Trust Your Gut When Deciding Whether to Sign a Construction Contract

Last week’s Construction Law Musings were about the need to communicate before, during and after a construction project.  This week, I continue my thoughts on some business practices that make my life as a construction attorney and adviser (not to mention your lives as construction professionals) easier and less stressful.  This week’s musing is a bit less legal and a bit more practical, namely, trust your instincts when deciding whether you want to work for the company or owner presenting you with a job or contract.

I know, those of you who read this blog regularly (thanks for the interest) read a lot about contract terms, scopes of work, mechanic’s lien deadlines and the like.  All of these are important, particularly in the Murphy’s Law riddled world of construction where the contract will determine your rights in the face of a dispute or other problem that you’ll need an attorney to deal with later.  However, that contract is only as good as the paper on which it is printed if one party to that contract does not see fit to follow it.

This is particularly true for those that do not hold the money.  The further down the “payment chain” you are (the “chain” being generally Owner, General Contractor, Subcontractor, etc.), the more trustworthy and solid the “upstream” party must be.  In other words, those seeking to get paid need to be sure that, regardless of what the contract says, the one paying them is willing and able to do so when the time comes.

By trustworthy I don’t mean that the party on the other side of the table is not honest or doesn’t intend to comply with the contract.  The construction world, both residential and commercial, would not run if this were not the case.  What I do mean is that experienced construction professionals get a certain sense of those that they contract with relating to the overall financial and organizational wherewithal of those with whom they contract.  Another factor is the experience of the owner or GC relating to the particular project.

As an example, most homeowners do not regularly participate in major construction.   Because of this lack of experience, and not because they don’t have the full intention to comply with the contract, a heightened level of diligence will be required.  The same is true for a GC that a subcontractor on a commercial project has little experience with.  Because there is no history, good bad or otherwise, between the parties, a better contract, and even a possible walk away may be necessary.

In short, know your customer.  I’m not saying raise your guard to the point of paranoia.  I am advising that if your hair stands up on your neck, or you feel that the other party might not have the organizational skill to run a project and this makes you think twice, listen to your gut.  It is always better to walk away before you start than to walk away during the project.

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