What Are Some Of The Key Clauses In Construction Contracts?

A lot of things can go wrong in a construction project that depends on the work of multiple parties. After all, in figurative terms, a train wreck may not necessarily be due to the train itself. It can result from problems at any point in the track.

This is why drafting construction contracts is so tricky. Effective construction litigation depends to a considerable degree on putting a proper contractual infrastructure in place before a project is even initiated.

What are some of the key things that should be clarified, then, at the outset of a construction project?

In this post, we will provide an introductory answer to that question. It will take the form not of legal advice, but of an outline pointing to the larger framework in which such questions arise.

First of all, it should be noted that contract law is pervasive in the construction context. To be sure, there are other issues that are implicated in the construction industry, such as tax and labor law considerations in the classification of workers. But when a construction project goes off the rails, it is contract law that is fundamentally involved in the resolution.

For example, if completion of a contractor's work is contingent on a subcontractor's work, who bears the burden if the subcontractor does not comply?

In such a situation, there is likely more than one contract in play.

The main contract is the one between the person or entity that wants something built and a general contractor hired to build it. But there are also contracts between the general contractor and various subcontractors.

When talking about construction contracts, then, it is important to be clear about which ones are being referred to. The contract between the general contractor and the owner is not the same as the contracts between the general contractor and the subcontractors.

For one thing, the contract between the owner and the general contractor will often have "scope of work" clauses setting forth the plans and specifications.

There will also typically be a section of this contract addressing when changes in the proposed work are allowed. A "changes clause" can set forth what process must be followed in order for the general contractor to be compensated for additional work that seems necessary to complete the project.

For instance, a contract may call for the construction of a new building on a former industrial site. If the general contractor encounters a need to do unanticipated environmental remediation, that contingency could be addressed in advance through a "changes" clause.

There are other important terms that must be nailed down in construction contracts, such as payment and performance. For more information on those issues, please visit our page on construction litigation.

Source: WestLaw, "Contract terms and principles," 8B Michigan Pleading and Practice, Section 62D

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