Three contract tips that can prevent construction litigation

Not only are construction project expensive and time-consuming, they can also be legal minefields. A large construction project can involve multiple contractors and subcontractors that can have issues with their contracts. A 2016 study by the consultancy firm Arcadis, showed that the top two causes of a construction dispute (PDF) were because of "errors with the contract" and "a failure to properly administer the contract."

While litigation is common in the construction industry, you can take a few steps to a prevent lawsuit. An enforceable and effective construction contract is one of the key tools that you have for protection. If you are a property owner, you can use these three tips to create a contract that prevents litigation and protect your rights if litigation does occur.

Drafting a contract that protects your rights

When you create your construction contract, make sure to include provisions for:

  1. Extra work: Construction projects can take a long time and sometimes unexpected circumstances may cause extra work. Property owners should include language in their contract that explains their expectations if a contractor needs to do extra work.
  2. Documenting changes: Contractors and property owners may verbally agree to potential changes to a project. These verbal agreements may not be clear and can lead to unwanted work. Make sure to include provisions related to documenting changes to your construction project in a written contract.
  3. Dispute resolution: Having a plan to resolve a dispute before it occurs can save property owners time and may prevent a potential lien on their property. You may also be able to require the use of mediation to resolve a dispute, which can save everyone an expensive trip to the courtroom.

When you draft your construction contract, it is important to work with a knowledgeable attorney throughout the process. A lawyer can confirm that your contract is enforceable and that it does not conflict with any California laws. A skilled construction litigator can also defend your rights if you cannot avoid a lawsuit.

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