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COMPLIANCE WITH BUILDING CODES DOES NOT GUARANTEE COMPLIANCE WITH THE CONTRACT

 

Another important question I am often asked is what happens to a contractor who complies fully with all the local code provisions.   Can the contractor breathe a sigh of relief with the knowledge that nothing negative involving the construction contract will occur?  Unfortunately, this is not the situation.   Even if a builder complies with all building codes, files the appropriate documentation with the applicable government agencies, passes all inspections, and obtains a certificate of occupancy, this does not guarantee that they would be free from litigation and claims of breach of contract. 

Often defects will occur even though a contractor complied with all appropriate standards.  Although a contractor may be certain that violation of a building code is enough for construction to be shown to be not workmanlike, compliance with a building code is not sufficient evidence to guarantee a finding that construction was performed in a workmanlike manner.

For example, in the Arizona Court of Appeals’ opinion Continental Townhouses East Unit One Ass’n v. Brockbank, the contractor requested two jury instructions that were not given by the trial court: 1) stating that since his contractor’s work passed the City of Mesa minimum workmanship standards, it was good and workmanlike; and 2) “compliance by a contractor with [a building code] discharges [a contractor’s] obligation for the safety of the occupants.” [1]

The Court of Appeals disagreed with the contractor’s argument that the desired instructions should have been provided to the jury, holding that the minimum workmanship standard contained within the building code “was only one of several elements which the jury could consider to determine workmanlike quality.”[2]  Instead, the Brockbank Court held that to determine whether a project was performed in a workmanlike manner is “one of reasonableness in light of surrounding circumstances” along with other factors outside of the minimum obligations of the building code.[3]

In the last several years, Arizona has documented an increase of construction defect litigation.  Often the allegation is that there was a breach in the “implied warranty” within the contract.  In the context of the contract, the implied warranty of habitability is often the term used to show a breach of the warranty in the contract-although not outlined by specific terms in the agreement.  It is often defined as a guarantee by the builder that the structure will have no defects that would substantially impair the enjoyment of the property.  The breach of this warranty generally involves design or workmanship defects that would make the property unsuitable for its intended use.[4]  These implied warranties of workmanship and habitability often interplay and are sometimes treated as one implied warranty.[5]  In addition, Arizona courts have expanded the allegation of breach of these implied warranties beyond circumstances where there is privity of contract[6] between the parties.[7]  (“Privity of contract” means that only the parties involved in a contract have the right to sue one another to claim a breach of the contract and demand restitution for damages arising from the alleged breach.)

Lawsuits alleging a breach of the implied warranty of habitability often allege a variety of defects in the construction of a property, including building deficiencies, improper design, or other claims of substandard workmanship.[8]  One recent case example showing the correlation between violations for building codes, substandard workmanship regulations, and its interplay with Arizona statutes is the Arizona Court of Appeals opinion Forsyth v. Four Crown Construction, LLC.[9] In Forsyth, a contract was entered into between an owner and builder for construction of a residential property.  During the course of the home’s construction the owner discovered construction defects as well as other improprieties, halted construction, and later filed a Complaint with the Arizona Registrar of Contractors (ROC) alleging defective workmanship (noncompliance with the code) along with other allegations against the builder.[10] The owner subsequently filed a lawsuit alleging, among other things, breach of contract for the implied warranty of workmanship and habitability.

The subsequent ROC proceedings found that the builder had violated his duties pursuant to regulation and A.R.S. § 32-1154(A)(2).[11]  The trial court granted Summary Judgment against the contractor concluding that the ROC decision proves a breach of the implied warranties of workmanship and habitability had occurred.  The builder appealed.  The Arizona Court of Appeals utilizing the concept of res judicata[12] affirmed the trial court’s decision on this subject, concluding that a violation of the applicable statute also proved a violation by the contractor of the implied warranty of workmanship and habitability and was therefore a breach of the contract.[13]

Although the odds of litigation substantially decrease when the builder has complied with the building codes and other regulations of its work, continued diligence is the key.   Sometimes issues will present themselves months, if not years, after a construction project has been completed.

[1] Continental Townhouses East Unit One Ass’n v. Brockbank, 152 Ariz. 537, 542, 733 P2.d 1120, 1125 (Ariz. App. 1987).

