Three Fundamental Construction Contract Terms

Given how the construction industry operations, parties must craft construction contracts with clarity and use terms, language that encompasses the multiple eventualities that may occur during the course of the construction project.  There are certain terms to which a drafter should particular pay attention.  These terms dictate the direction of the construction project depending on how the term is interpreted and in whose favor it is interpreted. Terms that discusses price, timing and technical details are all important.  However, some other terms should require additional work.

Scope of Work

Scope of work terms sets out the details of the construction project.  It discusses the limits and boundaries to the work the contractor will perform.  This term is important especially for a contractor because the scope of the work can drastically change during the course of the project. Without a scope of work term to dictate what a contractor is and is not obligated to perform, the contract is rather open-ended. A scope of work term should also be specific in naming the work to be performed with a clause regarding the limits of performance. For example, if a contractor is hired to lay pipes and install the plumbing systems in a building, they should include a statement on exactly what this work encompasses.  The contractor should add a statement that excludes the kind of work that may be closely related, but are excluded as part of the contract.

Indemnification

Indemnification is a legal term that is often found in construction contracts.  It captures the legal concept that guarantees against any loss that another party might suffer.  For example, if a legal dispute arises as part of the construction contract, one party may agree to pay any claims, which may arise from the contract while the other party remains unharmed. This, in essence, is a blame shifting mechanism. Indemnification terms can be reciprocal or one-sided depending on the nuances of the contractual relationship. A classic indemnification example unfolds as follows: an unassociated third party is injured on the construction site because of an omission by the contractor.  The third party sues the owner.  With an indemnification term, the owner has the right to indemnify the contractor in the lawsuit. If the owner pays out the judgment, the owner can turn around and sue the contractor for repayment with the indemnification term as a basis. 

Change Order Process

Given the nature of construction projects, changes are inevitable.  That is when a change order comes into play.  A change order refers to any changes to the scope of work agreed to between the owner, contractor and other involved parties. Before a project commences, all parties involved must have a clear picture of what the change order process will look like.  This ensures that when a change must be made, it is made efficiently. This term should identify the communication channels, forms of communication and the individuals who have authority to approve or deny a change.

Your Florida Construction Law Attorney

Attorney Brendan A. Sweeney is an experienced construction law attorney with years of experience advising on contractual obligations for both owners and contractors.  He also has extensive knowledge of Florida’s unique construction laws.  Contact us now for a consultation.