Construction Contracts
Tuesday, November 24, 2015
by: Attorney Roger Haerr

Section: Trends and Tips

An old joke speaks about a contractor who offered an owner a good price, schedule, and quality, as long as the owner only chose two of the three.  Putting the joke aside, this article explores the most important construction contract terms:
Scope.  Disputes arise because plans are not 100% complete. If the work is not shown, how will it be inferred?
Payment. The timing and sequence of payment are important. If payments are front loaded, there may be little incentive to finish. The owner will need releases to ensure that subcontractors are paid.
Schedule. Time may not be of the essence if construction start and duration are not spelled out. Delay clauses should specify responsibility for weather, owner, contractor and force majeure delays.
Changes. Changes in the work and unforeseen conditions expose the owner to substantial risk. A signed change order should address the agreed impact on price and schedule.
Insurance, Indemnity, Bonds. Project risks can be transferred by contract, insurance and bonds. The project should be insured by builder’s risk and liability insurance. There are many different types of indemnity clauses which shift the risk of claims. Bonds ensure the project is completed and paid. 
Liability. Contractors desire exculpatory provisions, and owners desire unlimited consequential damages. There are important considerations in determining whether to resolve disputes in court or arbitration, especially before agreeing to a prevailing attorney fee.

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