Here we talk about “scope of work” in all contracts. It is exceeding rare that a client says to a vendor/contractor, “I’m not going to pay you because screw you, I just don’t want to pay you” (although, I am seeing more of this in North Carolina since I moved here – be better, people).
Mostly, a client will not pay because they think they did not get what they contracted for from the vendor/contractor. That is a scope of work dispute, not a pay dispute.
What is “scope of work”?
“Scope of work” is simply put, what is one party to a contract going to do for the other party, in exchange for payment. You tell the gas station attendant, “Give me a pack of Marlboro reds”. That’s the “scope” of the contract. Yes, “scope of work” applies to all contracts at all levels. And it really is that simple.
More relevant, a construction contractor goes to a building owner and gets asked to put a new roof on the warehouse. Maybe a new business wants a website designed. A manufacturer asks a supplier to make them 10,000 widgets. A golf course contracts with a landscaper to maintain the fairways and greens. You go to the mechanic to get your delivery vehicle fixed.
Those are all examples of a “scope of work” in a contract.
So Why Are All Contract Disputes Scope of Work Disputes When My Business Doesn’t Get Paid?
Ask yourself “why?” Better yet, ask your client. “Why didn’t you pay me?” Seldom will the answer be “because screw you”. Usually it will be something like, “the roof you installed doesn’t insulate my building like the old one” or “the website doesn’t have a checkout-cart so customers can buy online” or “the widgets you sent me are 2mm too small and I can’t use them” or “you haven’t mowed the fairways in two weeks” or “you didn’t fix my delivery vehicle.”
Those are all failures to meet the scope of work in the contract. One party didn’t do the job right, so the other party doesn’t pay because they didn’t get what they expected.
How Does My Business Avoid Scope Disputes?
Glad you asked. And I cannot stress this enough:
Always always always have a well-defined scope of work for your contract. Always. Break down the job into discrete elements as much as possible. You want to be able to explain to a judge, “Here’s the six things we were hired to do, and here is the evidence that we did them”. Dummy proof it so the client understands.
Pretty much every contract dispute I’ve ever worked on has been a failure to either meet the scope of work; or to have a clearly defined scope of work in the first place. (I’ll talk about “scope creep” in a different post).
For example, “You want a new roof on your warehouse. Here is exactly what we will do:” and then list it out by materials, labor, time, method of construction.
Similarly, “You want widgets? Send me your specifications”.
“You want a pack of smokes, what kind?”
In other words, scope of work.
How To Protect Your Business From Scope Claims
First, vet the client to make sure they can actually pay you. Then, sit down and define the scope of work with the client, so the client understands what they are getting, can ask questions and offer feedback. You’re the expert if you’re selling, show off that expertise.
For example, when I used to do high-dollar public contracting, the public entities would prepare “line item” bid sheets. Construction contractors would have to fill in a cost for each item (how many yards of asphalt, how many gallons of sealer, how many gallons of striping, and so on). Public construction, and private commercial construction tend to have very well-defined scope of work included in the contract.
That way, the supervising engineer could point to the project and say, “here, the contractor completed line item 17 because they supplied and installed the doors called out in the project specifications” and approve payment. For example.
How is Your Business Doing?
There’s only two real elements to any contract: scope of work, and manner/method of payment. The rest is legal mumbo jumbo that won’t help you get paid unless you have to sue for payment. How is your business doing?
Contact me for help getting good contracts in place for your business. In western North Carolina, Asheville, Waynesville, Hendersonville at (312) 671-6453.
Email me at: palermo@palermolaw.com.
Be sure to check out my other blog posts HERE. Be sure to listen to my podcasts with Matt Mittan RADIO PROGRAM or at BizRadio.US