Construction is one of the fastest-growing industries across Texas.
To reap the rewards of the building boom, make sure you are prepared.
Good planning helps protect individuals and businesses from a host of different construction risks.
While you cannot control external factors like shipping delays when planning your construction project, you should take charge of the things you can control, like your contracts.
A poorly drafted commercial construction contract can sink a project faster than an ocean squall can sink a cargo ship full of building materials.
In this blog post, the Massingill team will provide some contract dispute examples common in the construction industry.
We will also provide information on commercial construction contract requirements and why you should have a construction law lawyer look at every construction contract you sign.
Delays and Timing Disputes
One of the biggest disputes builders and buyers run into with commercial construction contracts is delays.
Delays can cause a cascading effect of costs for contractors, subcontractors, owners, and landlords.
All parties want to avoid liability for the delays. Contractors typically want to be paid whether or not delays are within their control.
Building owners usually want a discount on the price of the contract if there are any delays.
Many factors influence delays, especially the global supply chain. With delays already being one of the most common contract dispute examples, both parties must know what to expect before the first brick is laid.
An appropriate commercial construction contract will clarify who is responsible for each kind of delay and who needs to pay what amount.
Speak with an experienced Austin construction lawyer before signing any new construction contract.
Having a lawyer draft or review your agreement can save you a lot of time, money, and heartache.
Material Costs Changes
It is a well-established best practice in the construction industry for clients to provide a budget.
Contractors provide price estimates for how much they think work will cost. Typically, a final commercial construction contract price is based on these amounts.
While contractors budget for the cost of materials, that cost can fluctuate significantly throughout a project.
This is especially important right now, with the increasing demand for building materials impacting all aspects of construction.
Your commercial construction contract requirements should specify what should be done in the event of significant fluctuation in material costs and who bears that burden.
Scope of Work Disputes and Changes
A Scope of Work provision or rider provides all parties with a description of the work to be performed. The most common construction contract dispute with this provision is that it is vague or incomplete.
Typically, this results in incomplete or defective work. Sometimes it also causes problems with subcontractors or coordination of responsibilities.
Finally, it can cause serious disputes about the quality of the work performed.
Scope of work changes or disputes often result in litigation. If this happens, work on the project halts or can even be abandoned.
This can cause millions of dollars in losses, depending on the size of the project and the length of the delay.
Ideally, you would prevent these construction contract disputes from ever becoming a disruption in the first place.
Having an experienced construction lawyer draft or review your proposed Scope of Work can dramatically increase your contract’s chance of success.
A construction lawyer can also include specific checkpoints and resolution procedures in your contract to quickly handle any issues that arise during construction.
The team at Massingill understands these issues and is ready to help.
Payment and Performance Issues
Another of the most common and sensitive contract dispute examples is your construction contract’s payment provision.
The payment provision details how each of the parties pays or gets paid.
Sometimes, this payment provision is structured as values assigned to items of work. As construction progresses, the builder periodically certifies the work that has been completed and is paid in accordance with the contract.
For instance, if the contract assigns a value of $10,000 for completing the roof of a building, the builder will be paid that amount when they certify the roof has been completed.
To avoid payment and performance issues, most parties take either one or both of the following two routes.
First, some require that the parties post a bond equal to a contractual payment. This helps keep payment agreements secure and ensures that subcontractors get paid.
Second, make sure that your commercial construction contract’s payment provision has clear instructions on how the builder and owner certify the completeness of an item for payment.
If you can, speak with your lawyer about negotiating an inspection and resolution system.
A construction lawyer will understand how to help you obtain the inspections you need to be confident your project is on track.
Indemnification
Building projects can be risky. Both builders and owners take on a good deal of risk when entering into a commercial construction contract.
With that in mind, both parties should conduct extensive due diligence on each other and any relevant partners.
It is important to ensure that any assets tied to an agreement are not being used up or wasted while the commercial construction contract is in effect.
Indemnity provisions are frequently used in construction contracts. However, these provisions are seen as ineffective because of a lack of insurance or assets to make them worthwhile.
A construction lawyer may be able to help you brainstorm creative indemnity strategies for your specific circumstances, such as periodic asset and insurance checks.
Contact a Texas Construction Law Attorney Today
If you have questions about construction contracts or commercial contracts disputes, we can help.
At Massingill, our goal is to take on complex business legal matters and make them easy for our clients to understand.
Whether you need assistance with drafting a construction contract or need help negotiating a complex instrument between you and a builder, we have the tools, resources, and experience to help.
Contact our team today, and schedule a consultation to speak with one of our experienced Austin construction law attorneys.
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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