Some Construction Contract Basics- Necessities and Pitfalls

Recently, I’ve been on an “advising” kick here at Construction Law Musings.  My last two posts have been about communication and trusting your gut when it comes to a smooth construction project.  This post will be the third in the trilogy (and who knows maybe I’ll have a 4th and 5th like the Hitchhiker’s Guide to the Galaxy “trilogy”).

While all construction contractors should use their communication skills and instincts to assure a smooth and hopefully profitable project, all of the gut following and great communication will not help you if your contract is not up to snuff.  In the spirit of giving you a few basics things to look at, here’s my list of three basics that you need in your contract and a three things to be on the lookout for in others’ contracts.

First, the good stuff that needs to be there:

1. Attorney Fees Clause– without it, a Virginia court (and most other courts) will not award you a judgment for any attorney fees spent to protect your rights.
2. Dispute Resolution– whether the specified resolution is through the litigation process, ADR or some combination, such a clause or paragraph will only help define the parameters of what happens with a claim.
3. Detailed scope of work– Without the proper detail in the scope of work, the parties cannot properly set expectations and know what happens when things change.

Now, the pitfalls:

1. Mechanic’s Lien Waiver– Yes, Virginia, you can waive your lien rights by contract in my fair Commonwealth.  Look for this in your contracts.
2.  Non-Specific Arbitration Provision– While I am not a huge fan of mandatory arbitration where the dispute resolution paragraph simply cites to a set of rules, a more specific and detailed arbitration clause could actually work.
3. Over-broad Indemnification– Generally, you should be held accountable for your direct actions and possibly those of your lower tier subs.  However, negotiate hard if you are faced with broad language such as “arising from” or “indirectly related to” your work.  This language is great for construction lawyers, but not for contractors.

Of course, the specifics of any construction contract need to be carefully reviewed, preferably with the help of an experienced construction attorney.

Are there others that you run across that you feel need to be added to the list?  Let me know.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.