A LAYMAN ’ S GUIDE TO CONTRACT TERMS
“ The purpose of a contract review is to ensure that you are comfortable and understand the legal agreements and terms , and that legal and financial risk is reduced as [ much ] as possible to protect the interests of your business ,” said Elmore . “ The contract is perhaps the most important part of a construction project , and getting it right is the pathway to a successful project . Given the complexity of construction contracts and the risk involved , it ’ s important to protect your interests should something unexpected occur .”
When reading the contract for accuracy , particularly the scope of work , contractors should pay particular attention to definitions , inclusions and exclusions from the estimate , project overview , contract amount , milestones and deliverables , schedule and timeline , and management and administration .
“ Once a contract is signed , any discussion about the scope or project , if it is not part of the contract , is no longer valid . You want to always make sure to read the scope of work for accuracy to make sure everything that you agreed upon is in the contract . Look for clear wording and terminology ,” she added .
Dispute resolution may also be an important part of the contract process . Many contracts stipulate that the parties will go to arbitration if there is a dispute ; many contracts stipulate that there are other options such as mediation or lawsuits . Contractors will also want to note who is responsible for attorney ’ s fees .
She also pointed out that liquidated damages ( LDs ) are penalties for completing a project after its scheduled completion date . LDs are assessed to compensate the project ’ s owner for lost revenues due to delays on the project and may be passed on to the subcontractor . LDs are damages that are meant as a fair representation of losses in situations where actual damages are difficult to ascertain .
Contractors should also be aware of “ flow down ” language , she said . A flow down clause is a contract provision by which the parties incorporate the terms of the general contract between the owner and the general contractor into the Subcontract Agreement .
“ If you find a flow down clause in your contract , make sure you request a copy of the prime contract and all the documents so you can review them . The primes have to share them with you if you request them ,” she advised .
Elmore offered these main tips for contract review : understand the contract to discuss strategies with your business partners ; hire a lawyer to review your contracts ; understand boilerplate language , use Adobe to search for terms ; and initiate an AI legal review .
The full webinar can be viewed online .
Contract review resources offered to contractors by the Contractor Development Program include assessment and targeted technical assistance , field support services , and surety and funding support .
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