7/31/2019 7 Essential Construction Contract Clauses - 1

1/2

By Wally Zimolong on December 28th, 2011

Posted in Contracts

I am frequently asked to review construction contracts both before a project starts and after a dispute

arises. Unfortunately , the later is much more common. Contractors are often disappointed to hear that

certain contract language limits or even prohibits their right to recover an otherwise justified claim or that

the contract shifts risk to them in a manner that just does not seem fair. Moreover, arguments over theapplication of contractual language typically ends up in expensive litigation; and attorney fees and cost

diminish any recovery a contractor ultimately receives.

Contractors can save themselves disappointment, time, and money by paying close attention to what the

contract they are signing says and what the language means. Of course, any lawyer will tell you that every

clause of a contract matters. However, certain clauses in a construction contract are more likely to lead to

disputes than others.

Based upon my experience litigating construction cases, the following are 7 typical construction contract

clauses that are commonly the source of contractual disputes: (1) scope, price, and time provisions; (2)

flow down clauses; (3) pay-when-paid/pay-if-paid provisions; (4) termination for convenience clauses; (5)no damage for delay clauses; (6) change order clauses; and (7) whether the specifications are performance

or design specifications.

In part 1 of this 7 part series we will exam the importance of understanding the scope, price, and time

provisions of the contract and why contractors commonly overlook them.

SCOPE, PRICE, AND TIME.

Contract language that states what work you will be required to perform; what you will be paid for it; and

how long you have to do it seems so fundamental to the basis of a construction contract it would hardly

seem possible to overlook. However, it is more prevalent than one thinks. Moreover, sometimes vaguelanguage concerning scope, price, and time is just as bad as no language at all.

1. Scope.

You think you know what work you agreed to perform. You discussed it with the party with your client.

You also stated it in your proposal or bid. However, have you carefully reviewed your contract to see what

the contract says what you have agreed to do?

A common mistake contractors make concerning the contracts scope is the attaching a copy of the

contractors proposal to the contract under the mistaken belief that it controls what the scope of the

contractors work is. Unless, the contract contains language specifically incorporating or referencing theattached scope, then the proposal is meaningless if the contracts definition of scope defers from what your

proposal says most likely it does.

Review one of your contracts definition of scope. The contracts definition of scope is probably much

sential Construction Contract Clauses http://www.supplementalconditions.com/2011/12/7-essential-constructi...

2 5/9/2012 4:22 PM

7/31/2019 7 Essential Construction Contract Clauses - 1

2/2

broader than what is set forth in your proposal. Often contracts will require a contractor not only to

perform the work specifically listed on its proposal but also any work that is necessary and is merely

implied by the drawings.

If your proposals scope conflicts with the contracts definition of scope, this could create the potential for

disputes over scope related change orders. Disputes over scope related change orders are a common

source of construction litigation. Moreover, because a contractor will not be compensated for the change

order work until after the dispute is resolved they have a major financial impact on the contractor as well.

2. Price.

Closely related to the scope of the work is the price of the work. Just as you need to make sure the

contracts definition of scope is consistent with what you agreed to perform so must you confirm that the

contract says what is included in your price.

Is your price for labor, material, and supervision only? Or, have you included in your price charges for

taxes, bonds, insurance, permits, and fees? Typically, contracts will require that these items be included in

your price. While you may have stated that these items are excluded from your price in your proposal, you

need to make sure that the final contract incorporates those exclusions. Otherwise, you could end up on

the wrong end of an unprofitable job.

3. Time.

Does the contract say how long you are expected to be on the job? If the contract does not clearly state an

anticipated completion date, you could be required to stand ready to perform indefinitely because of

delays that have nothing to do with your work. In fact, most construction contracts for smaller projects do

not contain an estimated completion date or schedule. Do not assume that there is an understanding as to

when your work is expected to be complete. Obviously, more time on the job equals more man hours.

More man hours equals more money. Also, if you are on a job longer than expected your resources are

diverted from other work you could be performing. Finally, if your work includes the ordering of material

or equipment with long lead times you could end up unwittingly financing the owners project.

Next, week I will review flow down clauses and what they mean subcontractors.

Wally Zimolong, Esquire

1515 Market Street, Suite 1360

Philadelphia, PA 19102

T / 215.665.0842

F / 215.689.3404

Copyright 2012, Wally Zimolong, Esquire. All Rights Reserved. Strategy, design, marketing & support

by LexBlog

sential Construction Contract Clauses http://www.supplementalconditions.com/2011/12/7-essential-constructi...

2 5/9/2012 4:22 PM