Reviewing construction contracts is a regular part of my practice as a construction attorney. From limited reviews of specific provisions to preparation of an entire array of form contracts, I have seen many different contract clauses and methodologies to evaluate them. In the end, contracts are about the allocation of risk. While the Rules of Professional Conduct prohibit me from giving legal advice as part of this blog, there are some clauses that commonly draw more attention when time is limited in the contract formation stage. Here are the top 5:
(1) Payment clauses. No contractor likes to work for free. The payment clauses in the contract determine how quickly you get paid, outline the items that must be submitted to get payment, and set out what happens when the company with whom you are contracting does not get paid. Start here.
(2) Insurance and indemnity clauses. These do not often come into play if your company generally performs work safely. However, the consequences can be large and the financial impact relating to those problems considerable when they are triggered. Be careful about assuming risk you don't control or can't insure. There are waiver issues to be concerned about in this area as well.
(3) Change order clauses. Changes in scope are among the most litigated construction issues. This is for good reason. Change order clauses often set out specific criteria that must be met to receive payment for change order work. The failure to comply with these criteria is often relied upon when there is not enough money in the job to pay for extras or there is genuine disagreement about whether something was included in the original scope. Due diligence in advance helps avoid change order problems, but make sure the change order clause is fair and not overly cumbersome.