Spring is a busy time in the construction industry, and with more projects ramping up, it’s crucial to ensure your contracts are airtight. A poorly written or misunderstood contract can lead to costly disputes, delays, and even lawsuits. Here’s how to protect yourself and your business from common legal pitfalls in construction contracts.
1. Account for Weather-Related Delays
Spring weather can be unpredictable, with rain and storms often causing project delays. If your contract doesn’t address weather-related disruptions, you could end up on the hook for delays beyond your control. Make sure your contracts include:
- Force majeure clauses that account for severe weather and other unforeseen circumstances.
- Clear timelines with built-in weather contingencies to avoid penalties.
- Responsibilities for site conditions—who handles additional costs due to muddy or unstable ground?
2. Define Payment Terms Clearly
Cash flow is the lifeblood of any construction business, and unclear payment terms can leave you chasing money. Avoid payment disputes by including:
- A detailed payment schedule outlining progress payments and final payments.
- Retainage terms—how much will be held back, and when will it be released?
- Late payment penalties to discourage slow-paying clients.
- Dispute resolution procedures to prevent lawsuits over unpaid work.
3. Specify Change Order Procedures
Scope creep is a major issue in construction. If clients request additional work but there’s no clear process for handling changes, you might end up working for free. Protect yourself by ensuring your contract:
- Requires all change orders in writing before additional work begins.
- Clearly states pricing adjustments for changes in scope.
- Outlines who has authority to approve changes—avoid situations where a project manager or owner disputes an agreed-upon modification.
4. Address Material Price Fluctuations
Material costs can be volatile, and a sudden price spike could eat into your profits if you’re locked into a fixed-price contract. Consider adding:
- Escalation clauses that allow price adjustments for materials.
- Alternative material provisions in case of supply chain disruptions.
- Allowances for fluctuating costs rather than fixed pricing in long-term projects.
5. Clarify Liability and Insurance Responsibilities
Construction sites come with inherent risks, and liability disputes can be costly. Ensure your contract spells out:
- Who is responsible for jobsite safety and what measures must be taken.
- Insurance requirements for all parties involved.
- Indemnification clauses to protect against third-party claims.
6. Ensure Compliance with Local Regulations
Regulations and building codes can change, and non-compliance can result in fines or project shutdowns. Protect yourself by:
- Stating that all work will comply with current codes and regulations.
- Clarifying permit responsibilities—who is in charge of securing permits?
- Including a clause for handling regulatory changes that may arise mid-project.
7. Settle Disputes Without Going to Court
Legal disputes can drag on for months and drain resources. Instead of heading straight to litigation, consider including:
- Mediation or arbitration clauses to resolve issues outside of court.
- A dispute resolution timeline to prevent drawn-out conflicts.
- A defined process for handling disagreements between contractors and clients.
Protect Your Business This Spring
A well-written contract isn’t just a formality—it’s a critical tool for protecting your construction business. By addressing common pitfalls in advance, you can prevent costly legal headaches and keep your projects running smoothly. Take the time to review your contracts, consult with a legal expert if needed, and make sure you’re covered before the spring rush begins.