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There are a few aspects of construction contracts that are often overlooked. Without a properly drafted contract drafted by an experienced construction attorney, owners can find themselves unprotected in situations that can result in extra cost and time. A carefully drafted contract will help owners avoid common problems that can derail a project.
What Should Be Included?
There are six commonly overlooked aspects of construction contracts that, if included by a construction attorney, can protect owners from unexpected delays and costs:
- Project Schedule
- Change to the Scope of Work
- Notice Provisions
- Lien Claims
- Force Majeure Clauses
- Prevailing Party
Including a detailed project schedule provides clarity and security for owners. Construction contracts should include a baseline project schedule that provides the different phases of construction and their timelines. They should also include provisions for providing the owner with progress updates and a schedule recovery plan in the case of delays.
Change to the Scope of Work
Construction contracts should include a way to resolve disputes that arise over change orders. A contract can include a provision that the contractor continues work when a dispute arises, resolving issues over price or timeline at a later date. Alternatively, a contract can provide for a fast-tracked dispute resolution to resolve any issues over change orders.
Notice provisions are important to ensure that owners stay informed of potential delays. The notice provision in a construction contract should specify that contractors should provide written notice of any problems that arise. It should further specify whether electronic notice is sufficient and in what circumstances special delivery, such as delivery by certified mail, is required.
Construction contracts should include provisions that specify the steps to be taken when a lien is filed. The contract can include language that requires the contractor immediately take steps to satisfy lien claims by any subcontractors. The contract can also require that the contractor indemnify the owner for any proceedings or lien claims if the contractor fails to take the necessary steps to resolve the claim after being notified by the owner.
Force Majeure Clauses
Due to the COVID-19 pandemic, detailed Force Majeure clauses should be included in construction contracts. Force Majeure clauses typically excuse a party from completing its obligations if an unforeseeable event prevents its performance. The Force Majeure clause should specify that written notice that the clause has been triggered is required. The delay must end once the unexpected event ends.
It is important that if a legal dispute does arise, there is a legal mechanism to recover attorneys’ fees and costs. The easiest way to provide for this is to include a prevailing party clause in the contract that allows a prevailing party in an action (either a lawsuit or arbitration) to recover reasonable attorneys’ fees and costs. Without such a provision, a party to a contract could end up with no legal ability to recover attorneys’ fees.
It is also important to consult with an attorney to understand the legal implications of other contract provisions, such as arbitration provisions (waiving the right to a jury trial) and waiver of warranties. It is important not to sign a contract unless all terms are understood. A construction contract attorney can assist with explaining all possible implications.