Considerations for Drafting Construction Contracts

To minimize potential legal problems when planning construction, whether the project is a large commercial project, a new residence, or even a renovation to an existing structure, care must be taken to have essential terms included in the contract. The failure to identify essential terms in the construction contract will lead to project confusion, extended completion time and expenses, as well as raise the likelihood of a future legal dispute. Below are several terms to consider in any construction contract:

• Identify Parties and their responsibilities
  Given the large number of parties involved in a typical construction project, a clear understanding of who is involved is essential.

• Scope of Work
  In addition to knowing the parties involved in the work, it is also necessary to determine what role each person will be performing on the project. This is known as the Scope of Work. To avoid confusion between contractors, subcontractors, and suppliers the Scope of Work should clearly state what each party is responsible for on the project.

• Payment Terms
  Having any work performed on a project prior to reaching a clear understanding and approval of the corresponding price and payment schedule is one of the fastest ways to create discord on a project. Clearly define the payment terms in advance of commencing on work so potential misunderstandings can be avoided.

• Scheduling and Delays
  The orderly, efficient, and timely completion of a construction project rests with advance scheduling of the trades and planning for potential delays. Proper contract language may be used to assign financial liability for any delays caused by a party’s failure to perform in their agreed timeframe.

•  Unanticipated Conditions
  At times, parties to a construction project must proceed on assumptions of existing conditions. This occurs when conditions needing to be examined are either hidden or otherwise concealed. After work has commenced, however, it may be discovered that those basic assumptions regarding existing conditions may be quite wrong. It is important to clearly state which party is responsible if unanticipated conditions should arise.

The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: [email protected] or (631) 608-1346.