Your Contract Terms Should Not Be “Standard”

Many clients come through our doors because a project has gone wrong due to obligations they unknowingly take on after signing “industry standard” contracts. Standard industry contracts make for good starting points, but careful contractors will want to move beyond, or at least study, the “typical” terms in a contract to maximize the opportunities for success on a project, including being paid for the work you complete.

• Form Contracts Favor the Trade that Drafted Them. If you are presented an “industry standard” contract, determine the group that developed the form. Is the form intended to favor an owner, an engineer, a general contractor, or a subcontractor? Often times the answer may lie in which organization drafted the form.
• Insurance Terms May Be Insufficient. Often, an “industry standard” contract will set forth default insurance coverage that is not sufficient for the project. Occasionally, default contracts will include a reference to insurance terms “set forth in [a separate section]” without the section being in the contract at all. Be wary of phrases that state a party should carry insurance coverage that is “typically carried in the industry” as this is the type of language that attorneys could argue about all day.
• Liability Limitations Could Be One-Sided. If you receive a standard contract that limits the opposing side’s liability to some amount that is actually less than the required insurance, be advised that it could be difficult to resolve a dispute when that party does not have much skin in the game or incentive to settle. This can be a small thing, but the ultimate negotiation could turn on whether the opposing side has risk in not being reasonable.
• Are Delay Terms Addressed? At this point, we are all aware that global events like pandemics could have a huge impact on our daily lives. Even short of a pandemic, events that are not contemplated impact our businesses every day. That said, be wary of a form contract that does not describe a way to remedy a delay caused by events that nobody has control over. These forms may not have been updated since 2020 but may have real consequences today.

While it is tempting to use “industry standard” contracts at the outset of a project before disputes arise, we see many contractors that wished counsel had reviewed their contract at the outset of a project. Often, doing so would have saved them thousands in litigation expenses.If you would like to have a construction attorney review your contract at the outset of a project, we are here to help.