Furnishing evidence for construction contract claims – an attorney's view
Secret Ingredients for Blending American and Japanese Management Technology
Texas A&M University
This article is written primarily to inform both parties to the general construction contract about furnishing evidence in contract claims situations. On the owner/client side of the contract this should be of special interest to those in management positions who purchase and administer contract construction for their firms.
Within the performance of every construction contract, there lies the potential for claims. Construction industry personnel and purchasers of construction are finally realizing the seriousness of this facet of contract construction. Often the claims are of a serious and very complex nature.
Once this “potential for claim” is recognized by the contractors (i.e., either party to the contract) they should develop methods and systems for obtaining evidence and adopt them as a matter of ordinary business practice.
The subject of contract claims is so extensive that it would be futile here to direct the readers’ attention to any other point except the furnishing of evidence for them. Basically, the contract claim process calls for the establishment of fact and this can only result from relevant and valid evidence; conclusions are drawn from the facts shown, and judgments are made on the issues raised. The purpose of this article is to examine the gathering of such evidence under the simplest form of the claim process, without regard to the complexity of any certain types of contract claims or class of claims.
The Contracting Parties and Their Attorney
In claims that arise from the construction contract it is likely that the technology of the building processes will be heavily involved. The contract process, however, imposes on the builder the obligation to build within legal as well as technical criteria and, in fact, in the claims area each criterion is usually as important as the other. This being the case, a close working relationship between attorney and client is essential in claim matters. This relationship has two purposes. First, it allows the attorney and the client to be dependent on each other for cross-instruction in their respective areas of expertise. They must utilize the expertise of each other and act accordingly. Second, this relationship allows for the determination of the proper means and methods for furnishing evidence in relation to both its legal and technical aspects so that the evidence will be usable in the claims process. For example, a claim that is based on evidence that furnishes proof of a technical fact required in the claim does not necessarily mean that this evidence alone will suffice to establish the validity of the claim unless the legal requirements for valid evidence allow its use. Indeed, in a court and in some arbitrations, technical evidence might not even be allowed to be introduced into the proceedings as a matter of law. It is just as true that merely satisfying the legal requirements for evidence in a claim situation may not necessarily be beneficial to winning the claim if its technical effects do not support its use.
Undesirable consequences result in court or in arbitration where a claiming (or counter claiming) party has everything going for its position except the verification of fact. For example, there are many times when a contractor claimant (the builder) can establish without question a delay for which the other party (the owner) was responsible, but where it is unable to establish conclusively how or to what extent it was damaged.
Problems in the Relationship
Claims invariably involve the legal process somewhere along the line and, thus, the contracting parties usually must become intimately involved with their attorneys in order for them to be successfully processed and resolved.
The most common problem that attorneys encounter in representing clients in claims situations is one of having effective relevant communications with his client. This means that knowledge of the technology, methods, and practices of the industry are not usually within an attorney's area of expertise — yet having this knowledge is essential to successfully prosecute the claim. A lack of knowledge about these things can be detrimental to the successful prosecution and resolution of claims because the attorney must be able to transpose very complex claim fact situations, caused by technical and practical construction problems, into clear and understandable terms on which a layman (judge, jury, or arbitrator) can base a sound judgment — that judgment, in many cases, ultimately being confined to only the legal principles involved.
It is just as true that industry personnel do not or cannot grasp some of the legal concepts that must be understood if they are to furnish valid and usable proofs as evidence. Some of these concepts have direct application in the claim situation. Nowhere is this lack of understanding more apparent than when one reads the correspondence or documentation of industry personnel relative to its legally important content or form. Industry personnel are primarily technical people having a technical “turn of mind.” While it might seem to be unfair to categorize the majority of personnel in an industry as being disinterested or disoriented in this phase of their business, it is nonetheless necessary for them to present documentation that is both technically sound and legally correct as evidence. Industry people usually do not look for claims or even expect them to arise but, unfortunately, when a claim does arise they very often are unprepared or actually unable to help their attorney.
The Importance of Timeliness
It might be wise, for attorneys who have clients engaged in the contemporary construction industry, to advise them as to the necessity of gathering evidence in a timely manner as a matter of course in their businesses. It is even more important for an attorney, who is alerted by his client that there is a possibility of a claim arising out of a developing dispute, to make certain that the client starts immediately to gather the evidence in some organized manner. This avoids the problem of subsequently having to cast about for evidence that is necessary to support a certain position in the adversative situation.
