Top Construction Clauses That Lead to Disputes

Construction contracts are complicated documents that tend to include a lot of details. They also tend to contain provisions that become the focus of disputes when a project runs into problems.

A good contract can help prevent disputes, but sometimes certain clauses cause more harm than good. Three of the most commonly litigated clauses involve payment, change orders, and indemnification. Carefully negotiating these contract provisions before work begins can help clarify expectations, allocate risk fairly, and reduce the likelihood of expensive construction litigation.

Payment Provisions

Payment terms are among the most important parts of any construction contract. Contractors and subcontractors rely on timely payments to keep projects moving and maintain cash flow. When payment is delayed, they may effectively end up financing the project themselves.

One of the most controversial provisions is the pay-if-paid clause, which makes a subcontractor’s payment contingent on the owner paying the general contractor. Because these clauses can shift significant financial risk, many parties seek alternatives that provide better protection. Contracts should clearly outline payment deadlines, interest on late payments, and remedies if payment is withheld. For example, allowing work to be suspended after proper notice can help prevent contractors from continuing to perform work without compensation.

Change Order Provisions

Disagreements over change orders often arise when the original scope of work is vague or incomplete. If the contract does not clearly define what work is included, the parties may disagree over whether additional work is part of the original agreement or constitutes a change requiring additional payment.

A well-drafted contract should establish a clear change order process. Every change order should describe the additional work, identify any adjustments to the contract price, and specify whether the project schedule will change. Requiring all change orders to be approved in writing before the work begins can help avoid misunderstandings and disputes later in the project.

Indemnification Clauses

Indemnification provisions determine who is financially responsible when claims arise from accidents, property damage, or other losses during construction. While most parties expect to be responsible for their own negligence, disputes often occur when one party is asked to assume liability for another’s actions.

Many states have enacted anti-indemnity laws that limit or prohibit certain broad indemnification provisions, although the rules vary by jurisdiction. Before signing a construction contract, parties should carefully review indemnification language to ensure they are not accepting unnecessary liability. Narrowly tailored provisions that allocate responsibility based on each party’s own conduct are generally less likely to result in disputes than broad, one-sided indemnity clauses.

Contact Us Today

Construction contracts can be complex and hard to understand. It is important to have a solid, clear contract in place to prevent misunderstandings.

Count on a Florida construction contract lawyer from Linkhorst Law Firm to guide you through the process. You can count on us to be insightful and practical when handling your contract-related concerns. To schedule a consultation, fill out the online form or call 561-626-8880.

Source:

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