Clarity in Construction Contracts Can Save Money

I ran across another post at Best Practices Construction Law blog that rings true for me.  It concerns the benefit of clear/concise legal writing but also touches on need for attention to detail and the benefit of having legal counsel review construction contracts before the job starts. (An "ounce of prevention is worth a pound of cure" is a truism that has stood the test of time and applies squarely to construction contracts.)  Matt touches on a couple of guidelines for drafting construction contracts and I agree with them all. One I would add: clearly define the draw schedule and documentation for same.  In addition, although not substantive in nature, here are a few pieces of information which every contractor should require in its contracts and which are very useful if/when lien claim or litigation has to be filed in NJ:

  • Identify fully the contracting party on the other side and its interest in the property.
  • Identify current/best address for the contracting party.  No PO boxes, if at all possible.
  • Identify as best as possible the location of the property, including lot and block if available.

The above information provides a great start for research that may be necessary before filing a timely Construction Lien Claim against a commercial property in New Jersey.

 

Green Building and Surety Bonds

I am a regular reader of the Best Practices Construction Law blog by Matt DeVries. If you work for a small business in the construction industry, I highly recommend that you check it out.  Matt has an excellent sense of the issues -- legal and otherwise -- of interest to professionals in construction. 

Recently, Matt provided an informative "guest post" from Kevin Kaiser of SuretyBonds.com about how green building is becoming increasingly more problematic for the surety industry.  As noted in the post, many surety companies will not bond a contractor where any type of "green" or "energy efficiency" benchmarks must be met under the contract.  The primary reason for the surety industry's reluctance to embrace green building: issues of risk management and liability.

If the contract calls for third-party certification -- e.g., by the U.S. Green Building Council -- who is liable if the building fails to meet the third-party's requirements?  Your initial answer may be the bonded contractor, but what if the contractor does not have control over LEED certification? Interesting stuff. 

The impact on contractors should be obvious: if unable to get bonded or if the bond cost is too high, then a contractor's ability to get the job and profit from it is dramatically diminished. My take: green building is here to stay in both the public and private sectors, the "friction" discussed in the post will be around for a while and it will be left to contractors to press the issues.

The key for contractors will be to have well-crafted construction documents clearly defining the following with respect to "green building" benchmarks: how will compliance be measured; who is responsible for meeting the benchmark; and the extent of liability -- e.g., monetary cap? Rebuild the entire building? -- if the benchmark is not met. This seems to be an area where contract ambiguity is not the contractor's friend.