[2] Id.

[3] Id. n.5.

[4] See Hill v. Jones, 151 Ariz. 81, 84, 725 P.2d 1115, 1118 (Ariz. Ct. App. 1986).

[5] Lofts at Fillmore Condominium Ass’n v. Reliance Commercial Construction, Inc., 218 Ariz. 574, 190P.3d 733, 735 n. 2 (2008); See Metropolitan Property and Casualty Insurance Co. v. Del Webb’s Coventry Homes, Inc., 2007 WL 5448133 (Ariz. Ct. App. 2007)(unpublished opinion).

[6] Privity of contract – only the parties involved in a contract have the right to sue one another to claim a breach of the contract and demand restitution for damages arising from the alleged breach.

[7] Richards v. Powercraft Homes, Inc., 139 Ariz. 242, 678 P.2d 427 (1984).

[8] See also Stephanie Wilson, Business Law Deskbook, Advanced Topics in Business Law,  Brent Olsen and Lisa Thompson eds.,  9A Arizona Practice Series § 38:5 (2012).

[9] 2010 WL 2403755 (June 15, 2010).

[10] Id. at *1-2.

[11] Id. at *6.

[12] Res judicata – once a case has been adjudicated by a competent court, the parties may not continue to litigate.

[13] Id.

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

DOES VIOLATION OF A BUILDING CODE CONSTITUTE A BREACH OF CONTRACT?

 

In modern law, the duties with which the contractor or design professional must conform to the building codes are typically outlined in the construction contract.  The construction contract will include a number of terms including the price, reference to the design plan and specifications, as well as a clause stating that the builder must perform the work in a “workmanlike manner”, by following building codes, and the following the standards of care in the construction industry.[1]

A contractor often warrants that his work will be performed in a workmanlike manner.[2]  “Workmanlike manner” has been defined as “doing the work in an ordinarily skilled manner as a skilled workman should do.”[3]  In order to determine if the structure was completed in a workmanlike manner, the courts will examine “established usage, procedures, and acceptable industry practices prevailing when such work was performed.”[4]  If a contractor does not perform his work in a workmanlike manner, besides the violation of the Registrar of Contractor standards, the contractor has more than likely breached the contract with the owner and will be liable for the damages that result. 

Arizona courts have found that failure to comply with an applicable building code implies that work is not performed in a workmanlike manner.[5]  For example, in Dillig v. Fisher a builder-vendor sold a house to a purchaser.  Immediately following the date when the purchaser occupied the house, the purchaser “began to encounter numerous problems with the construction of the house, the most significant of which pertained to an allegedly improperly constructed roof which permitted water to leak into the house.”[6]  The trial court awarded the purchaser damages for their costs to repair the roof.[7]

The builder-vendor appealed the trial court’s decision claiming that, because the house was habitable, the builder-vendor could not be found liable for damages.  The appellate court disagreed, stating that the builder was liable for damages as long as the purchaser proved that “the roof was not constructed in a workmanlike manner and that [the purchaser] was thereby damaged.”[8]  The court held that the purchaser had proven that the roof had not been constructed in a workmanlike manner in part because the construction method utilized “was contrary to the Uniform Building Code,” which was the code in force in the city where the home had been constructed.[9]  Therefore, the failure of the contractor to comply with building code requirements resulted in the construction not being workmanlike. 

In addition, construction contracts will often contain a clause stating “the contractor will carry out the work with reasonable skill, care, and diligence pursuant to all applicable standards and industry practices and in compliance to all relevant building regulations and statutory requirements.”  Also, a contract will often contain a clause where the builder warrants that the work performed is “free from defects and in compliance with the contract documents.”  However, even in circumstances where the contract may not directly state the builder’s obligations to comply with building codes, courts have concluded that compliance with codes governing construction work or services performed is an obligation implied in every construction contract.[10]  In fact, a code violation which reduces an owner’s use and enjoyment of his building or property that is not corrected in a timely manner may also be considered a material breach of the contract and grounds for termination with cause.[11]

Not only is a violation of various building codes considered a possible breach of contract, it also runs afoul of Arizona Statues, which would lead to other allegations of breach.  For example, as outlined in A.R.S. § 32-1154(A)(2), a “departure from or a disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have a particular construction project or operation completed in accordance with such plans and specifications of the code” is both considered grounds for revocation or suspension of the contractor’s license and another breach of the contract and grounds for the builder to be terminated with cause.[12]

