Georgia Construction, Bond & Lien Law Blog


8 Simple Changes To Improve Your Construction Contracts

Posted in Contracts,General Contractor Info,Good Business Practices by Blue Blog on the July 7th, 2014

Drafting Better Construction Contracts

by Mark A. Cobb

If you are a Georgia contractor or subcontractor who uses written contracts (and if you are not using written contracts, you should!), then this blog might save you some legal costs and or headaches.  To improve your contracts, just follow the eight simple tips below!

What this blog article is not: Previously, we have written about the best contract terms and the vital contract terms that every construction contract should include.  This is not a repeat of that material.  This article is not full of legal jargon and nuanced technicalities rather, we are providing your with eight simple–but sound–contract improvements which you are able to apply to your contracts today!

Why we are writing this blog article (in other words, The Problem With Your Contracts)?  Regardless whether you are a general contractor or a specialty trade subcontractor, you want to have a successful, problem-free project.  A properly written contract can provide great strides to clarifying the project scope and the parties expectations.  The construction contract lawyers at the Cobb Law Group regularly review, draft, and negotiate various types of Georgia construction contracts on behalf of their clients.  Needless to say, our clients have varying personalities and goals, but we have noticed that a significant number use a “boilerplate” contract that they highjacked several years ago from another contractor or subcontractor.  To this template, from time-to-time, they have added other terms which they thought useful and borrowed from other contracts they ran across. Through time, an original boilerplate which may have had some practical use has been cobbled into a hodgepodge of redundancies and contradictions, and these problems can make your contract unenforceable.  Thus, we are giving you some very basic tips which you can put into use today and improve, at least a little, your contracts without hiring a lawyer.

Disclaimer About the Use of Any Forms: Although there are some very good and very useful form banks created expressly for the construction industry (such as the AIA Contracts, the EJCDC contracts, the DBIA contracts, and ConsensusDOCS), there really isn’t any  “form” that can provide for all of the unique complexities of any specific construction project without substantial modification; thus, we strongly recommend that forms should be viewed only as a starting point, and they must be carefully reviewed and amended to meet the unique needs of the project and the parties.  In other words, there is no such thing as a “boilerplate” contract which will work in every situation.

A Word on Readability: Your contracts should be easy to read and easy to understand; if they are not, then you probably need to start-over from scratch.  You will see that many of the tips covered in this article suggest making your contract easy to read.  Something which is easier to read is more likely to be read and understood which encourages better performance.  So, make it a goal to make your contracts more readable.

1.    Read Your Contract and Check for Redundancies.  Redundancies are repetitions; let me repeat that:  redundancies are repetitions. A quality contract should not have redundancies as they take up space and time; and, needless to say, they are unprofessional.  More importantly, however, redundancies may open the door for ambiguity or even inconsistencies.  Saying more than once that “The Subcontractor acknowledges that he has read the General Contract, all plans and specification, and is familiar therewith” more than once does not make the covenant any truer. If you contract also says “The Subcontractor acknowledges that he has has access to review a copy of the General Contract”), then it may cause some confusion which could be detrimental to your goal of passing the risk to the subcontractor.

2.    Read Your Contract for Inconsistencies. Inconsistencies in a construction document also show an unprofessionalism, and they, too, can make your contract meaningless.  Consider the following example:  Parties to a contract may consent to a a method of resolution in the event of a dispute. If one section of the contract refers to “mediation” whereas another section refers to “arbitration”, then if a dispute occurs, it may be unclear in which forum the resolution should be handled–this might land you in court for resolution!

3.    Group Similar Provisions Together.  Nobody wants to read a contract (much less interpret a contract) where provisions on the same topic are spread throughout the document.  For example, do not have provisions regarding “Payment” at the beginning of the contract, the deadlines regarding the due date for payment applications in the middle of the contract, and a paid-when-paid provision at the end of the contract.  Move these provisions closer to each other then, it will be easier to read the contract, in general, and it will be easier to spot redundancies or inconsistencies as well.

4.    Use Effective Headings for Each Contract Provision.  Headings are a terrific and easy way to make your contract easier to read and, perhaps, increase its enforceability:

First, good heading it makes it easier to locate pertinent provisions (deadlines for giving notice, for example) and it make the contract easier to read as headings are usually either bold or underlined which breaks up the monotony of a standard type.

Second, headings may help the enforceability of a provision.  In a recent blog post, we wrote about a subcontract which contained a Signature Provision which attempted to make the signatory to the contract personally liable for its performance. The Georgia Court of Appeals, when rationalizing the terms enforceability stated that the contract included the heading “Signing Individual” in boldface type which further enhanced the term’s clarity and the parties’ intention.  Thus, the court continued, that the President of the company “must be charged with knowledge of the Signature Provision, even if he did not read it, and he is therefore bound, individually, to the terms of the Agreement.”

Third, in the event that a contract terms because an issue in a trial, your attorney may consider enlarging the term on a large board as a trial exhibit for the judge or jury to read. Without a heading, this exhibit may be nothing more than a large poster with long sentences filled with legal-ease.  A pertinent heading (e.g., “Individual Indemnification”) might resonate more easily with the judge or jury and they may be more easily persuaded to interpret the contract as you intended.

5.    Spaces! Just like this article, we tend to suggest that contracts use double-spaces between paragraphs. The other day we were asked to review a contract which did not separate the paragraphs.  Page-after-page of unending contract terms quickly became very difficult to read much less make sense of.  Thus, it took much-longer to read (time is money), and it required greater concentration.  If your contracts look like that one, change them today and save yourself some headaches!

6.    Check Your References.  When someone cobbles together a contract from different sources, it is important to pay close attendtion that you don’t lose your references.  Thus, if your contract says, “then parties shall agree to be bound by arbitration as provided in Article 10. . .” please make certain that Article 10 of your hodged-podged contract is the section dealing with arbitration.  Otherwise, it may to used against you if the need arises to interpret the provision.

7.    Eliminate Useless Provisions. Longer is not always better–don’t have extraneous provisions.  If your contract includes a terms which doesn’t make sense to you; then, it probably doesn’t make sense to the other party and it will likely not make sense to a jury or a judge.  You may want to ask your construction contracting lawyer to explain it, but if no one understands it, then it should probably be omitted.

8.    Grammar and Spelling Count.  You run a success business, and you know proper grammar and how to spell.  When a contract is created over time, sentences get cut-and-pasted and letters get cuts off or added accidentally.  Unfortunately, a substantive mistake can invalidate the terms of your contract so read it carefully often and correct as necessary. One example we see particularly often is a paragraph that is supposed to end with list of items but fails to include the list.  Thus, the paragraph ends, “All subcontractors will adhere to the following policy on all jobsites:” and the policy is not expressed (and, at a minimum) not a part of the contract.  Those missing policies are certainly not enforceable and may limit your rights including a right to terminate.

As we stated above, using the same template or form for your Georgia construction project is dangerous; instead, use them as a starting point for negotiations.  Having a qualified construction attorney help you draft your “master” documents and assist you with specific provisions as each contract is negotiated may be vital to having a clear, understandable contract. In fact, we encourage our clients to review their master contract at least once a year.  Laws changes, courts write decisions, and policies need amendment.  If you are looking for a construction contracting attorney to help you review and improve your contracts, please feel free to contact us today!

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