If you want to learn how to avoid commercial construction contract issues, you’re in the right place. A single commercial contract dispute can turn a profitable investment into a costly nightmare.
When you know how to avoid a commercial construction issue and resolve it effectively, you’ll be able to avoid delays and save costs.
5 Tips For Avoiding Commercial Construction Contract Issues
A construction contract dispute arises when the parties in a contract disagree. This disagreement may be due to a perceived violation or an actual violation of a commercial construction contract.
Luckily, there are proactive steps that you can take to avoid contract issues from delaying your project. To reduce the possibility of contract issues arising, it’s important to work closely with an experienced and reliable commercial contractor.
1. Draft Contracts Carefully
The most common cause of contract issues is ambiguous contract language. To minimize the risk of future contract disputes, make sure to use the correct language in your commercial construction contract.
Use clear, concise language throughout the contract.
When drafting an agreement with your commercial contractor, pay extra attention to the following sections:
- Any provision that affects compensation,
- Extensions of time,
- Damage delay clauses,
- Variation or change orders,
- Differing site conditions,
- Substantial completion requirements.
2. Monitor Progress Closely
A well-drafted contract won’t necessarily prevent a dispute from arising. To help avoid contract issues, the project managers, contractors, and their crew must follow the contractually mandated procedures.
For instance, they need to understand the change order approval process. Everyone should follow it to the letter. In other words, they need to comply with all notice and approval requirements while documenting any additional costs.
3. Keep An Accurate Schedule
Without an accurate schedule, it’s impossible to assess the impact that a delay claim or change order will have on your project.
A schedule provides a baseline and sets a realistic tempo from the start of the project. It serves as a tool for anticipating any delays early on.
4. Understand The Law
It’s essential to stay updated with any laws and regulations that affect your commercial construction project.
For example, state or federal laws and rules regulate public jobs. They may impact specific contract clauses. A court will read a contract as if it contains these clauses, even if they’re not in it.
When your project fails to comply with all the laws and regulations, it may lead to contract issues and litigation.
5. Hire An Experienced Team
Typically, project managers can spot potential issues long before they arise. When you have a well-trained, qualified team with a good project manager, like we have at Chad Fischer Construction, they can quickly resolve any potential problems.
When they resolve these issues proactively, they can prevent issues from turning into contract disputes.
How To Resolve Commercial Construction Contract Issues
Despite all of your preventative measures, contract issues may still arise. Contract issues can be time-consuming and may damage the relationship between the client and the contractor.
Here are 5 tips to resolve contract issues.
1. Negotiation
Today, most commercial construction contracts include a negotiation clause. This clause stipulates that should a dispute arise, the parties will attempt to resolve it through negotiation.
Negotiation allows both parties to resolve the issue before seeking resolution elsewhere.
2. Mediation
While mediation isn’t legally binding, it can be an effective way to resolve a contract issue. Mediation is when a third, neutral party enters the dispute to fix it before matters deteriorate anymore.
3. Determination
An alternative to mediation is determination. Determination is an effective way to resolve any disputes over a valuation disagreement.
You cannot legally enforce a determination. However, suppose both parties agree to the findings of an expert judgment. In that case, it may save your project valuable time and lead to an acceptable outcome for both parties.
4. Adjudication
Adjudication is similar to mediation. A third, neutral party will enter the dispute and make a decision based on their expertise and findings. The court can enforce the outcome of an adjudicator’s decision.
Adjudication is a cost-effective method to resolve contract disputes. In most cases, normal operations can continue while the adjudicator is busy investigating the issues.
5. Arbitration
Both parties may agree to arbitration before the dispute reaches a costly and often lengthy litigation process to find a speedy resolution.
Arbitration involves a neutral third party considering the documents and facts concerning the specific contract issue. The arbitrator can deliver a verdict favoring one party if nobody can achieve consensus.
While arbitration can be costly, it costs less than litigation and is faster. Like litigation, arbitration can be legally binding.
Avoid Commercial Construction Contract Issues From The Start
To avoid commercial construction contract issues from arising, you need to work with a contractor that understands the importance of good relationships.
At Chad Fischer Construction, we’ve been in the construction industry for decades. We know what to look for and how to avoid contract issues – giving you peace of mind from the the day you meet us, to the ribbon cutting.