When you work in construction, you need to understand the business side of the operation. Contracts are vitally important in construction. The contract should completely lay out the responsibilities for everyone involved in the transaction. However, you should also know about some of the loopholes in contracts that can be detrimental to your business. The following are some things you should know about construction contracts and possible loopholes:
A loophole in a contract is sections of the contract which are not completely clear or portions that are left out. If you work with a party who is less than ethical, you could be taken advantage of so the party. This allows the unethical party to take advantage of you and the situation for his or her betterment. Although a loophole in a contract can be unethical and cause you to lose money, they are not illegal. If you leave out a part of your contract due to an oversight, the other party is allowed to utilize the loophole if they want.
Unclear Terms in a Contract
Another common issue for construction contracts is when the terminology is not clear. In some cases, a contract is not fully even for everyone in the project. This can result in one part of the party to benefit more under the contract. For example, if you are building a home for a client, you contract should directly spell out when you should receive payments and how often. You have to state which dates or periods of time payment is due. If your contract stipulates you are to receive ten payments during the construction of the home with no specific due dates, the client could opt to pay you ten times in two months rather than throughout the building process. This is obviously going to be a problem, but you did not clearly state your payment terms.
Making Changes to the Contract
If you believe your contract is unclear or contains too many loopholes and you want to make changes, you do not have to start over completely. Instead, you can make clarifications to the terms in your current contract and make a proposal for adding the changes. Any changes you make must be done in writing.
When you are in such an expensive and important industry like construction, understanding contract law is crucial. It is best to let your attorney view your contract before your clients sign to make sure your bases are covered.
Reach out to professionals like Sauro & Bergstrom, PLLC to learn more.