How is Negotiating a Construction Contract Like Buying a Car?

1968 Chevrolet Camaro Z28 photographed in Lava...

1968 Chevrolet Camaro Z28 (Photo credit: Wikipedia)

I know, you’re probably looking for a punchline, and likely thinking something along the lines of “only a construction attorney would be sitting in his office and come up with such an analogy,” but I really do think it’s a good one.

When you are buying a car, you look for priorities. Is the color what you want? Is the motor a hybrid or a v-6? Does it have Android Auto? What is the fuel mileage? All of these things may be more or less important to you. If you can get your priorities for a price that is attractive, you will likely let some other less important items, e. g. trunk space or rear seat leg room, slide and purchase the car anyway. Furthermore, you may use these minor items as negotiating points to either get one of the priorities or a lower price. Of course the dealership will want to get its priorities, likely a sale and a profit, when negotiating and will have certain items that it won’t move on just as you have terms that you won’t move on.

Much like when you walk onto the car lot, and particularly as a subcontractor looking at a contract from a general contractor, or a GC looking at the contract from the owner of a project, a construction contract presented to you is the starting point. When looking at the contract, be sure to have some non-negotiable items in mind when taking a critical eye to the terms of that contract. Some of these terms may be more or less negotiable depending on your experience with the other party to the construction contract. For instance, striking a pay if paid clause may be less important with a paying party with whom you have a 10 year history without payment problems. On the other hand, if it is your first contract with the other party, a stricter list may be required. So, much like a dealer that you know will stand behind its cars, you may be more willing to take more “risk” in entering a construction contract with a trusted/known owner or GC.

Again, like buying that car, hold some “throw-away” clauses. These lower priority items are ones that in an ideal world would not be there, but which you could live with particularly if one of the higher priority changes is agreed to. This is an approach I take with review of contracts for my “in house counsel” clients in that I prioritize any advised changes so there is something to give up in order to get something. One example could be the notice requirements for claims. As a subcontractor, it would be better to have 72 instead of 48 hours, but you may be willing to go with 48 if you can at least soften a “pay if paid” clause.

Remember, much like a car dealer, the company holding the money does not have to give you the work any more than the dealer has to sell you the car. Because of this, a construction contract won’t be perfect, just be sure that everything “under the hood” meets your “must haves” before starting work. If you keep this analogy in mind (and get some early advice) your next construction project should hum along like a well tuned automobile.

As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.

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