As Lydgate famously wrote, “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.” Even if stellar work is done on a project, there will always be hard-to-please owners and disputes between general contractors and subcontractors. It is important to have provisions in place that protect you from costly litigation.
Let’s take a look at some crucial provision to include in your construction contract that will minimize risks and maximize rewards.
A common problem contractors and owners run into with SoW is lack of specificity. Individual interpretations of ambiguously written stipulations may not support either party in the event of a dispute. The SoW should be clearly detailed through itemized lists, timelines of specified milestones, expectations, and other necessary documents.
Though scopes of work are subject to modification, having well-defined project goals and considerations is key in reducing risks and potential project disputes.
Indemnity provisions provide protection against financial burdens by holding one party, the indemnitor, accountable to the other party, the indemnitee, for incurred losses or damages. The 3 main types of indemnification are:
Indemnity clauses need to be carefully reviewed by an attorney or insurer, and all parties involved should be aware of state indemnity laws that may limit or void enforceability of certain forms of indemnification.
The agreed upon Scope of Work and price of a construction project should be proportional, and as the SoW may be subject to changes, so too is pricing. Common pricing models include:
Also referred to as Lump Sum or Stipulated Sum, this model provides an upfront price and is best for projects with a clearly defined SoW. The overall price, however, may be higher than other types of pricing to buffer potential setbacks.
Under this model, the contractor is reimbursed for time and materials, plus a fixed fee or percentage, so a predetermined SoW is not required. This is a high-risk contract for the owner, so reimbursement limitations should be clearly defined and understood by all parties.
Unit pricing breaks the project down into smaller, billable units of labor and materials. This model allows for clearer cost analysis and is good for projects that require SoW flexibility.
Terms of payment should clearly specify when and how payments should be made, as well as outline non-payment repercussions.
The complexities of construction contracts can be a bit overwhelming, but are crucial in ensuring the best project results for all parties involved. Let the expert legal team at Stone Canyon Law help you draft the best contract for your next construction project!
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