As is often the situation involving breach of contract litigation, the contract itself will dictate whether the contractor complied with all building codes, permits, variations, and building circumstances.  Most contracts will also include an agreement that the contractor will supply its building in compliance with all local, city, state, and other code regulations involving health and safety.  Additionally, most contracts will include a clause stating that any derivations from these codes must be approved by the owner in writing before the contractor can proceed.  Under these circumstances, most contracts contain these provisions which allow for a breach of the contract if the contractor does not meet these obligations.

[1] Stephanie Wilson, Business Law Deskbook, Advanced Topics in Business Law, Brent Olsen and Lisa Thompson eds., 9A Arizona Practice Series § 38:8 (2012).

[2] Kubby v, Crescent Steel, 105 Ariz. 459, 460, 466P.2d 753, 754 (1970).

[3] J. W. Hancock Enterprises, Inc. v. Registrar of Contractors, 126 Ariz. 511, 514, 617 P.2d 19, 22 (1980).

[4] Id.

[5] See, e.g., Dillig v. Fisher, 142 Ariz. 47, 688 P.2d 693 (App. 1984).

[6] Id. at 48, 688 P.2d at 694.

[7] Id. at 49, 688 P.2d at 695.

[8] Id. at 50, 688 P.2d 696-97.

[9] Id. at 50-51, 688 P.2d at 696-97.

[10] Philip Bruner and Patrick O’Conner, 5 Bruner and O’Conner on Construction Law, § 18:10 (2015); citing Tips v. Hartland Developers, Inc., 961S.W. 2d 618 (Tx. Ct. App. 1998) (design-builder impliedly assumed the duty that the project complied with all municipal building codes so that the owner could receive a certificate of occupancy); Baltimore Neighborhoods, Inc. v. Rommel Builders, Inc., 3 F. Supp. 2d 661 (D. Md. 1998).

[11] Id.; citing Attardo v. Petosa, 240 A.D.2d 607, 659 N.Y.S.2d 294 (New York 1997), abrogated on other grounds by, Brushton-Moria Cent. School Dist. v. Fred H. Thomas Assoc., P.C., 91 N.Y.2d 256, 692 N.E.2d 551 (New York 1998) (construction of a home below standard outlined in the code caused city to refuse to issue certificate of occupancy was determined to be a substantial variance in performance and a material breach of the contract); see also 5 Bruner and O’Conner at § 18:25.

[12] Philip Bruner and Patrick O’Conner, 5 Bruner and O’Conner on Construction Law, § 18:30 (2015).

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

THE IMPACT OF VIOLATING THE BUILDING CODES

 

Once a potential building code violation occurs, it has the potential for ripple effects throughout the construction project.  In accordance with the directives of the International Building Code (“IBC”), it is unlawful to “erect, construct, alter, extend, repair, move, remove, demolish or occupy” any building “in conflict with or in violation of any of the provisions of the code.”[1]  The primary avenue for the discovery of a violation of the code occurs when a building official inspects the construction project, either at random intervals or when a certain segment of construction is nearing completion.  If a code violation is apparent during inspection, the building official is obligated to provide a notice of the code violation in writing to the parties involved.[2]  In typical circumstances, the building official will issue a stop work order to either prevent an unsafe work environment or to halt the construction operating in violation of the building codes from continuing.[3]  If the work is continued after receipt of the written stop work order, the construction is considered unlawful and subject to penalties.[4]  The municipality in which the construction project is located may also begin an action at law or in equity to restrain or correct the violation as well as require the removal or termination of the violation.[5]

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A building code violation has the potential of impacting several areas of a project far beyond the stop work notice.  Building code violations are relevant to a contractor’s license, breach of contract litigation between a contractor and owner, indemnity actions, and negligence actions.  The party responsible if a code is violated is also a frequent topic of litigation, which will include the use of both common law legal doctrines and legal interpretation of contract language.

