The construction business is unique. There are multiple players that come to the table to complete a project, and each one has to perform its duties appropriately if the project is to be completed on time and on budget. Contracts can help ensure that everything goes according to plan, but even the seemingly most minor details in a construction contract can cause you headaches further down the road. Let’s look at some of those terms here:
- Scope of work provisions: These terms in your contract should specify in detail the work that is to be performed and the obligations of each party. Sounds simple enough, right? Even so, there are often issues that arise during construction projects because the scope of work is poorly defined. This can lead to delays, incomplete work, and even defects. There can be arguments over who is to fulfill which responsibility, which can create more infighting within the project than you hoped for. So, try to make sure that design documents are clearly drafted, that relevant external planning documents are incorporated into your contractual agreement, and that applicable standards and specifications are clear.
- Payment terms: In most construction projects, payments are periodically issued based on the portion of the overall work that has been completed. A contract should lay out the parameters of those payments. However, issues tend to arise when certifying how much of the project has been completed. Who determines when a certain line item has been completed? If one party thinks the work has been completed and the other doesn’t, then payment may be withheld, and breach of contract allegations may be made. To avoid this costly and time-consuming issue, make sure that your contract clearly specifies how work completion determinations will be made and how disagreements will be addressed.
- Delay issues: You should anticipate that there will be delays with your construction project, and your contract should reflect that reality. Therefore, your contract will probably contain terms that specify that a payment will be made despite certain delays, such as those related to material shortages and labor issues. But problems can arise when a contract is inarticulate on this issue, thereby giving one party the opportunity to unilaterally delay a project and seek compensation for the delay. This sometimes leads to non-payment, which, again, can result in litigation. To avoid this problem, it may be helpful to carefully think through all of the potential delays that your project could face and include them in your contract.
- Change order provisions: As we have discussed previously on the blog, change order disputes can be costly and hotly contested. Without proper contract negotiation, developers can see inflated costs or halted construction when a price cap is reached. This can lead to extensive delays and costly litigation. You may be able to avoid many of these issues, though, by simply including an appropriately thorough change order provision in your contract that gives both sides some flexibility and protection.
Don’t leave your business in the hands of a haphazard contract
Contracts are commonplace in the construction industry. As a result, far too many people don’t bat an eye when they have to sign one of these agreements. But you really should take the time to carefully negotiate and draft your contractual arrangements so that you can protect your interests and avoid additional expenses and delays. If you’d like assistance in drafting your construction contracts, then you may want to discuss your situation with a law firm that is experienced in this realm of the law.