{"id":892907,"date":"2017-09-13T09:45:16","date_gmt":"2017-09-13T15:45:16","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=892907"},"modified":"2017-09-13T10:05:53","modified_gmt":"2017-09-13T16:05:53","slug":"cost-plus-contract-disorganized-contractor","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/cost-plus-contract-disorganized-contractor\/","title":{"rendered":"Cost-Plus Contract and the Disorganized Contractor"},"content":{"rendered":"<p>I&#8217;Ashea Myles-Dihigo | <a href=\"http:\/\/abaconstructionforumdivision1.blogspot.com\/\" target=\"_blank\">The Dispute Resolver<\/a> | September 6, 2017<\/p>\n<div>Some contractors are better at record keeping than others.\u00a0\u00a0I always seem to run into this issue when I working with a client and I\u2019ve asked them to provide me with all of their records regarding the project.\u00a0\u00a0The usual answer that I get is, \u201cI don\u2019t keep those kinds of records,\u201d or \u201cAll I have are text messages.\u201d\u00a0\u00a0Depending on the type of contract dispute, the lack of accurate record keeping may not be such a big deal, however, when there is a dispute regarding a cost-plus contract, recording keeping can become a central issue.\u00a0\u00a0This concept is explained by the Tennessee Court of Appeals in the case of\u00a0<u>Forrest Construction Company, LLC v. Laughlin.<\/u><\/div>\n<div><\/div>\n<div><\/div>\n<div>Generally speaking in Tennessee, when a contractor seeks to recover unpaid fees relative to a cost-plus contract, and the owner denies owing fees, the contractor must show the court an itemization of each expenditure made on the project.\u00a0\u00a0In Forrest Construction Company, LLC v. Laughlin, homeowner entered into a cost plus contract with Forrest Construction Company to build a home.\u00a0<u>Forrest Construction Company, LLC v. Laughlin<\/u>, 337 S.W. 3d 211 (Tenn. Ct. App. 2009).\u00a0\u00a0Prior to completion, of the house, Forrest Construction and the homeowner began to have disputes about payment.\u00a0\u00a0<u>Id<\/u>. at 216.\u00a0\u00a0Forrest Construction stopped work on the home, filed a lien, and thereafter filed a breach of contract action against the homeowner and an action to recover damages based on the doctrine of\u00a0<i>quantum meruit<\/i>.\u00a0<u>Id<\/u>. at 218.\u00a0\u00a0Forrest Construction claimed that homeowner breached the contract by failing to timely pay pursuant to the terms of the parties\u2019 agreement.\u00a0<u>Id.<\/u>\u00a0Defendant homeowners filed a counter-claim against Forrest Construction for negligent construction, gross negligence, negligence per se, breach of contract, and violations of the Tennessee Consumer Protection Act.\u00a0\u00a0<u>Id<\/u>. at 218-219.<\/div>\n<div><\/div>\n<div><\/div>\n<div>The contract at issue in Forrest Construction required that the contractor retained a detailed accounting and back-up documents for all expenditures and draw requests on the project.\u00a0\u00a0When the homeowner asked Forrest Construction for the accounting records on the project, the contractor could only provide a \u201ctwo foot thick pile\u201d of unorganized receipts.\u00a0\u00a0<u>Id.<\/u>\u00a0at 224.\u00a0\u00a0The Court found this type of record keeping to be unacceptable when it said,\u00a0\u00a0&#8220;In any cost-plus contract there is an implicit understanding between the parties that the cost must be reasonable and proper.&#8221;\u00a0<u>Id<\/u>. at 223-224;\u00a0<u>Kerner v. Gilt<\/u>, 296 So. 2d 428, 431 (La. App. 4 Cir., 1974). &#8220;The contractor is under a duty of itemizing each and every expenditure made by him on the job and where the owner denies being indebted to the contractor the latter has the burden of proving each and every item of expense in connection with the job.&#8221;\u00a0<u>Id.<\/u>\u00a0(citing\u00a0<u>Wendel v. Maybury<\/u>, 75 So.2d 379 (Orl. La. App. 1954);\u00a0<u>Lee v. National Cylinder<\/u><i>\u00a0<\/i><u>Gas Co<\/u>., 58 So. 2d 568 (Orl. La. App. 1952));\u00a0<i>see also<\/i>\u00a017A Am Jur. 2d Contracts, Sec. 495 (2008). Forrest Construction never itemized the expenditures it sought to recover from the homeowner.\u00a0<u>Id.<\/u>\u00a0Instead, it submitted essentially unsubstantiated requests for draws.\u00a0<u>Id.<\/u>\u00a0Moreover, when called upon to provide proper documentation and itemization of the costs, it provided a wholly disorganized, un-itemized box of documents, many of which were unrelated to the actual project.\u00a0\u00a0<u>Id.<\/u>\u00a0As a result of this finding, the Court reversed the trial court\u2019s decision in favor of the contractor and instead held that the contractor materially breached the contract first.<\/div>\n<div><\/div>\n<div><\/div>\n<div>The take away from this case is when a contractor chooses to work under a cost-plus contract agreement, the contractor should be sure that they are able to maintain the heightened accounting requirement that goes along with that type of agreement. This means fully documenting each expenditure in an organized manner. If your client is like many of my clients, the fixed-fee agreement may work better because it does not require the heightened accounting in order to recover on a dispute of non-payment.<\/div>\n","protected":false},"excerpt":{"rendered":"<p>I&#8217;Ashea Myles-Dihigo | The Dispute Resolver | September 6, 2017 Some contractors are better at record keeping than others.\u00a0\u00a0I always seem to run into this issue when I working with a client and I\u2019ve asked them to provide me with all of their records regarding the project.\u00a0\u00a0The usual answer that I get is, \u201cI don\u2019t&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/cost-plus-contract-disorganized-contractor\/\">Continue reading <span class=\"screen-reader-text\">Cost-Plus Contract and the Disorganized Contractor<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":true,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,10263,10264],"class_list":["post-892907","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-cost-plus-contract","tag-record-keeping","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cost-Plus Contract and the Disorganized Contractor - Advise &amp; 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