WHEN a client comes to me, I listen to what she or he has to say and also look at the documents to assess the strengths and weaknesses of the case. Some clients tell me their documents were lost in an office move, destroyed in a flood, or thrown out. They tell me of verbal agreements and broken promises to pay for both base contract and change order work. These obstacles may not be insurmountable (we can look at prior conduct and history), but think about how much easier and stronger your case would be if you had good habits in maintaining your business records. It is important to note that documents kept in the regular course of business are admissible at trial, while documents prepared in anticipation of litigation are not. Here are 3 ways contractors can keep good records:
DAILY LOG OR JOURNAL
1. If you did not write it down it did not happen. Keep a log or journal of each day’s activity at the job site. Try to have change orders signed by the owner, but if you cannot, put an entry in your daily log or journal that you discussed the change order with the owner, and he or she verbally approved the work to be done and the price of the change order. There is case law that says the conduct of the parties can be looked at to determine whether the requirement that change orders be in writing has been waived.
FOLLOW UP VERBAL CONVERSATIONS IN WRITING
2. If you have a verbal conversation in person, or by telephone, send a follow up letter, fax, or email memorializing the conversation. For example,
“As we discussed via telephone on x date, you agreed to pay an additional $10,000.00 regarding the excavation work since the area has been doubled in size to 5000 square feet. If you disagree with the above, please contact me immediately.”
If they never disputed the letter prior to the lawsuit, it is hard for them to dispute it at trial.
ORGANIZE YOUR DOCUMENTS AND KEEP THEM IN A SAFE PLACE
3. Keep your records (originals and a copy) in a safe, dry place, and have them backed up, on disk and store hard copies in another office or offsite. Keep copies of contracts, estimates, proposals, bid documents, change orders, correspondence, checks, contracts with your subcontractors, invoices and payments to your subcontractors and materials suppliers, receipts, bank and credit card records, payroll, drawings, blue prints, schematics, permits, inspections, sign offs, logs, journals, correspondence, emails, letters, faxes, photographs, videos, recordings, etc. Make it a routine to keep the above documents in a safe and easily accessible location, and train your staff accordingly. These documents will be needed in the event of a lawsuit.