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The Hidden Pitfalls in Construction Contracts: What You Need to Know

When it comes to construction projects, a well-drafted contract is your best defense against potential issues. However, beyond the key clauses, there are several hidden pitfalls that homeowners and contractors should be aware of. Understanding these nuances can make a significant difference in ensuring a smooth and successful project. Here are some of the lesser-known but equally important aspects of construction contracts:

1. Warranty Provisions

While most people focus on the scope of work and payment terms, warranty provisions are often overlooked. These clauses define the contractor’s responsibility for correcting defects and the duration of the warranty. Ensure that your contract includes a comprehensive warranty clause that covers both materials and workmanship.

2. Insurance Requirements

Construction projects come with inherent risks, and it’s crucial to ensure that all parties are adequately insured. Your contract should specify the types and amounts of insurance coverage required, such as general liability, workers’ compensation, and builder’s risk insurance. Verify that your contractor carries the necessary insurance to protect against potential claims.

3. Termination Clause

Life can be unpredictable, and sometimes projects need to be terminated before completion. A well-defined termination clause outlines the conditions under which either party can end the contract. This includes the procedures for termination, any penalties, and the settlement of payments for work completed up to that point.

4. Indemnification Clauses

Indemnification clauses are designed to protect one party from legal liability arising from the actions of the other party. In construction contracts, this often means that the contractor agrees to indemnify the homeowner for any damages or losses caused by the contractor’s negligence. Make sure this clause is fair and balanced to protect your interests.

5. Retainage Terms

Retainage is a portion of the contract payment withheld until the project is substantially complete to ensure that the contractor finishes the work properly. Your contract should clearly state the retainage amount and the conditions for its release. This serves as an incentive for the contractor to address any punch list items and complete the project satisfactorily.

6. Force Majeure

Force majeure clauses cover unforeseen events beyond the control of either party, such as natural disasters, strikes, or pandemics, which could delay or prevent the completion of the project. This clause should detail what constitutes a force majeure event and the steps to be taken if one occurs, including potential extensions of the project timeline.

7. Permits and Licensing

Ensure that your contract specifies who is responsible for obtaining the necessary permits and licenses for the project. This not only includes building permits but also any specific licenses required for electrical, plumbing, or other specialized work. Failure to obtain the proper permits can result in fines, delays, and legal complications.

By paying attention to these often-overlooked aspects of construction contracts, you can better protect yourself and your investment. Contracts are complex legal documents, and it’s wise to consult with a legal professional to review and negotiate the terms to your advantage.

Need Expert Help?

If you have a $50,000 or greater problem, call Wyman Legal Solutions at (561) 361-8700 for expert advice on navigating your construction contract and ensuring your project is set up for success.