Negotiating construction contracts can sometimes seem more difficult than the work itself. Knowing what to look for can help you in your contract negotiations. While there are any number of key contract provisions, this blog will address two: indemnity and delays.
Indemnity shifts loss from one party to another. In construction contracts, the parties can agree to shift responsibility, and more often than not, the owner or up-stream contactors want the downstream contractors to take on that risk.
When you are negotiating an indemnity provision, you should try to limit its scope to those claims covered by insurance. It may also be beneficial to make the indemnity obligation mutual, meaning that each party will be responsible for its own negligence.
Another concern with indemnity provisions is that there may be any number of contractors in the area when the problem arises. If you have agreed to indemnify another party, you may be on the hook, even though you are just one of several contractors that caused the problem.
Construction contracts usually set forth the method by which contractors may request more time on the project. Not surprisingly, these delay provisions presume that the contractor is not responsible for the delay. The contract may also address the relief a contractor may demand, such as more time or more money to complete the project.
When you are negotiating delay provisions, be on the lookout for no damage for delay provisions. As the name indicates, these provisions limit a contractor’s recovery for delay and only allow the contractor more time to complete the project. They specifically preclude a contractor from demanding additional compensation for the delay. This means, a contractor may not be able to recover the overhead costs associated with the project taking more time.
You should also be on the lookout for provisions that allow the owner or upstream contractors to demand payment for your delay. Owners often times include liquidated damages clauses to recover their damages when the project is delayed. Upstream contractors may also include language that allows them to bring on extra workers to complete the project. That same provision may allow the upstream contractor to deduct the cost of those extra workers from any amount that you are owed.