Protecting Owners in Contract Agreements
Owners in the construction industry must no longer rely on standard cookie cutter contracts to represent their best interest. Where many agreements may benefit others on a construction project, these same agreements may leave owners hanging in the balance.
What Contracts Fail to Do
For your contract to be effective, it must be specific and worded with language that is clear, concise, and easy to understand for each party. Many times contracts lack in the following areas:
- A fixed construction price
- Leaves owners vulnerable to excessive change orders
- Leaves owners open to increased project delays
- Owners are responsible for cost overruns
How to Protect Owners
Contract review and drafting is a critical component of any construction operation. As experienced Orlando construction lawyers, we know that the best line of defense for owners is to address them in the contract agreement. The contract should have specific language that protects the owner against claims and lawsuits from contractors and other third parties.
Recommended Provisions for Contracts
The contract should identify the Owner’s Representative and address in detail the Scope of Work, contract price, and the start and end date of the project. In addition, the contract should include the following provisions:
- An Indemnification and insurance clause should be worded to protect owners and the owner’s additional insured against third-party claims, litigation, liability (physical and financial). It should also ensure that contractors are insured.
- A Dispute Resolution clause should address how disputes will be handled and where they will take place.
- A Change Order clause should address how changes orders will be presented and approved or denied. This includes shifting risk to contractors when work is done, yet has not been approved by the owner.
- A Mechanic’s Lien clause should protect the owner when subcontractors or suppliers file a claim of lien on the property.
- Payments should be addressed in-depth. Lien waivers should be requested as well as bonds to secure the completion of the project by the contractor and to protect the owner if the contractor breaches the contract.
- A Termination For Cause and For Convenience clause used in good faith as needed.
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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.