the contract carefully and look for payment terms, deadlines, grace periods, penalties, late fees, remedies for breach, and any specific dispute resolution process, such as mandatory arbitration or mediation. Understanding the contract will help inform your next steps.
2. Send a Demand Letter
The second step to enforce your contract is to send a demand letter. The demand letter needs to explain the breach, cite the relevant terms of the contract, demand payment or performance by a certain deadline, and the defaulting or breaching party of legal action if the breach is not resolved.
3. Negotiation
The third step to enforce your contract is through informal negotiation. This can include negotiating a new payment plan, entering into a partial settlement with the defaulting party agreeing to pay an amount smaller than what was owed, and/or agreeing to modify the terms of the contract.
4. Mediation or Arbitration
The fourth step to enforce your contract is to consider mediation or arbitration. Some contracts require the parties to submit to formal mediation and/or arbitration prior to filing a lawsuit. Mediation is when the parties agree to hire a third person (who is called a mediator) to attempt to resolve the dispute through a formal process of mediation. However, arbitration is usually binding and is a more involved process of litigation. In some situations, arbitration can be less expensive than litigating in court, but in some cases, the filing fees to initiate the arbitration may be more expensive, although the parties can reach a timelier resolution instead of protracted time in court.
5. File a Lawsuit
The fifth step to enforce your contract is to file a lawsuit. In a lawsuit for breach of contract, the plaintiff must prove that a contract exists, the other party failed to pay or otherwise comply with the terms of the contract, and money damages occurred as a result. The plaintiff can recover principal and interest, but also in many instances attorney’s fees (depending on the type of contract), court costs, and interest at the statutory rates.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at Jonathan@libertylegalok.com to schedule a FREE consultation.
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