A great deal of significant evidence exists at the time of an occurrence or event and, with proper instruction as to its gathering, there should be less probability that incomplete, irrelevant, or inconsistent evidence will surface later on in an adversative proceeding. Simple instructions for properly making and gathering evidence at the time of the occurrence will suffice to alleviate many problems caused by subsequently fading memories and recollections. The closer in time to an occurrence that evidence can be gathered to establish or verify its happening and the circumstances surrounding it, the easier it will be to establish the total and true picture of the occurrence when it becomes of importance in an adverse situation. There will be greater value and validity assigned to evidence that is documented at the time it is initially perceived. There is no doubt, for example, that potentially important physical evidence vanishes on a construction project and can vanish in a very short period of time. This is a problem that is inherent in any building project and is caused by the concurrent and consecutive nature of the assembly of its components. Where it is possible, it is wise to record and document the state of the construction before it becomes hidden and thus unobservable.
Considerable emphasis should be given to the importance of being timely in recording observed facts when gathering evidence. Consider, for example, the evidentiary value of a late verbal representation of a fact as compared to the value of early written documentation of the same fact. In most cases it is difficult enough for an attorney to transform good written documentation of a fact that might be required to influence the decision of a judge, jury, or arbitrator, much less having to transform hazy, reconstructed, and orally produced evidence about it.
The need for being timely in the gathering of evidence is based on the simple notion that that which is observed and noted closest to the happening of a fact tends to be (and will usually be accepted as) better evidence of the fact. Memory and recollection in a highly complex and technical business are never good foundations on which to build a claims case. This is so, not only because of any possible considerations of deliberate misrepresentation of fact, but because the evidence of fact appears and disappears too rapidly in the building construction process to allow the ordinary person to remember even generalities much less specifics about a fact or circumstance. Clients should be made particularly aware of the chances of success of a claim that rests solely on a recollection or memory of its personnel. It should be stressed to them that memory and recollection carry the danger of inconsistency and contradiction.
It is of the greatest significance to emphasize to the client, time and timeliness in the documentation stages of the claim process. Time considerations are important in these stages both from a practical and contractual standpoint. In fact, there are many contractual time limitations for written documentation that are put into construction contract instruments (conditions) just for the purpose of ensuring timely documentation. The contract specifically obligating the parties to transmit job related information or answers within specified time limits furnishes the means for providing acceptable evidence of such things as notice, intent, claim, and so forth. This is a sound, practical idea, and the client should be made aware of why these contractual limitations exist and particularly the consequences of their being ignored.
Establishing the “Chain of Circumstances”
There is not only the need to properly gather and note just the physical evidence in an expeditious manner, but also the need to start the process of attesting to supplemental facts that establish circumstantial evidence. If we assume that at some point in the claims process there will be a need for adapting documentation to establishing a chain of circumstances, we can readily see the real value of gathering as much supplemental evidence as possible that may add to or extend the understanding of the issue in dispute.
Establishing circumstantial evidence is an extremely important function in claims processing. It goes beyond the mere establishment of physical fact — it can, for example, establish more intangible, but relevant things such as motives, causations, and attitudes. Often, for the successful prosecution of a claim, it is necessary to establish, with documentation, how and why a chain of circumstances has claim or contributed to it.
The Nature and Extent of Good Documentation
Documentation is the primary factor used in the contract construction process to establish evidence. It should be more than just a “better than nothing” tool. There should be an affirmative effort to record the facts and circumstances that have raised the issues of the claim as closely as possible to their time of occurrence.
The construction industry uses many traditional forms of documentation that have been developed and established to furnish evidence of fact. These forms of documentation range all the way from a project superintendent's handwritten job log or notes, to highly specialized documents required by the provision of the contract. Some types of documentation that have been traditionally established are of an informal and impromptu nature while others are rigidly formal and planned. Some have been traditionally acceptable as good evidence based on their spontaneous nature and others have been rejected on the basis that they have been deliberately contrived.
There are, however, minimum requirements for the formation of all types of documentation, whether formal or informal, to make them acceptable as evidence from a legal standpoint. It is unfortunate, for example, that an otherwise clear and forthright written statement of purported fact which is not dated or a photograph which has not been attested are unacceptable. Such simple requirements are easy to learn and remember, but unfortunately clients oftentimes are ignorant of or careless about them.
Some Practical Suggestions
To begin with, the client should be instructed as early as possible in the client-attorney relationship of certain basic factors that will expedite the furnishing of good documentary evidence:
1. The client should make its employees aware of the importance of literacy in documentation.
2. The client should instruct its employees as to the potential danger of making statements to opponents when such statements are neither necessary nor appropriate.
