Three Necessary Construction Contract Provisions
A provision is a legal clause that is designed to protect the interests of one or all of the parties involved in a contract. Understanding the provisions that are included in your construction contract is essential to the success of the construction project. If you are unclear on any aspects of your construction contracts, we highly recommend seeking the help of a Tampa construction law firm.
Here are three provisions that should be included in your construction contracts.
1. Contingent Payment Provisions
A common concern among contractors in the construction industry is the risk of non-payment for work that has been performed. For this reason, contractors often include risk-shifting payment provisions in their contracts. There are two types of risk-shifting payment provisions that transfers the burden of non-payment from the general contractor to the subcontractor(s): pay-when-paid and pay-if-paid provisions.
If the provision is clearly expressed as setting a condition precedent in which the general contractor is not obligated to pay the subcontractor unless payment is received by the owner, it is considered a pay-if-paid provision. If the provision is ambiguous or does not clearly express a setting of a condition precedent, it is considered a pay-when-paid provision, which in essence only delays payment for a reasonable period of time. To ensure your risk-shifting provisions are clearly expressed, it is highly advised to have a construction law firm in Tampa review or draft your construction contracts.
2. Delay and Damage Provisions
Most construction projects rely heavily on a schedule for completing of contracted work. Because construction projects are so dynamic, it is almost inevitable that the project will not follow according to plan. When delays (excluding delays caused by natural events) occur during a construction project, one party of the contract will bear damage, and the other party will almost always be blamed. To help manage the level of liability associated with delays, contractors commonly include damage provisions in their contracts. Three of the most commonly used damage provisions include:
- Liquidated Damages
- Mutual Waiver of Consequential Damages
- No Damages for Delay
These provisions provide a limit on the amount of recovery that an injured party is entitled to receive or may remove liability from either party entirely.
3. Change Order Provisions
It is not uncommon for one party of the contract to request work that falls outside of the scope of work that is outlined within a construction contract. To ensure that all parties involved are protected, many construction law firms in Tampa include change order provisions in their clients’ contracts. A change order provision allows the flexibility to make changes to the scope of work being performed without causing the contract to be invalid.
Change order provisions also provide a layer of protection for contractors. If a party of the contract requests work that is outside of the scope of work included in the contract, the contractor must request that the changes be made in writing and signed by the party requesting the changes, or by a representative of the party. A contractor who proceeds with work that is not documented with a change order risks not being compensated for that work.
To speak with a licensed construction lawyer, 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.