Effect of Building Code Violations on a Contractor’s License and Bonds

A violation of the building code can have negative ramifications on a contractor’s license status and bonding capability.  All contractors must be licensed by the Arizona Registrar of Contractors.[6]  One of the conditions of a contractor’s license is that a contractor must maintain a bond in a specified amount set by statute.[7]  If a contractor performs work that is “not in compliance with the requirements of any building code applicable to the construction work,” any party having a direct contract with the contractor who is injured by that failure can make a claim against the contractor’s license bond.[8]  Generally, the owners of property can make claims against a general contractor’s license bond if the work performed does not conform to the applicable building code.  For subcontractors, the claim usually comes from a general contractor who is forced to perform corrective work.   If a claim is made against a bond, and a surety pays it, a contractor must either replenish the bond or provide a new bond within thirty days to avoid his or her contractor’s license being automatically suspended.[9]

In addition to liability on a license bond, failure to comply with a building code may subject a contractor to discipline.  A.R.S. § 32.1154(A)(2), states that a contractor shall not commit:

“departure from or disregard of plans or specifications or any building codes of the state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.” (Emphasis added).

If any contractor violates the provisions of A.R.S § 32-1154(A)(2), his or her license can be suspended or revoked.[10]  In addition, the Registrar has the authority to order restitution to repair any building code violation or to issue a corrective work order directing the contractor to complete the listed work within a specified time period.[11]  If a licensed contractor fails to correct any violation of a building code after ordered to do so by the Registrar, the Registrar may impose a civil penalty of not more than $500, which if not paid within thirty days after imposition, results in the automatic revocation of a contractor’s license.[12]  In a residential setting, if a contractor is unwilling or unable to correct a violation of a building code as found by the Registrar, the Registrar may order payment from the residential contractor’s recovery fund, after which the contractor and his or her license bond may be required to reimburse the Registrar.[13]

[1] IBC § 113.1.

[2] IBC § 113.2.

[3] IBC § 114.1.

[4] IBC § 114.3.

[5] IBC § 113.3.

[6] A.R.S. § 32-1151.

[7] A.R.S. § 32-1152.

[8] A.R.S § 32-1152(E).

[9] A.R.S § 32-1152(F).

[10] A.R.S § 32-1154(B).

[11] A.R.S § 32-1154(A).

[12] A.R.S. § 32-1154 (D).

[13] A.R.S § 32-1154(F).

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

BUILDING CODE AND CONSTRUCTION CONTRACT INTERACTION

 

As outlined in previous posts (found HERE, HERE, and HERE) on the subject, developing and completing a construction project can be a daunting task.   In the modern world, seeing a construction project through to completion often requires dozens of people, government regulations, construction personnel, an architect, and other professionals with permits, licenses, designs, and contracts.  All of the parties involved need to be informed of the intricacies in building codes, city ordinances, and zoning laws with their applicable regulations.  These guidelines often vary from community to community.

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Danish Proverb

The definition provided in the International Building Code (“IBC”), identifies that the purpose of the building code is to establish the minimum requirements necessary to ensure public health, safety and general welfare through structural strength, means of egress, stability, sanitation, adequate light and ventilation, energy conservation, and safety to life and property from fire and other hazards.[1]  However, these minimum requirements can lead to conflict and confusion between differing building codes, contract specifications, and significant differences in the directives of the owner, architect and engineer.   In addition, these conflicts lead to questions of who is responsible when a code violation occurs.  The following will discuss these issues in greater detail.

Conflicts Between the Construction Contract and Building Codes

Often the requirements outlined in a contract between the owner/developer and contractor may differ from the guidelines found in a building code.  In addition, conflicts between building codes may occasionally occur.  A contractor must be aware of how these contractual requirements differ from the code and what specifications will apply during construction.  In addition, the contractor will need to be aware of the importance of interpretation when building or other codes may interfere with or even contradict each other.

            A contractor’s fundamental obligation is to follow the plans and specifications provided by the owner of the property and their architect.[2]  In addition, compliance with the specifications contract may also provide protection for the contractor if allegations arise in the future concerning the design or construction of the project.

