How can you write better construction contracts?

Many smaller residential builders need help with their contracts, but do not know where to find it at a reasonable price. They cannot afford paying attorneys the hours necessary to develop a contract. Texas Association of Builders have worked with residential attorneys for years to develop and fine tune a contract that will work for their member builders at a fraction of the cost and the updates are included. I would recommend investing in a Texas Association of Builders contract. It is a solid contract that is fair and will protect builders. It would be a great template even if you needed to make some changes for your location.

Creating a great contract requires careful performance of all the tasks that lead up to that point. Having fully informed and engaged participants from initial RFQ, pre-bid meeting and reviews, clarifications, etc. will definitely help everyone in developing and executing a contract that is "Better"!

Parties to a contract need to understand that the contract is there as a tool to aid the project, not as a weapon to hurt one of the parties. A contract in my view is an equitable division of risks and opportunities, between parties who can understand and can manage those risks and opportunities. It follows that the goals must include dispute avoidance. In my opinion that can only happen where there is respect and transparency. Specialist contractors terms are often ignored. This is really unwise and lazy. These specialists are the experts so their views must be taken into account when drafting the contract. That way the real risks are factored into the contract and disputes can be avoided while relationships maintained.

Fundamentally, whatever form you use or whatever you’re trying to let, the procurement process needs to include getting the full scope and risk you’re wishing to procure out on the table and give genuine time and opportunity for the tenderer(s) to read, understand and query the document. Point them to the key risks and obligations and ask whether they’re included and agree the exclusions - it doesn’t matter how robust the document is, if the other party knows they’ve not allowed (or even considered) for something, they won’t take the liability laying down. If all parties know what they’re walking into, risks, change and forecasting will all be more accurate. Too often contractors leave themselves far too little time to procure a package.

En mi experiencia se le da poca atención a la redacción del alcance del contrato, siendo que es la herramienta fundamental con la que se pasa del diseño (Ingeniería) a la obra material (construcción). Los contratos deben ser consistentes con la estrategia de ejecución del proyecto y entregar toda la información necesaria para una adecuada propuesta (que minimize los riesgos para ambas partes). Creer que el Proponente adivina lo que se quiere ejecutar, y las condiciones de dicha ejecución, es uno de los principales errores. Lo que vale es lo que está escrito, lo que se omite (aunque sea involuntariamente) es origen de controversias y desviaciones del proyecto. La parte legal puede ser definida con documentos estándar, pero no asi el alcance.

Clear and concise language? Use NEC contracts. Designed for clarity and written in plain English. NEC contracts for professional services, construction, physical services, supply, FM and more! Radical!

Avoiding unnecessarily complex language when drafting construction contracts is of high importance since it can needlessly complicate matters. It is vital to consider that the contract's readers are often individuals without legal training. Therefore, employing simple and straightforward language is key to facilitate the understanding of the Parties' intent during the drafting process.

The problem with many construction contracts is they’re usually a standard form such as NEC, JCT or FIDIC which are written and developed by industry experts to be easy to administer. However the employing party will employ lawyers who have less than ideal practical knowledge and are instructed to protect the employing party, so the standard form is butchered and rewritten to favour one party. The language is filled with legalese and is in my experience oftentimes intentional to catch the unwary. KISS is an acronym I love. It means Keep It Simple Stupid. That’s the key. The contract should be written in such a way that a practical, non-legally experienced person can fully understand it. Employing parties should allow them to ask questions

In the world of construction, clarity isn't just an option – it's a fundamental necessity. Utilizing clear and concise language in construction contracts is an investment that pays off immensely. The Contract should employ simplified language, eliminate ambiguity, and adhere to best practices, construction professionals can ensure that their contracts become effective tools for project success. The use of 'clear and concise language' fosters transparent communication, minimizes disputes, and streamlines project execution.

If the terms may not be understood easily by anyone, define them in the contract to avoid confusion. If you can’t understand your contracts, time to rewrite. Legalese does not make the contract more binding!

Do not start the work or activities before agreement execution or before start date as per agreement. It is commonly seen that parties start work while agreement is still in discussion. This left so many confusion between the parties which may end up with default or unexpected compensation. Avoid "notice to proceed" without execution of clear terms and conditions or agreements to avoid unexpected risks.

During contract negotiations you may have offered value engineered options to mitigate cost challenges and agreed these with the client, be clear and precise with contractors proposals and ensure your proposals are superseding the employer’s requirements in the schedule of amendments.

Typically, risks and contingencies are often ignored during contract drafting or bid submission. Factors like excessive optimism and competitive bidding may contribute to this oversight. The problem arises when the contract fails to provide guidance on managing these risks and determining their respective owners. Construction contracts commonly encounter significant risks, such as ground-related issues, delays caused by interface contractors, third-party delays, changes in scope, market fluctuations, and more. Consequently, it is crucial to identify potential risks and develop mitigation strategies right during the contract drafting stage so as to avoid disputes during the currency of the Contract.

