Key Construction Contract Terms
Construction contracts have certain key terms that are constants. For example, most construction contracts have boilerplate terms that are a mainstay in the construction industry. These terms encompass agreements that are typical in the construction industry and refer to standardized methods and procedures. Arbitration terms are also a constant in today’s construction contracts. These terms set out the out-of-court dispute resolution processes that are preferred in the industry. Further, insurance terms govern the risk of loss and who holds responsibility if such loss occurs.
Arbitration is a dispute resolution method where one or more persons hears a dispute and renders a binding decision. The agreement to arbitrate is usually made in a contract before the dispute arises. In some instances, parties can agree to arbitration after a dispute arises–these are usually court ordered. Parties who decide to use arbitration have the authority to choose the rules that apply. For example, the parties may select the qualified arbitrator. In a construction dispute, it is more than likely that the parties will select an attorney who is well-versed in the area of construction law.
Given the wide bandwidth of freedom contracting parties have to craft a clause; they should take advantage of this to create one that best fits their interests. The primary question when negotiating an arbitration clause is whether arbitration will be mandatory or permissive. Parties who have a long relationship in the construction industry may agree to a mandatory clause as a means to continue the relationship even after a dispute.
Boilerplate construction terms refer to frequently used form language that can be reused in a new context without making substantial changes to the text. For the most part, boilerplate language remains unchanged so the parties to the contract are not misled into agreeing to undesired items. There are certain terms that lend itself well as boilerplate terms. A clause that explains which party bears responsibility of paying legal fees in the case of a legal dispute is one example. This comes into play during in-court disputes and arbitration. Similarly, jurisdictional clauses determine the country or state where legal action can be filed. Parties can agree to exclusive or non-exclusive choice of jurisdiction.
A solid insurance term is vital to the risk and loss dynamic in any construction contractual relationship. Firstly, construction insurance is a type of insurance policy that covers damage to or destruction of a building while it is in progress. Contractors will write a construction provision in the contract to ensure that all parties involved are aware of where responsibly falls in each instance of loss. That is because insurance disputes are a norm in these ongoing relationships.
Insurance disputes can arise from various stages of the claims process. One basic source of a construction insurance dispute is the definitions written into the insurance policy. The definition of terms in the insurance policy frequently determines what the policy covers and what it does not. If parties can contract around these terms and definitions, they can easily eliminate sources of disputes before they arise.
Your Florida Construction Law Attorney
The Fort Lauderdale construction law attorneys at Sweeney Law, P.A. have years of experience advising general contractors on contractual issues as well as reviewing construction agreements Attorney Sweeney is here to guide you through any legal pitfalls that can arise during your contractual relationship. Contact us now for a consultation.