The Art of a Well-Drafted Construction Contract
by Mark A. Cobb
We always enjoy sharing great blog articles with you. Sometimes, the topics just happen by themselves, sometimes they are based upon a real-life experience with a client or opposing counsel, other times they are more deliberate such as series of articles on a particular construction topic. Regardless of the source, our attorneys strive to offer something well-written that is informative, practical, or, occasionally, funny.
Looking through our archives of articles, there are many articles about contracts including how to improve your contracts, the different types of construction contracts, specific provisions within contracts, and case-law interpreting contracts. Although all of this information is very useful to our readers, there was a glaring omission from the archives: no article discussed the “art” behind writing a meaningful contract. That started my mind thinking about what to say and how to best convey the concept of contract as “art”.
When I was a child visiting a modern art museum on a school field-trip, I remember a guide pointing out that when a viewer studies certain pieces of art, it is incumbent to realize what is missing from the canvas as meaning can form from the absent. Perhaps this isn’t as provocative, but drafting construction contracts are similar–it’s important to recognize that what they are not; then, what remains on the canvas likely has a greater importance.
Every Construction Project is Unique:
Despite our desire for convenience and ease, construction contracts cannot be the same. Every project and every party to a project is different; thus, there is “no one-size fits all”. It doesn’t matter whether you are always in the role of a general contractor or you sometimes act as a general contractor and other times you are a subcontractor, no single contract will serve you well in every project.
Furthermore, every project has is own set of needs and requirements. Isn’t is easy to spot the different needs between a contract for the construction of a health care facility, a federal military base, a church, a jail, a restaurant, and a house? Are the project owners an entity, an individual, a committee, a board? Regardless, these obvious changes–as well as the more nuanced differences–should be reflected in every construction contract which you sign.
You Cannot Simply Fill-In-The-Blank:
Construction contracts are not forms to be “filled-in”. Many construction professionals believe that with the proliferation with the AIA documents, ConsensusDocs, and other construction document banks, that creating a contract is nothing more than completing a form. This is not true for the forms banks nor is it true for an attorney-drafted contract. Admittedly, the form banks can be useful starting points for contract negotiation; however, they are intended to be modified and virtually every responsible owner or GC we know regularly modifies the documents offered through these services. In addition, these banks have preferences and legal theories that may not reflect your business’ values and, in fact, may be prejudiced against it. (Can you guess which party is the “preferred” party in the American Institute of Architect’s–the AIA–documents?)
The Personality of the Contract:
Form sites offer only one personality which probably doesn’t fit for you or your job. Personality in contracts can be difficult to articulate. Recently, I used the following examples for a client who required a written contract between an owner and the GC. Contracts can be difficult to read (arrogant), they can be easy to read (friendly), they can be boring (too academic), they can be one-sided (bullying), they can be simple (dumb), they can be inappropriate (immature), they can be a hodge-podge of cut-and-paste provisions from other sources (sloppy). In short, contracts can assume any shape or “personality” the parties want. And, it should be pointed out, this personality does not impact the strength of its particular provisions nor the enforceability of the contract!
Another significant component is the “fairness” of the contract. True, there may be certain provisions for which a particular party may not have room for negotiation; however, that is not true for most of the contract. Thus, parties (and the attorneys who draft the contracts) must decide how forceful the contract will be. We have seen contracts which give one party a seemingly limitless supply of rights which denying the other party virtually every right. Other contracts try to mimic the old-fashioned “hand-shake” where parties pledge to do their best and, in the event of a problem, they continue to resolution in good-faith. A party requesting a contact needs to ask themselves what they want their (legal) reputation to be. Are they going to be hard-nosed about every term and condition or are they going to look at each term and condition from each side’s perspective? Is there a chance that the parties will work together on other projects? Are the parties more concerned about successful completion of a project or are they more interested in smashing those downstream?
Yes, Contracts Mirror Your Values:
There are personal values and corporate values which should be incorporated into every artfully drawn construction contract. Values run the gamut from legal compliance to employee cursing on the jobsite, from a Christian’s implementation of the Golden Rule to dress codes, from work ethic to dispute resolution. It is vital to think about what is written down and how it is written before giving another party something to sign.
Although most individuals are complex and our individual personalities may slide between highs and lows, there is no reason for a well-drafted construction contract to be anything other than a fluid, consistent document. But, this may take some time and effort on your part, but we have found that clients who invest in well-written contract can use those documents for more than just protecting themselves legally. They are furthering their reputations, they building business, and they are reflecting on the types of business values they actually possess. And, most importantly, they are the most successful in performing their work.