            To the extent a particular construction method or material outlined in contract specifications is not covered in the Code, it is still permissible to build utilizing these materials or methods.[3]  In order to protect the contractor and other parties involved, the alternative method or material must be approved by the applicable agency or governing board.[4]  The International Building Code provides for this option when it directs that an alternative material design or method of construction “shall be approved where the building official finds that the proposed design is satisfactory and complies with the intent of the provisions of the code” and the material, method, or work offered is for the purpose intended (or at least the equivalent to) the material or method prescribed in the building code in quality, strength, effectiveness, fire resistance, durability, and safety.[5]

The contractor should keep in mind that adherence to the contract terms, plans, and specifications provided by the owner and its representatives provides protection to the contractor both from allegations of breach of contract, defective work, and the negative impact of Code violations.  The architect has a duty and is required to make certain in his/her design that the construction specifications and materials, at a minimum, comply with the applicable codes and regulations.[6]  Reliance by the contractor on these designs and specifications provides defenses against future allegations brought by an owner for a failure by the contractor to comply with the specific building code.

This approach may not only protect the contractor from future breach of contract allegations by an owner, but also from the potential of sanctions imposed by the Arizona Registrar of Contractors.  Although not a perfect defense (and entirely within the prosecutorial discretion of the agency) the Arizona Registrar of Contractors may choose not to impose discipline on a contractor for building in violation of a building code as long as it can be demonstrated by the contractor that the owner consented to the deviation.[7]   At a minimum, the fact that owner knowingly consented to a deviation may be utilized by the contractor as a mitigating factor to minimize the potential punishment imposed by the Registrar of Contractors.

Conflicts Between Code Provisions

Often, a builder faces code provisions and other regulations which are in conflict with one another.  This situation typically occurs among the interplay between local, state, and federal rules/regulations which govern similar areas of building and construction.  When a conflict of provisions occurs, as outlined by the IBC, the most restrictive code provision will govern.[8]  This issue becomes particularly relevant when individual jurisdictions incorporate specialty codes that are not part of the uniform code.  One common example of a specialty code in use in Arizona is the Pima County code for construction of adobe structures.[9]  This specialty building code was added to the Pima County building code to address the prevalence of adobe structures in Pima County and to give heed to the special considerations required in order to successfully build with this material.[10]  Hence, the requirements of the adobe portion of the code conflict with or vary from the traditional requirements in the masonry portion of the building code.  The contractor, and its representatives, will need to pay close attention to what portions of the code govern and where deviation is permitted for each project. 

            To the extent a building code conflicts with a federal, state, or local law, the state or local law will typically control.[11]  Remember that conflicting federal, state, or local laws can effectively evolve into an independent and unique building code.  For example, the accessibility requirements within the federal Americans with Disabilities Act may create obligations to the owner/developer and the contractor that are not necessarily reflected in the applicable municipal building code.[12]  However, the owner/developer or its representatives and the contractor must keep these requirements in mind while designing and constructing a structure.  Failure to do so, could lead to substantial damages for the parties.[13] 

No matter what scenarios and interplay between code provisions that might be in play, it is essential that an owner, contractor, and design professional be familiar with the potential conflicts between separate statutes, codes, and regulations which impact the design and/or construction of structures in Arizona. 

[1] IBC § 101.3.

[2] See, e.g., Hammond v. Lowes’ Home Centers, Inc., 316 F. Supp. 2d 975 (D. Kan. 2004) (contracting parties are free to provide more contractual protection than the law requires).

[3] IBC § 104.11.

[4] Id.

[5] Id.

[6] The duty of an Architect will be discussed in greater detail in Section V below.

[7] A.R.S. § 32-1154.

[8] IBC § 102.1.

[9] See Generally, §§ 7101.01 to 7106.4 Uniform Administrative Code Amendment Tucson/Pinal County

[10] Id.

[11] IBC § 102.2.

[12] 42 U.S.C. § 12101.

[13] For a local example, many jurisdictions in Arizona utilize the Maricopa Association of Governments Specifications (often referred to as the “MAG Specs”).  Provisions of the MAG Specs may conflict with the applicable building codes. 

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

THE DUNNING-KRUGER EFFECT ON BUSINESS DECISIONS: WHAT YOU DON’T KNOW (OR THINK YOU ACTUALLY KNOW) WILL HURT YOU

 

An issue I often encounter with prospective business clients is that they have made a decision/choice, which appeared to be insignificant from their perspective at the time, but it actually was not.   Instead, this decision or action is the catalyst that led to significant legal issues, loss of business revenue, and disputes with other parties.   What started out from their perspective as a minor matter evolved into their business facing significant financial losses, litigation, legal fees and costs, and even the potential closure of their business.

