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Avoid These Construction Contract Tricks and Loopholes

If an item is omitted from a contract or the language is vague, this can be considered a contract loophole. A contract loophole may seem harmless at the time a contractor puts pen to paper, but it could have serious ramifications down the road. In this editorial, we will discuss some of the most common loopholes in construction contracts. 

To ensure that contract loopholes aren’t present in your construction contracts, consult a Colorado Springs construction lawyer with Cotney Construction Law for all of your contract needs. Our attorneys are experienced in drafting and revising contracts. We also review construction contracts in Colorado Springs to ensure your best interests are covered. 

Construction and Contracts

There are tons of contracts that need to be drafted and agreed to in the construction industry. For example, a contractor doesn’t just sign an agreement with an owner. They also need to come to terms on agreements with all of their subcontractors, suppliers, workforce, and other construction professionals needed to complete a project. With so many contracts being signed and shuffled around with so many entities, it’s easy for one loophole in a contract to have a domino effect down the line that disastrously impacts every professional on a project. 

For this reason, construction professionals need to always pay close attention to detail with regard to their contracts and partner with a Colorado Springs construction attorney that knows what to look for. Here are a few common areas where important clauses in a contract get overlooked or omitted from a contract.

Payment Clauses

Payment disputes remain the most likely issue to lead to a construction dispute and can occur for a variety of reasons. Some contracts exclude any information related to a payment plan. Without a breakdown in place, a contractor is basically entering a lump sum agreement with an owner, so they won’t receive any compensation until their work is completed. Along with having clearly defined dates related to subpayments, the contract should clearly define the penalty each side will experience if they fail to meet the expectations of the contract. 

Related: How Contractors Can Reduce the Cost of Contract Review

Intellectual Property

With a variety of professionals working together on a project, there can be issues with who owns what intellectual property on a project. Whether it’s a copyright issue, such as technical design documents, blueprints, renderings, materials, or equipment, or other forms of intellectual property, such as a patent or a trade secret, there needs to be an agreement in place that protects original works of authorship from theft. Moreover, there needs to be language in the contract that defines the penalty for the improper usage of this information. 

Construction professionals must keep a close eye out for intellectual property clauses in a contract. A Colorado Springs construction law professional can review your contract and help you maintain strict control and ownership of the intellectual property that sets your business apart from the competition. 

Related: Protecting Your Intellectual Property in Construction

Performance Clauses

There are many ways that the performance clauses in a contract can create pitfalls for an unsuspecting construction professional. Here are a few examples:

  • Unfair Agreements: Some contracts will have clauses in place that favor the entity that created the contract. For example, if an owner has a clause in place that allows them to provide changes to the scope of the work without a deadline, this would dramatically affect the contractor’s performance and ability to complete the work on time. Any one-sided clause needs to be removed from a contract.  
  • Realistic Performance: Project requirements should be defined in the contract. The end goal of a contract is for both parties to agree to what needs to be done and then the party that completes these tasks gets paid. If certain tasks are not going to be performed as stated in the contract, the agreement needs to be revised to account for these adjustments or the contract will be rendered either unfair or invalid.     

Related: Don’t Make These Construction Contract Mistakes

Consult an Attorney for Contract Review in Colorado Springs

Although the above are common areas of a construction contract where one party may try to take advantage of another, there are many other ways that a person can be deceived into signing a bad contract. It’s important to remember that a hidden clause can be devastating to your business. This is why you should always consult a Colorado Springs construction law firm to draft and review all of your agreements. 

Lastly, always make certain that your attorney provides the final review of a contract. It’s common that both sides will go back and forth and alter and review various clauses within a contract. If the other party provides excessive revisions to the contract, make sure that you provide your attorney with the latest draft and give them an opportunity to review these changes before you sign the document. In many cases, when one side makes heavy revisions, they are trying to sneak a loophole into the contract at the last moment. When contracts are dramatically altered, you need to partner with an attorney that can review contracts in Colorado Springs.   

If you would like to speak with a construction law firm that provides construction contract review in Colorado Springs, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.