3. The client should stress the idea to its employees that the more facts they gather about the claim, with proper attestation where necessary, the better supported will be its position.
4. The client should make its personnel aware of the importance of noting carefully such things as time, job production or nonproduction, weather and its effects, job access, and many other observable conditions. It should require the recording of these conditions. For example, whenever time and its effects are observed they should be recorded by the hour, day, week, or whatever timeframe is necessary to accurately support issues involving time. In most claims, for example, it is vitally important to the client's position on an issue to have documented evidence of all pertinent facts about time segments within the total contract timeframe.
5. It would not harm the client and its employees to know what is effective and allowable evidence and what is not. It does not take an expert, for example, to learn the basic “best” or “hearsay” legal rules of evidence. We are not suggesting learning the specific details of the law here, but simply learning the basic rules and then giving them notice and application to the evidence furnishing process. Knowing these basic rules tends to make recorders’ observations more perceptive and, thus, their resulting documentation more acceptable as evidence.
6. The client should be made aware that when reliance is to be put on data furnishing agencies and reporting groups such as the weather bureau or agencies that furnish statistical information, there are limitations on the value of their data and records as evidence of fact. Many times a construction job report, for example, will note rain at the site location where weather reporters have recorded a clear day in the same area.
7. Specific methods of documentation are also important to discuss with your client. Certainly where the contract specifies its form or content, the documentation should follow that specification exactly. If specific forms are furnished for documentation they should be used.
8. The client should be carefully instructed on the value of photography with all its evidential possibilities.
In addition to these last suggestions for clients it is also necessary that they require from their employees the following:
1. Whenever the client's personnel are in doubt about whether or not to write down facts as they see them they should do so, even if for no other reason than aiding their recollection in the future. When they are in doubt about sending correspondence, they should send it.
2. Employees should learn the proper form of correspondence to fit the circumstance. When they correspond they should understand what the required substantive content of their correspondence should be. If, for example, the contract requires giving notice, they should give notice and not something else.
3. The importance of answering correspondence must be stressed to the employees. In many cases an answer or a rebuttal to a statement furnishes excellent, and many times the best, evidence of circumstance. Personnel must carefully keep, record, and file these return documents. When involved with continuing correspondence, they should note its receipt and file it in strict chronological order.
4. The employee should be instructed that circumstances dictate the substance and “tone” of their correspondence. Sometimes, for example, it is better to flatly state the issues and conclusions involved in a problem area. Sometimes it is better to just state the problem. Sometimes an answer should be requested or even demanded. Sometimes circumstances will call for a questioning letter and other times will call for a definitive statement. Some will have to be made patient or impatient in tone, nice or nasty, pleading or demanding, or whatever the particular situation at hand requires.
Posting the Evidence for Use
When the claim is finally ready for actual processing (even in its prelitigation negotiation stage) it would be wise to encourage the client to “post” his documentation. This recording can be done in different ways and in different formats. It can be done by actually posting the documents or by posting them by reference. Posting will serve certain practical purposes when it comes time to use the evidence. First, it will present a chronological sequence of events if it is done in a graphic or semigraphic form. This allows the client to understand more easily the full legal picture of the claim positions as the attorney explains them to him using this graphic record. Second, it will also make it easier for the attorney to more fully understand the technical problems involved. It will also enable the attorney to play “devil's advocate” with his client's position more expeditiously and completely.
The posting of documentation can be put in almost any sequence desired to give a clear picture of the claim and its supporting evidence. The one essential requirement of this record, however, is that the documentation be presented in sequence as to time within the sequence. While it is sometimes true that a claim will allow or even demand skipping over documentation in the sequence in which it was originally made, it should nevertheless always be posted in sequence as to date, if for no other reason than to clarify questions of time.
The difficulties and labor involved in developing a record are always determined by the complexity of the claim. This is not to say that the number of parties or contracts involved in the claim necessarily make it more complex. Caution must be exercised here because, in fact, single incident claims can be very complex.
The foregoing suggestions may better prepare the contracting parties when and if they encounter a claims situation on their projects. The contracting parties must establish a close working relationship with their respective attorneys. The attorney and client must teach each other. They must learn to communicate effectively.
The best evidence is documented evidence in claims situations. Evidence must be documented in a timely manner, and it must be gathered by people who understand its importance in the claims situation.
Richard P. Maher is Professor of Building Construction and of Civil Engineering, Texas A&M University. He teaches both graduate and undergraduate courses in construction law applications.
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