If you’re about to sign a construction contract, you need to be aware of some important clauses that may and/or should be incorporate into your contract. Certain clauses are critical for any contract to effectively protect your rights and minimize your liabilities.
At Wolfe Law, we always carefully review the contracts our clients are considering. Here are 5 clauses we recommend you pay attention to in your construction contract:
1. Scope of Work
Though the scope of work clause may seem simple enough, it is often overlooked or taken for granted.It is critical to clearly define the scope of your assignment and to make sure that each party is satisfied with the understood terms. To avoid disagreements in the future, expectations should be set out from the very beginning.
An indemnification clause obligates one party to compensate the other party for certain losses or damages resulting from third-party claims. This compensation is unrelated to other contractual obligations and damages. An indemnification clause can help protect you against future liability.
3. Payment Conditions
Make sure you know the conditions upon which you will receive payment for your work. To help determine this, you should have a cost breakdown of the entire project ready as part of the contract negotiation process.
4. ADR Clause
This can be Arbitration and/or Mediation. Though not all construction contracts have them, arbitration clauses may prove to be extremely helpful in case of a future dispute. Arbitration and meditation can help cut costs of potential litigation. Consider what sort of arbitration suits both of your needs best and include these provisions in the contract. There are many versions of arbitration and we recommend you consult an attorney before deciding which one to incorporate into your contract.
5. Choice of Law and Jurisdiction
The choice of law clause helps determine which set of laws governs the contract.This is a critical clause, especially where parties and the work cross state borders. Different states have different laws and it is important for you to know which set of laws governs your contract. In addition to knowing which law governs, it is also helpful to decide where the parties will go to court. The jurisdiction clause may save you in time and cost of travel, not to mention inconvenience, in the case of future litigation.
We understand that contracting is never easy. Negotiations and drafting can become confusing and burdensome.Thus, an attorney should be on hand to help your understand the risks and benefits of the contract you are considering. At Wolfe Law, we have years of contracting experience, especially in the construction industry. We would be happy to help you with all your contracting needs.
Particularly in the construction industry, where timing and cost may vary greatly depending on the project, the type of contract you sign can have an incredible impact on your future earning potential. We recommend you speak to an attorney before picking which contract works for you. Contact the attorneys at Wolfe Law for all your construction contract needs.