When I inquire of these individuals concerning the linchpin decision/choice that led to this outcome, they have a difficult time explaining their decision or understanding why it led to the legal issues that occurred.  When faced with the decision/choice, they have often said to themselves words to the effect of “no, I’ve got this . . .” or state “really, how difficult can this be.”   Oftentimes, they have taken self-help steps to answer their question (or confirm their decision), but they actually have located incomplete or incorrect information.   Consequently, problems develop.

“How does a company, its leadership, and ownership not see these landmines and issues before they occur?” has often been a question I have asked.   While researching another issue, I came across a research study that may explain this mental roadblock.   It is called the Dunning-Kruger Effect.

The Dunning-Kruger Effect is named after two psychologists who chose to examine why individuals make obviously bad decisions believing they are correct.   Their initial question originated as a result of a news article of a local man who decided to rob a bank.   Having learned that lemon juice can be used as an invisible ink, the robber smeared his face with the substance believing that it would make his facial features unrecognizable or invisible.   Because of this assumption, he made no effort to disguise his face beyond the lemon juice and was quickly caught by law enforcement.   The robber expressed sincere surprise and a complete lack of understanding as to why his plan did not work.

Dunning-Kruger decided to research why individuals make obviously bad decisions, but are completely unaware that they are doing so.   They concluded that individuals who are unskilled, not fully educated, or ignorant of certain matters often suffer from an illusion of superiority believing that their abilities are much greater than in reality.  In basic terms, a little bit of knowledge can be bad because individuals have the tendency (with a little bit of information) to extrapolate that they have more knowledge than they actually possess and, as a result, make bad decisions of which they are completely unaware with disastrous results.

Dunning-Kruger proposed that, for a certain skill or knowledge set, “incompetent” people will:

  1. Fail to recognize their own lack of knowledge or skill;
  2. Fail to recognize the extent of their inadequacy;
  3. Fail to recognize the genuine knowledge or skill in others;
  4. Only recognize and acknowledge their own lack of knowledge or skill when educated otherwise.

This is often the perspective that business leadership and ownership will display.   Business leaders, corporate owners and entrepreneurs have a sense of independence, which sometimes serves them well.   However, this independent streak can lead to an overconfidence in areas where they lack the appropriate skills or knowledge to make an informed decision.   This overconfidence leads to decisions and directions that should have never been taken.

In addition, this overconfidence and lack of complete or accurate information results in their failure to take the advice of others, such as legal counsel, who would be able to properly inform them of their situation and provide advice to avoid the problem.  Instead, the “I’ve got this” or “why should we pay for an attorney for advice when we already know our answer” attitude occurs.    Unfortunately, these businesses only realize their own lack of knowledge after the fact, when a problem has occurred, damage is already done, and they are embroiled in serious legal issues.

In order to prevent the Dunning-Krueger Effect from taking hold of a company’s decision process, businesspeople need to have a team of trusted individuals in place in order to keep them properly educated and informed.   Finding these key individuals, whose only purpose is to help you succeed, are essential for the long-term success of a business.   From my observations and experience, I would recommend four key individuals to become part of the success of your business.   They are:

  1. A Business Attorney or Law Firm
  2. A Business Accountant
  3. A Financial Planner with Business Clients
  4. An Experienced Mentor or Business Coach

Locating and utilizing these individuals who are able to provide answers, advice, and assistance with knowledge, practical experience, and different perspectives will help avoid bad decisions caused by lack of knowledge and overconfidence.    These are also individuals whose purpose is to help a business succeed and have no ulterior motives to the contrary.

Those who own and lead businesses need to accept that they do not know everything.   A quote by philosopher Bertrand Russell highlights this approach.  “One of the painful things about our time is that those who feel certainty are stupid and those with any imagination and understanding are filled with doubt and indecision.”  Every successful business owner/leader acknowledges that they are not omniscient and that they need to utilize the wisdom of others to supply critical knowledge and advice.   Understanding the areas where a business owner or leader has a genuine lack of knowledge or skill and has in place those who can provide this knowledge and skill with which they lack, can lead to a more successful and sustainable business.

©2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.