When working on a project, a risk analysis is quite often carried out, but it generally focuses on the technical aspects of the design and works. When drawing up a contract, it's important to take into account the relationships between the Parties and their responsibilities in the event of deviations to the contract. I would recommand to clearly define the process for managing changes & contingencies, with the allocated time for each Party to proceed for each step and the allocated risk if the task is not done on time (penalities/damages, loss of right to claim...), and to compare accurately the execution schedule to the project schedule in order to allocate the costs associated to prolongation or extension of time.

More often than not, you know what the significant terms and concerns are in most contracts. Prioritizing those concerns and working through them directly face to face and in conversation can help build a trust in the negotiation process. Liquidated Damages, contingency useage, supply chain delays are all sticky topics that can generally be resolved through dialogue and memorialized in writing. Don't defer to a volley of email responses when a 30 minute call can get you to common ground in an afternoon.

This is excellent in theory but can it really be achieved in practice? I would say better advice here is to keep all changes and amendments clearly tracked and visible so that the progression can be seen and any new changes are obvious to all, not hidden away in the dense text.

PMs and operators need to know that us contract people need their help! We need you to help us understand project details so we can effectively protect the real risks for your projects and not waste time on the stuff that doesn’t protect you. Plan to work with your contracts professional to help them better understand what you do so they can protect you when redlining.

In Canada, we typically (with larger corporations) are privy to a copy of the prime contract which is part of the tender package. A perfect time to do so would be during the tendering stages. However, the reality is that some of those clients will dig their heels in the ground or dismiss you if you even think of challenging the contract terms during the tendering stages or ever for that matter because by making part of the tender package, and you subsequently agreeing to (or not commenting on) the terms and conditions, you lose all powers to make changes to it after the fact. Motto of the story: If the client is unwilling to make the contract fair, that is the first, biggest and brightest red flag offered to you to consider walking away.

Many construction contracts are amended versions of standard forms. Some of these amendments can be difficult to follow. Try to produce a single contract document that includes all of the amendments. Avoid having a standard form contract with a list of amendments in a second document.

Utilizing MS Word’s Track Changes feature optimizes the process of revising/modifying contracts in collaboration with other parties and stakeholders.

Implementing everything that's been shared so far in the article as well the contributors will establish a fair contract that for all intents in purposes will - if adhered to and respected - collect dust in the filing cabinet or space in on the server or cloud.

Most contracts are not designed to be updated ie version 1 etc. But there are contract management systems that allow all contract-related decisions, orders and instructions to be stored together to create a pack of all changes. Contracts are not just about legal enforcement so they shouldn't be consigned to the filing cabinet or folder - they are about managing the project so need to be live and changing all the time.

Contract instructions are very important. Contractors need to be given their instructions in writing. Ensure that oral instructions are followed up with an official instruction as soon as possible. Also take the time to ensure that minutes are taken at meetings. The minutes should be circulated and agreed in writing before the next meeting. Good record keeping on both sides helps to avoid problems later on.

You should be aware that once the contract is award you have to manage it ! But for an efficient contract management, a contract awareness session should be organised for the project team (at least the staff directly involved in the contract follow up). This step is unfortunately by passed !

In my approach, the Contract is consistently updated on the server with all amendments seamlessly integrated into the final wording. Additionally, a detailed change log, referencing specific articles, paragraphs, and parts of the contract, highlights modifications such as payment term alterations, warranty condition updates, and changes to submission deadlines. This change matrix provides a comprehensive overview of all revisions made throughout the Contract's lifespan, facilitating easy validation of decisions based on previous versions of addenda while ensuring a single, accessible document reflects the most current agreement.

Why write a contract. I would suggest it is far more prudent and provides less risk by using a standard form contract as a basis for a contract, and then following the standard form ecosystem of contracts for designers, subcontractors, etc. The hardest part is to chose the contracting strategy DBB (execution only) or D&B. By using a standard form contract and amending it slightly to suit individual projects, and utilizing the standard form ecosystem of contracts helps to ensure the parties have robust (legally and administratively) contracts as a starting point. Thereafter all that is required is a clear unambiguous scope document to be developed

My mantra is that contracts should be (1) simple and effective, (2) cover scope, trust, aims and risks all as discussed above (3) designed carefully to be read, understood and used by the project team.

The biggest issue is the small builder and domestic project. I always promote the RIBA 'Home Owners and Builders Contract' it is clear precise has all the needed elements and can have the spec and drawing appended as part of. Nice little contract and easy to understand, I would strongly say that if a builder will not embrace this the basics of contracts run for the hills.

Whatever form of contract is used, whether standard, bespoke or hybrid it must be clear so that the parties are fully aware of the risks they are shouldering. It sounds simple but it too often the drafter makes too many assumptions.

This is a great post. I would add to think about identifying critical project scope interfaces and defining responsibilities for work to appropriately address or resolve those interfaces.