Whether you are a general contractor or a subcontractor, it is important to have a complete understanding of your construction contract before starting the project. Often in the negotiation stage, the primary focus is on the client. You, of course, want to secure the job and give them what they are asking for. There are important points to keep in mind, however, when you are entering into a new agreement that can make or break the job down the line should a problem arise.
Needless to say, having a lawyer review your contract is highly recommended. An experienced construction attorney often sees the same problematic clauses repeatedly, particularly when standardized contracts are used. Your lawyer will be able to negotiate changes and possibly rework a clause that isn’t to your benefit and can open you up to potential liability in the future.
Get the Complete Contract Document
Keep in mind that often, what you end up signing isn’t the complete contract Often there are attachments, exhibits, project specifications and other addenda that are important parts of the agreement. It is also important to be aware that a contract can legally bind not only the general contractor and owner, but it can also bind a subcontractor, even if they didn’t sign the actual document.
Indemnity Clauses
Many people don’t fully appreciate what an indemnity clause is before agreeing to it. To indemnify a party, you are assuming responsibility for them. The term “hold harmless” means that you are waiving any right you may have against another party. You may be able to negotiate these clauses in some instances, but if not, it is important to be aware of what you are agreeing to.
Bond Rights and Liens
Remember that if anything goes awry with a project, a lien or bond may be your only means of getting paid. These are important rights, so it is not a good idea to waive them.
Warranty Period Start Dates
It is generally to your benefit to have the warranty period of your contract begin when your work is completed, not when the entire project is complete. If you agree to have your warranty start when the project is complete, you could be unknowingly and substantially extending your warranty period.
Always Get it in Writing
This may sound like a no-brainer, but it happens all too often, particularly with change orders. If you do not have a change documented and something goes wrong, you could run into trouble down the road.
If you have any questions about the above or want to talk about a construction matter, please contact me.