If you’re in the construction industry, you’re probably used to hearing about safety hazards. But what about contract hazards? These hazards may open you up to troublesome liabilities. There should be a “Danger, Danger!” sign attached to every poorly drafted contract because without a solid contract backing you up, all you really have is your word.
And unfortunately, your word may not be worth much. Here are some construction contracting hazards we want you to keep in mind:
Vague Scope of Work Provision
One of the most important provisions in your construction contract, is the scope of work. Having a clear verbal conversation about expectations is not enough! You must stipulate what exactly each party is expecting. Of course, there’s a proper balance between too much and too little, and oftentimes your position in the contract will determine your preference. The right attorney can help you figure out what amount of detail is right for you. Remember that contracts are usually written in favor of the party who drafted it. Therefore, if you receive a contract which needs to be signed, it should be reviewed ahead of time.
No Duration of Work
Make sure to put the expected project duration into your contract. Though delays may occur, it is important to have an estimated timeline that both parties are in agreement on before work begins. Then you can put in provisions for how delays should be handled based off the original duration of work.
Inappropriate Payment Schedule
An improper payment schedule can prove catastrophic later in the construction project. Make sure to draft a payment schedule that makes sense for all parties. A good example of an effective payment schedule is one that is tied to key milestones in the project.
Whether you are an owner signing a general contract agreement or a contractor signing a sub-contract agreement, it is vital that you check that both you and the other party have the license(s) required to perform the work being contracted for in the agreement. Depending on your jurisdiction, a license may mean passing required exams or being in good standing with the relevant licensing board. Without the right license, work may halt and litigation may follow. The city or state could put a stop-work order on the project and subject the parties to fines. Further, in Louisiana and most states, an unlicensed or improperly licensed contractor may not be entitled to full compensation for work performed on the project.
Unfortunately, injuries occur and are oftentimes unpredictable. You should always make sure that your general contractor/sub-contractor has the proper liability insurance and/or worker’s compensation insurance. You don’t want to be liable for someone else’s mistake!
The right warranty period can be critical in limiting future liability. We recommend speaking to a professional in your industry and jurisdiction to assess what the warranty period should be for your project. Each project and each role in the project have different customary warranty periods.
Here at Smiley Law, we are always ready to take your construction contracting questions. Contact us today.