Expert: Timmy Chou - 10/4/2004

Question
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Followup To
Question -
Mr. Chou,
The contract is written, and was initiated by her.  Unfortunately, the terms are rather vague.  A significant point of interest is that the contract states that she would assume the role of a "teacher", or "mentor" to teach me how to conduct similar business deals.  My responsibilities are to assist and learn.  I think that her intention was to have me do all of the labor not completed by professionals.  The confusing part is that I made no representation as to my abilities or understanding regarding renovating a house.  I am a college graduate though, and was willing to learn.  She has  put me in an awkward position because I did what I was contractually obligated to do, and in the spirit of the venture, I did more than what was contractually expected of me.
An interesting footnote:  The same lawyer that encouraged her to protect herself by drafting a contract is the same lawyer advising her to "cut me out" of the deal that she presented me with.
Sincerely,
Brandon Nichols


Answer
Thank you for your question!

Mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement.

I am not an attorney but you may want to go see one.  The case you describe here sounds far too common and my initial advice here is to prtoect yourself as qucikly as you can.  I am assuming that the "50/50" split of profits was part of the contract and I am also assuming you have done a good job--hence, the house is proving to be worth more than anticipated and therefore your perceived "share" is too big for this greedy person to stomach.  Note that this issue may
certianly have legal ramafications and you may wish to consult an attorney.

It is best to have as much structure created at the outset of starting or building a business rather than in the middle because there are inevitable assumptions and expectations created by each party.  In your case, I hear the familier sound of the "bulldozer" starting up with the intent of building a case to marginalize both the promises made to you and the contribution you have made.  I do not have enough information here to conclude if your cousin is designing or not but I don't like the smell of what you have described.

You must take steps right away to protect yourself.  Here are my recommendations:

1. Document a chronological timeline noting promises and your work product.  Also document the rise of this dispute and track how this plays out.

2.  Go see a lawyer.  The local Bar Association usually has a referral service that will give you access to an attorney for free.  If you are a college student you may have access to legal assistance through the ombudsman's office at your school.  You need to understand the legal landscape.  Items to cover in this meeting:

2.1.  Filing a mechanic's lien.  A mechanic's lien is a device used by contractors and other craftsman to protect themselves from being "cut out" of work done on construction.  The lien places a legal claim on the property that must be satisfied before the property can be sold.  You can also foreclose on the property if the owner does not pay you.

2.2.  File a lawsuit claiming 1/2 ownership in tne property.  Based upon your contract you can argue that you have satisfied the requirements to take 1/2 ownership.

Once you understand where you are legally you are in a position to begin to push back on these demands.  However, do not agree to anything at this point.  You should also send a letter to your cousin stating your case in the vein of:

Dear Mrs. Grinch,  Recently you approached me to discuss reducing my interest in this deal and altering the contract we have executed.  Unfortunately I have already complied with the terms and conditions of the contract with respect to the property in question and therefore I must refuse any suggestion that the contract terms be changed.  As you are aware I have
1.
2.
3.
4.
It appears that, through my work locating this property, managing the sub-contractors and performing construction work personally, we will achieve the financial goals we had intended and I look forward to a prompt sale and division of profits as per our agreement.  I am happy to explore amending terms and conditions for future projects if you wish.  Sincerely, B

You must begin documenting and insiting on the value of your contribution right away.

You must be careful that you are not the victim of predatory litigation, which is that those with money can use litigation against those without money because they cannot afford to defend themselves.  Take advantage of your school resources.  You may also be able to get help from organizations that help defend construction workers from predatory contractors.  You have done construction work to benfit someone, you may qualify as an employee.  Chech with your state contactor's board or other licensing agency.

The notion is that if you make it clear you will not be bullied and that whatever you do will cost a lot more money than just honoring the deal you are likely to prevail.

These are some ideas.  Feel free to follow up with additional questions.

For your general information, the pros and cons of the types of dispute resolution methods follows.

GOOD LUCK!

Arbitration, Mediation, and Litigation

Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system

Benefits of Arbitration:

    Confidential, no public record
    Limited exchange of documentation, information
    Quick, don't have to wait for a court date
    Arbitrators have expertise in the subject matter and are trained in conflict resolution
    Cheaper than litigation
    Preserves business relationships

Negatives of Arbitration

    It's a compromise, no %100 winner
    Complex arbitration can be costly
    If not satisfied, may litigate the arbitration procedure
    Poor results with an unskilled arbitrator
    Both parties must agree to cooperate in the process

Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.

Benefits of Mediation:

    Neutral mediator can objectively suggest alternatives not considered before
    Parties are directly engaged in negotiating the settlement
    Can be quicker than litigation
    Less costly than litigation
    Preserves business relationships
    85% of American Arbitration Association cases mediated find successful solutions

Negatives of Mediation

    may not reach a binding decision
    unskilled mediator

Litigation: using the judicial system to resolve disputes

Benefits of litigation:

    a clear winner and loser
    uses a prescribed set of procedures
    more predictable outcomes
    is final

Negatives of Litigation:

    waiting for court dates can do more harm
    usually more expensive than mediation and arbitration
    part of the public record