Originally from Dispute Resolution Journal

The author addresses the considerations involved in presenting claims for damages based on wrongful termination or abandonment prior to completion of a project. It introduces owner and contractor “damages accounting forms” specially designed to process damages claims where a replacement contractor has been hired to complete the work.

This article discusses the management of disputes arising out of the termination of a contractor or the contractor’s abandonment of a project and completion by a replacement contractor. The discussion applies equally to a subcontractor termination. When a contractor walks off the job or is terminated by an owner, major disputes are likely to follow. One reason is that the total cost of completing the project using a replacement contractor is almost always substantially higher than the original contract price and someone must absorb this unanticipated additional cost.

Termination claims are difficult. A final act of termination or abandonment often is preceded by a multiplicity of disputes that lead to a breakdown in the working relationship between the owner and contractor. These triggering disputes have ramifications that must be resolved, in addition to the damages resulting from the termination or abandonment. When termination or abandonment claims are presented, having specific, well-organized proof of damages is critical to an efficient, accurate resolution of the dispute. It is also important for each party to have a claim- management plan. Otherwise, the arbitration could be long and drawn out and the award might only approximate the damages rather than determine them with accuracy.