Why You Shouldn’t Use Outdated Construction Contracts

Are you using the most current construction contracts? If you’re not sure, you better double-check because there could be dangers in using outdated contracts.

A Supreme Court decision proved this. The court found an arbitration provision unenforceable when the contract stated that all claims “shall be submitted to arbitration before the Southern Arbitration and Mediation Association.” At the time the contract was drafted, the Southern Arbitration and Mediation Association was not around. In fact, it had not existed for approximately 17 years prior, showing just how outdated the contract was.

The Supreme Court ruled that the arbitration forum was a contract requirement and that the court could not select a random forum. This meant that the arbitration provision was unenforceable, so if the parties needed to resolve any claims, they would have to spend the time and resources to do so before the appropriate court.

There are a couple main takeaways from this situation. First, it’s a good reminder for contractors to carefully review contracts and make sure they are up to date before giving them to clients. It is possible that there could be changes to the law that may require revisions to form contracts. As an example, some states periodically amend laws relating to prompt payment, indemnity, and retainage.

Another thing to consider is that contractors, owners, developers, and design professionals should pay particular attention to provisions relating to alternative dispute resolution (ADR). Although most ADR provisions specify the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS) as the forum for arbitration, you need to make sure that the provisions are up to date and do not specify a non-existent forum.

Other Key Issues

Here are some other issues with outdated contracts:

• Legal compliance. Construction regulations are subject to change over time. Outdated contracts may not reflect the latest legal requirements, which could result in non-compliance and potential legal disputes.
• Lack of clarity. As construction practices evolve, so do industry standards and best practices. Outdated contracts may lack clarity or fail to address current construction methods, materials, or technologies, leading to conflicts between parties.
• Inadequate risk allocation. Outdated contracts may not properly allocate risks associated with unforeseen events, changes in scope, or delays, leaving parties vulnerable to unexpected liabilities.
• Limited protections. Modern construction contracts often include provisions for dispute resolution mechanisms, warranties, insurance requirements, and indemnification clauses to protect the interests of all parties. Without these protections, the parties are exposed to unnecessary financial and legal risks.
• Failure to reflect market conditions. Construction market conditions, including material costs, labor rates, and economic trends, can fluctuate over time. Outdated contracts may not accurately reflect current market conditions.

Contact Us Today

Contracts need to be current and accurate. Otherwise, you open yourself to a lot of risks, including possible legal issues.

A Florida construction contract lawyer from Linkhorst & Hockin, P.A. can handle your contract-related concerns. We can ensure you have a strong and valid contract. To schedule a consultation, call 561-626-8880 or fill out the online form.

Source:

natlawreview.com/article/recent-court-decision-warns-dangers-using-outdated-construction-contracts