Construction projects are all very unique. They can differ in many respects, including:
- the scope of the construction;
- the location of the project;
- the pre-existing conditions at the construction site;
- the projects budget; and
- the projects schedule – amongst others.
When negotiating these terms, it is important to pay close attention to the details, as they can make a very big difference when it comes to construction contracts. In every construction contract, there are a few key provisions that the parties must address. Here are a few of those major terms and negotiating points.
Force Majeure
A force majeure provision is one of the major terms of a construction contract, and many contractors will not even entertain the negotiation of a contract absent a force majeure clause. So, what is a force majeure provision? A force majeure provision outlines certain circumstances that will excuse a party’s performance, or lack thereof, under a contract if that circumstance occurs. Force Majeure events are often referred to as “uncontrollable circumstances”. Most contracts will provide a detailed definition of what constitutes a force majeure event. Generally, for the contractor to rely on such an event to excuse its lack of performance under the contract, the event will usually need to be beyond the contractor’s control. For example, many force majeure clauses state that the event must be an “act of God.” The contractor will then usually have to notify the property owner of the force majeure event preventing the contractor’s performance under the contract.
Limitations on the Contractor’s Liability
Another very common and important clause found in most, if not all, construction contracts relates to the allocation of liability for damages or losses amongst the contractor and owner. While there are limited instances of owner liability, there are numerous occasions in which a contractor can be liable for damages or losses that occur during construction. For that reason, contractors will look to shield themselves from liability as much as possible. If the contractor is forced to take on liabilities, it is important to try and cap the liability from a monetary standpoint as liability resulting from construction can be very costly. A contractor’s liability under a construction contract can be achieved in several ways, one of which being clearly stating the types of legal damages and remedies a property owner can recover from a contractor. For example, many construction contracts limit the damage available to the property owner to those who actually incurred damages resulting from the contractor’s actions. This eliminates any potential claims for punitive, consequential, or special legal damages.
The above-noted clauses are just two examples of important clauses that must be taken into account when negotiating any construction contract. As you can see, there are many nuances related to construction contracts, and it is crucial that you are properly protected and represented when negotiating such a contract. For more information on construction contracts, or for help on your next construction venture, reach out to the knowledgeable attorneys at KI Legal by calling (212) 404-8644 or submitting a contact form on our site at kilegal.com.
This information is the most up to date news available as of the date posted. Please be advised that any information posted on the KI Legal Blog or Social Channels is being supplied for informational purposes only and is subject to change at any time. For more information, and clarity surrounding your individual organization or current situation, contact a member of the KI Legal team.
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