Construction is one of the busiest industries across the globe, which also faces a high number of disputes and claim issues. A significant number of court cases in any part of the world are linked to the construction industry.
Construction projects need the involvement and honest contribution of a number of parties. When one or more of them do not work efficiently, it negatively impacts the quality of the project and gives rise to legal issues.
In their efforts to reduce construction-related disputes and claims, the involved parties try to develop detailed contracts. The contracts include the legal clauses of handling problematic situations with discussion or referring the case to authorities if they fail to resolve it on their own. The agreement of all the involved parties over the legal clauses of the contract is necessary to ensure its success.
This article intends to provide you a brief guide about legal clauses you should include in construction contracts, so keep scrolling down to learn and implement it.
Top 7 Clauses You Should Add in Construction Contracts
Contracts are an important part of the construction projects. They include a detailed description of the project, as well as the parties involved in the project and the detail of their respective responsibilities.
Still, the contracts fail to offer a proper solution to some issue or strategies to share its responsibility. Therefore, including legal clauses in contacts is crucial to deal with challenging situations.
Here are the top clauses you should add to your construction contracts to better manage disputes and claim issues.
1. Work Outline
The work outline is one of the basic legal clauses to include in the construction contracts. It is often confused with the scope of work; however, it is different from that.
Work outline includes a detailed description of the scope of work of a construction project, time constraint, and the price of the project.
Most contractors acquire the help of a construction claims consultant to prepare the contract without any mistakes and resolve issues in light of the contract when needed.
2. Process of Change Orders
One of the most crucial legal clauses to add to your construction project contract is the process of change orders. Change orders give rise to a number of disputes and claim issues in the project. You need to define and describe the detailed process of accepting or rejecting change orders. Failure to do so can give rise to claims on the basis of work outline.
3. Termination Clause
If the parties tied in a contract are not satisfied with the performance of each other or are facing issues in getting the work done, they have the option of terminating the contract. Mostly, the party having the upper hand can terminate it and claim compensation for it. You need to include a termination clause in your construction contract to deal with the issues revolving around the scenario.
4. Indemnification Clause
The indemnification clause is one of the most important legal clauses you should include in your construction contract. This clause helps one party to claim compensation for any harm done to the project.
For example, if the project has faced any loss due to the mistake of the contractor, the owner can use the indemnification clause to hold the contractor responsible for the loss and demand compensation.
5. Damage for Delays Clause
One of the most crucial legal clauses to include in the construction contracts is the damage for delays clause. Delays in construction projects can occur due to the negligence of the involved parties, as well as due to foreseen and unforeseen natural conditions.
In every situation, delays cause damage to the project. It is essential to define the process of handling delay damages in a contract to avoid further disputes and claims.
6. Alternative Dispute Resolution
Construction projects are quite unpredictable. Dispute and claim issues can emerge at any stage of the project and impact its progress and smooth completion.
To save your project from unnecessary delays and issues, you can include the legal clause of alternative dispute resolution in your construction contract.
It can highlight the framework of dealing with disputes out of the court and ensure smooth and successful project completion.
7. Liquidated Damages
Adding a liquidated damages clause in your construction project contract is equally important for all the parties involved in it.
The liquidated damages clause helps measure the expected value of the damage according to the initially set price and schedule of the project.
You can hire construction claim consultants and include the clause in your contract under the guidance of professionals, who can also lend support in resolution.
Pay attention to legal clauses to avoid prolonged disputes later!
The purpose of adding legal clauses in the construction contracts is to handle the disputes and issues in the light of legal implications, without prolonging the matter.
However, if you are not much aware of the legal clauses, you cannot add them to your contract. Therefore, it is best to get construction quantum experts on board and prepare contact under their guidance. You can also gain support from them when dealing with such issues.