Construction (among many other industries) has seen major changes amidst the COVID-19 pandemic. Various construction companies across the nation have adopted concrete steps toward cleaner jobsites, social distancing, the use of technology, and more in some form. Another aspect of the construction industry that has seen changes due to the ongoing pandemic is contracts. Keeping in mind the important items that should be included within a construction contract post-COVID-19, can help to minimize confusion and keep responsibilities clear for all involved.
What to Include in a Construction Contract
Construction contracts provide legally binding agreements between both the owner of the property and the builder. These agreements detail specifics, such as the duration of the project, the quality of work expected, material specifications, and many other items. Because the coronavirus pandemic has changed the way construction projects are completed, contracts have adapted to these changes as well. Some of the most important things that should be included within a construction contract include:
A Specific Scope of Work
When drafting a construction contract, the scope of work must be detailed in regards to the type of work to be undertaken for a specific project. This could be a project that includes only materials, one that utilizes materials and labor, or one that only requires labor. Additionally, a construction contract will state all the responsible parties for the work shown within the plans and specifications. In delineating who is responsible for specific work, contractors can easily keep track of projects and their progress overtime.
Verified Project Schedules
The coronavirus pandemic has put construction projects on longer project schedules and timelines. While contractors and others working on the project may be well aware of potential timeline delays, clients may not be, making verifying the project schedules within the contract incredibly important. Construction companies can also face certain penalties for the failure to perform timely work. Additionally, if liquidated damage provisions are included in the contract, they should be reviewed to ensure they remain reasonable given current circumstances.
Dispute Resolution Procedures
Dispute resolution procedures should be included in each construction contract post COVID-19. The contract should require that those in charge of the project and the client meet within at least a week if a disagreement occurs to attempt to resolve it. If this does not work, then mediation may be needed to facilitate a resolution between parties.
Construction Contract Strategy Considerations
Along with the items that should be accounted for within a construction contract post-pandemic, there are also various strategies that should be considered when drafting agreements as well, including:
Immediate Contract Issues
Among the potential contract issues to review, all parties should review any force majeure clauses. Because force majeure language varies widely in different contacts, they will likely need a careful review. In order for one of these clauses to apply, it must be specifically stated within the contract. Whether it applies to COVID-19 or not will depend upon whether the clause listed a pandemic event or provided for unforeseen, extraordinary circumstances and events beyond reasonable control.
Other potential contract issues could be related to indemnification, project termination, limitation of liability, notices, litigation, governing law, and change in laws, all of which deserve careful consideration. These should be analyzed and reviewed to understand all available business options.
Rising Construction Costs
Although the construction industry is not as dependent on the global supply chain as others, potential disruptions should be considered when drafting a contract. The contract should account for roughly 60% of the total construction costs depending on the nature, size, and location of the project. Construction costs that rose globally in 2019 and were expected to continue to rise this year will now be further influenced by the decrease in productivity caused by social distancing requirements, enhanced health compliance, and increased supply chain costs.
Houston Contract Drafting Attorneys
Drafting construction contracts is complex enough on its own. Now, with the continued impact of the COVID-19 pandemic, they require even more consideration when taking on a new project. Because of this, it’s incredibly important to consult with an experienced Houston contract drafting attorney. At Feldman & Feldman, our lawyers have decades of combined experience helping Houston-area businesses of all sizes with business contracts. If you need assistance in drafting and/or negotiating a construction contract, contact us today for more information on how we can help.