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Know Before You Sign: Hidden Construction Contract Risks

The construction contract is a powerful tool in any contractor’s toolbox, but, like any tool, it’s all about how you wield it. As the “rules of the game,” the construction contract’s duty is to clearly define the responsibilities of all parties involved while protecting the contractor from unwarranted claims, but there are numerous hidden risks in the construction contract — and if the contract is not drafted properly, the contract may end up doing more harm than good.

MNCLS knows what it takes to draft a contract that serves as an asset to contractors, not a liability, and uses plain English in our contracts so that our clients and their customers don’t need to be fluent in legalese to understand their terms. Contractors that lean on MNCLS for their construction contract needs can avoid the common pitfalls many construction professionals face, instead receiving a contract designed to protect their business.

Those that don’t, however, should pay close attention to the hidden risks outlined in this article — as avoiding them can make a world of difference to your livelihood.

Regulated Language

The Minnesota construction industry is heavily-regulated, and these regulations extend to the specific language which must be present in the construction contract. Without the necessary language, contractors run the risk of incurring significant penalties, or can lose out on hugely helpful tools, such as mechanic’s liens. While these regulations put many construction professionals drafting contracts at risk, MNCLS can help you abide by these regulations and avoid the associated penalties altogether.

Differing Site Conditions

Differing site conditions refer to conditions which differ from what was expected, and are significant enough to alter the nature of the work. If site conditions differ significantly, contractors may be negatively financially impacted — therefore the inclusion of a differing site conditions clause can mitigate this hidden risk. Without a differing site conditions clause, the risk falls on the (sub)contractor should the work end up being more difficult or costly.

Lack of Detail

As construction industry professionals and attorneys, MNCLS firmly believes that you should say what you mean — and in few places is saying what you mean more important than in the construction contract. Not only can vague language create confusion, but it can also allow your contract to be interpreted in the exact opposite way you intended. Therefore, a contract should explicitly outline both expectations and deliverables for every involved party in order to eliminate risk and easily settle potential disputes.

Arbitration Clauses

While it is vital to include some form of dispute resolution clause in your construction contract, the inclusion of an arbitration clause specifically can come with hidden risks. For starters, the inclusion of an arbitration agreement in your construction contract leaves the team at MNCLS few options when it comes to guiding you on next steps — and there are very few instances where including a mandatory, binding arbitration clause in a construction contract is the right choice. While offering slightly greater economy of time, arbitration can be a major expense that swapping in the proper dispute resolution clause can prevent.

Avoid These Hidden Risks with MNCLS

As we’ve pointed out, the construction contract is a useful tool which can become a minefield without expert guidance. Therefore, construction professionals looking to make their contract work for them should call on the team at MNCLS. Though we may be expert construction law attorneys now, we’ve seen the industry from your perspective — and know exactly what it takes to protect your business.

To partner with MNCLS and ensure your construction contract does what it is designed to do, complete our online contact form or give our office a call at (651) 484-4412.

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