Contracts: Worth the Time!
Words: John Swindal
The Swindal Group (www.swindalgroup.com) is a full-service construction consulting company providing specialty contractors with practical advice on contract formation, contract review, contract revision, contract negotiation, litigation strategy, document review, general business planning, strategic planning, and contract management strategies. John B. Swindal (jbswindal@swindalgroup.com) is the Managing Director of the Swindal Group.
Contracts are a part of the construction business. Large contracts and small contracts. Good contracts and bad contracts. In a perfect and bygone world (confluence of trusted client, cash richand timely-paying owner, unlimited manpower and no cash flow issues) a negotiated contract was not an issue, because a handshake guaranteed fair treatment. In today’s industry, it is vitally important for a mason contractor to review all contracts prior to signing— whether the contract is large, small, good or bad.
We always suggest a thorough review of any contract internally and by a properly licensed attorney, as applicable. There are no perfect contracts. Every contract (unless the mason contractor is the author and the contractor or subcontractor does not revise) needs revision in order to create, effectuate or properly preserve rights of a subcontractor.
Once a mason contractor understands the contract, a series of business decisions must be made weighing risk against client, client relationship, project, owner, backlog, manpower availability and cashflow projections (to name a few). Ideally, the masonry contractor submits a well-constructed list of suggested contractual revisions to the contractor well in advance of project commencement that is discussed, negotiated and properly amended. The amendments include requested changes to payment clauses, indemnity provisions, no damage for delay clauses, termination clauses, forum selection clauses and many other problem clauses that as business owners and your trusted attorneys are well versed to identify.
However, oftentimes-extenuating business circumstances force a mason contractor to veto the advice of counsel and simply execute a contract hurriedly in order to facilitate manpower placement, cash flow or backlog. In this situation, it is perhaps even more important to understand all of the contents of the signed contract. It is paramount to closely examine payment clauses, schedule clauses, no damage for delay clauses, and notice provisions in these contracts in order to preserve any rights the masonry contractor may be afforded. After studying these clauses, it is instructive to create documents and/or spreadsheets for internal use detailing the rights and available remedies of the contractor, documentation procedures and timing mechanisms that create a contract management plan.
A well-assembled contract management plan will not replace a negotiated contract, but it can certainly lessen potentially catastrophic problems when a project goes sideways. A mason contractor may blindly sign a contract in tough times, but they need to keep their eyes wide open when managing the contract once the project is underway. Over the coming months, this column will examine particular contract clauses and suggest contract management language for each one.