Elements of a construction contract you should know about

The weather in our region is expected to get better very soon, even though meteorologists have been promising that spring will actually be here for soon for the past couple weeks. Whatever the weather has in store for us in the coming week, one thing is for certain, once the weather clears, construction projects will begin in earnest. The same will likely occur for the planning of future projects.

For those who are in the planning stages, the wording of a construction contract is critical. Not only will the contract dictate the time frame and the pace of completion, it could also serve as the basis for any legal remedies. Because of this, we will highlight a few construction contract provisions that of which entities should be wary.

Indemnification – This clause can protect against future liability for harm inadvertently affects a third party. Essentially, an indemnification clause obligates one party to protect the other party in the contract for harms inflicted (inadvertently or otherwise) upon a third party.  Usually, insurance is obtained to pay for an indemnification claim.  As a result, it is important to work with your insurance agent/broker when you are either including an indemnification clause in your contract, or signing someone else’s contract that has an indemnification clause.

Choice of Law and Jurisdiction – As the title states, this clause helps to determine where legal disputes may be adjudicated. This clause is especially important for projects involving companies working across state lines.  Some laws, such as the Prompt Pay Act, will negate these provisions when it comes to the collection of monies owed.  Thus, it is always best to consult with construction counsel before agreeing to a specific state’s laws or courts.

ADR Clause – Indeed, not every legal dispute has to be resolved in a courtroom. An alternative dispute resolution clause can establish a process for resolving disputes either through mediation or arbitration. Also, this clause can establish what type of arbitration can be used, and what types of disputes will be subject to arbitration.

If you have questions about unfamiliar elements of construction contracts, an experienced construction law attorney can help you.