Contract Clauses Your Construction Company Should Negotiate

You might be focused on signing new clients and building their projects when running a construction company. While you’re busy with that, you might overlook the importance of crucial paperwork – like your contract. 

While rushing to get started on your project and meet timelines, it’s crucial to stop and take the time to create a contract that protects you and your company and helps you avoid potential disputes with clients and vendors. 

When creating contracts, you should negotiate the following clauses.

Scope of Work

One of the most essential parts of the contract you must negotiate is the work scope. Leaving the scope of work on a project vague can get you into trouble. Clients can keep asking for more – for the price you quoted and on the same timeline – which can cost you time and money. 

To avoid this, make sure the scope of the work is defined. You should specifically list the specific project’s tasks, materials, and deliverables. 

You also need to account for potential problems that can come up. Include a process for handling change requests by the client, especially if construction has already started. Include how requests should be made and documented, what they will cost, and how they will impact the project’s timeline. 

To protect yourself, you should also include details about any unforeseen issues at the construction site. If hazardous materials are found or other serious problems occur, document how these will be handled, who will need to pay for any needed work, and how this can impact the project timeline.

Payment Terms

When creating a contract, negotiate a clear payment schedule. Ensure the client understands when payments are due and what happens if the payments are not made on time. 

If you have a retention percentage that you withhold as security, document the percentage that will be withheld and when it will be released (typically at the end of the project). 

Schedule and Delays

In a construction contract, you should negotiate the exact schedule of the project and how delays are handled. 

You need to create a realistic project schedule that builds in time for any unexpected circumstances or delays you might encounter. You should also define what happens if there is a delay due to severe weather, problems getting materials, or other problems that are out of your control. 

Risk Management

Construction sites can be dangerous and pose many risks to your contractors and other people on the site. You should negotiate your contracts to address these risks and establish who is liable and how disputes will be handled. 

In the contract, you should state the types and amounts of insurance coverage that all parties need. 

You should also include limitations on liability to protect yourself and your company from unforeseen events or circumstances during the project. 

In addition, if a dispute arises between your construction company and the client, include a clear process for resolving it. The contract should include mediation, arbitration, or other options to help you avoid litigation.  

Warranties and Guarantees

Your contracts should include information on warranties and guarantees. If your work is under warranty, state how long the warranty period is and what it covers. You should also state what your guarantee includes and any limitations on this to protect your construction company.

Why Hire Us to Represent Your Construction Company

Negotiating contracts can ensure the protection of your construction company. Hire our construction attorneys at Johnstone Adams LLC to help you create and review contracts to ensure they properly protect you.

Ranked in the 2023 U.S. News – Best Lawyers® “Best Law Firms” list regionally in 12 practice areas, we have experts in many areas of law to give our clients top-notch representation. In business for more than a century, our firm can mix its experience with the ability to evolve with the changing times.


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