The importance of a well-crafted construction contract cannot be overstated. As Murphy’s Law states, if something can go wrong, it will. The best way to mitigate against potential liability and costly litigation expenses is to spend the time and money upfront and prepare a contract that handles prospective issues fairly and efficiently. To achieve this result, there are a number of critical contract provisions that should be carefully negotiated to provide the utmost protection in the event of issues arising during the construction process.
WHAT DOES THE JOB ENTAIL?
As simple as it may seem, the value of a succinctly drafted description of the work provision cannot be overstated. If the description of the work is not accurate and comprehensive it can result in very contentious disagreements about what each party’s expectations are regarding the project. From the owner’s perspective, the contractor should be obligated to do all of the work as set forth in the contract documents. Unfortunately, because of the complexities of construction documents, there are likely to be inconsistencies amongst the various contract documents including the plans and specifications and disagreements as to what exactly constitutes “all of the work” in the contract documents. The inclusion of a clause obligating the contractor to perform the all of the work as well as that which is “reasonably inferable so as to complete the specified work” fills the gaps for items not specifically delineated in the contract documents.
While the “reasonably inferable” language is a relatively simple inclusion to the description of the work contract term, contractors may not readily agree to its addition to the contract language. This is so because the goal of a contractor is to have a complete and specific description of its duties set forth in the contract. An astute contractor will likely push back on the “reasonably inferable” language and argue that inconsistencies or clarifications to the contract documents should be handled and negotiated between the parties as they arise and not simply be the responsibility of the contractor as a fall back provision.
WHAT ARE THE SITE CONDITIONS?
Another critical contract term that should garner significant consideration at the contract negotiation stage is the contract term addressing site conditions. A common challenge to owners in a construction contract is when a contractor makes a claim against an owner because the contractor has encountered unanticipated site conditions. Accordingly, when drafting the construction contract, owners should consider including a contingency amount in exchange for the contractor assuming complete responsibility for the site conditions.
HOW ARE CHANGE ORDERS HANDLED?
Fully addressing the change order process in a construction contract is essential. No matter how well a construction project is planned, most, if not all, construction projects will succumb to the necessity of entering into change orders. Typically, owners have the right to add to or remove matters from the scope of work under the construction contract. Accordingly, the contract should expressly set forth the procedure for adjusting contract payments. From the owner’s perspective, care should be taken to ensure that the change order provision does not require the owner and contractor to agree in advance on the pricing for a change order. This can result in significant delays if the parties cannot agree.
Resources spent at the beginning of a construction project to negotiate and enter into a well-defined and comprehensive construction contract are invaluable to ensuring the most efficient and problem-free construction project as possible. Investing in counsel with the requisite tools and experience to prepare such an agreement will save thousands and thousands of dollars for the duration of the construction project. There is no doubt that it is money well spent.
ABOUT THE AUTHOR
Laura Colca is a partner in the law firm Goldberg Segalla, where she is a member of the leadership committee of the Corporate Services and Commercial Litigation practice group. Laura is also a member of the National Association of Women in Construction as well as Professional Women in Construction. Laura has counseled countless clients on all types of business transactional matters including representing owners and contractors on both private sector and public construction projects. She can be reached at 716.710.5840 or firstname.lastname@example.org.
Modern Contractor Solutions, August 2018
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