Considerations With Contract Review and Negotiation

By Trent Cotney, Cotney Attorneys & Consultants.

Contractors need to know what to look for in a contract and where to look for it.

They should be aware of their risks and be equipped with the tools to best manage these risks.

With this article, I will attempt to highlight a few areas which require careful consideration to ensure the associated risks are properly managed.

If the Contractor’s scope of work, includes any form of specialized work that the contractor is unfamiliar with, the contractor must ensure that he properly investigates all aspects associated therewith. The Contractor must consider whether he will employee the resources himself, whether he will make use of a sub-contractor for this work, sub-contractors available to perform this work, effects that the delayed onboarding of such sub-contractors could have on the project, the availability of these resources, the cost implications of specialized materials required to perform the task, the availability of specialized materials and many more.

The Contractor must ensure that his risks are properly managed in his contracts be it with the client, the sub-contractor or even the employee.

When specialized materials are involved, the contractor must investigate its availability and costs and how volatile the material’s prices may be. Alternatives should always be catered for in all possible instances. Termination clauses may be considered to protect the Contractor in exceptional circumstances.

The contractor should carefully examine its drawings and compare it to the BOQ to identify any discrepancies, especially in relation to materials with excessive lead times or volatile price adjustments. Where possible the contractor should request clarification on such issues before concluding the contract. These clarifications should be properly documented.

In instances where a specialized sub-contractor will be used for the execution of the works, it is advisable for the contractor to link the payments of the sub-contractor to the acceptance of the work by the client or an expert consultant, and not just to the actual progress and completion of the works.

Contractors should also ensure to examine all associated specifications supplied as in many instances, these specifications provide additional information and detail that one will miss in the drawings and the BOQ. This detail could have serious cost implications on a project. If the contractor does not receive the specifications before contract signing, it is advisable that the contractor records this and that the contractor makes provision for instances where the specifications could substantially impact on the cost or the time of the project.

It is advisable that an attorney with experience in construction contracts is consulted to assist contractors with the review of their contract and to make recommendations that can place the contractor in a more favourable position to better manage the risks that the contractor might be exposed to. It is important to understand that the contractor should properly identify and acknowledge its risks, prior to contract negotiation. This will ensure that the contractor can act proactively in the management of its risks instead of dealing with the risks, reactively.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Contact Cotney Construction Law for additional information.

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