By Alexander Barthet

Everyone knows that to make a settlement stick, you need to get it in writing and get it signed. But there are 3 parts of every construction settlement that need to also be addressed if that settlement is to have the effect of timely releasing all the affected parties.

You need to be sure to 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.

Don’t do this and you could end up in hot water, just like one poor plumber.

He had been hired to renovate some bathrooms and shower stalls at a college residence hall.  After completion of the project, the school discovered a number of leaks 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 with the college.  Eventually so did the general contractor.  But then the general contractor did something the plumber wasn’t expecting. He cross claimed against the plumber, seeking reimbursement 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.

What’s in your settlement agreement?