Issues to Look for in Construction Contracts

Posted by on Nov 16, 2012 in Blog, Construction News | Comments Off on Issues to Look for in Construction Contracts


In the construction industry, the successful outcome of your project relies on risk management. Obviously, one of the greatest tools that lenders, owners, contractors and subcontractors have is the contract. While a contract is no substitute for solid business and construction practices, it does provide contractors with a careful written document to review, allowing them to assess various risks to consider when starting a new construction project.

So what types of issues should you be looking at in your construction contracts?

Risk Should be Spread Out across Individuals

First, it’s important that potential risks be spread out to those who can best manage them. When all the risks are placed on a few key individuals, it can be difficult to control these problems. Instead, there should be a ladder of individuals. For example, the owner should enter a construction project with a contractor, who will then delegate tasks to subcontractors. The potential risks and nuances of the construction industry are then spread to these individuals who have the best ability to control them.

Make Sure Insurance Coverage is Available

Second, all insurance requirements in the contract should be identified and addressed. A common issue in construction contracts is that there are contractual indemnity provisions included, and these contracts are only as valid as the indemintor’s ability to honor them. Don’t be fooled; make sure that the insurance coverage that is being promised is available if risk were to occur. With this in mind, don’t accept Certificates of Insurance. These certificates can include incorrect or incomplete information.

Have the Contract Reviewed by an Attorney

To ensure that your contract is as thorough and credible as you expect it to be, it’s best to have the contract reviewed by a knowledgeable attorney. To avoid unnecessary delays, high project costs and other issues, you should take the time to have your contract examined. Too often, construction contracts include information that is outdated or unenforceable, so when risk does occur, it’s difficult to pursue action.

Contracts Should Include Realistic Information 

Finally, any construction contract you enter should have realistic time frames, adequate quantities of materials and accurate insurance liability claims. When contracts have invalid information, it’s setting everyone up to fail. Sometimes this happens when individuals want the contracts to look most appealing, but there are no winners in this situation. Your contract should be the foundation for a successful construction project, and this can only occur when the included information is valid.

Blog sponsored by: Construction Reports 

Source: LexisNexis Communities






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