Construction Law

Are Payment Clauses Featured in Your Construction Contract? featured image

Are Payment Clauses Featured in Your Construction Contract?

In some cases, a crucial contract clause is omitted. In other cases, the contract language is unclear. In either case, one party may be deliberately crafting a contract that has loopholes to deceive the other party. Most contract loopholes exist so that one party doesn’t have to abide by strict requirements within the contract. Of course, if a party signs a contract without a thorough review of its content, the signed agreement is usually valid despite their lack of oversight. 

It’s critical that contractors partner with the construction lawyers of Cotney Attorneys & Consultants for construction contract review in Denver. When you hire a Denver construction lawyer to draft, revise, and review all of your agreements, they can make sure that any loopholes within a contract are identified, revised, or removed. In this brief article, we will discuss payment loopholes in contracts. There are three common ways that payment loopholes exist in contracts, including undefined payment plans, no payment deadlines, and no stipulated penalties.  

1) Undefined Payment Plan 

If a contract doesn’t clearly breakdown payments, this is a serious problem. Contractors never want to deal with an owner that deliberately excludes a payment breakdown from the contract in order to force a lump sum payment at the end of a project. Every construction contract should have payment installments that clearly break down each specific task and the cost associated with that work.    

Related: When Subcontractors Are Owed Payment  

2) No Defined Dates

It’s in everyone’s best interest to have a clear outline of when specific tasks are due or when changes can be requested by. If a contract doesn’t have deadlines for these issues, an owner can request changes to a project whenever they want without notice. Defined dates help everyone on a project understand exactly when items are due to ensure that everything moves along as planned. 

Related: 3 Ways to Ensure Prompt Payment 

3) No Penalty 

It’s important that your contracts breakdown the penalty for failing to meet the terms and conditions. It’s also important to define how a dispute will be resolved. For example, our Denver construction lawyers are experienced in resolving disputes through arbitration. When penalties aren’t clearly identified in the contract, this can lead to a dispute.  

Related: 4 Options for Collecting Payment 

Not all payment clauses in a contract have to be related to the performance of the work. In some cases, a hidden contract clause regarding payment involves the requirement for one party to pay the other contracting entity’s legal fees in the event of a dispute. If a contractor signs a contract featuring this clause without their knowledge, this can significantly impact their financial situation later on if they are involved in a dispute. Again, this is why it’s critical to have a Denver construction attorney review all of your contracts to ensure that your business won’t experience any fiscal ramifications resulting from one well-hidden clause in the contract. 

If you would like to speak with a construction law firm that specializes in contract review in Denver, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.