Construction contracts have a lot of boilerplate language on price, scope of work, indemnification, venue and attorneys’ fees to be skimmed, signed and ignored until a problem arises. But inevitably there will usually be a few provisions specifically worded to address certain problems—maybe an acknowledgment by the owner about noise levels associated with the project or a provision about protecting the landscaping or entrance. Contractors have names for those provisions such as the Owner’s-Deposits-Are-Nonrefundable provision or the XYZ Co.-Access-To-Property clause.

These provisions are usually born from a negative experience with an owner. As Randal Graves said in Clerks, "this job would be great if it wasn’t for the customers," and while that can sometimes be true, there are a lot of ways to manage owners and their expectations through a contract. By including provisions that provide direction and requirements for owners (and their representatives), it is possible to reduce the ability of an owner to delay a project, withhold payment or otherwise interfere with construction.

Timing

If a portion of the scope of work requires input from the owner, one of the easiest ways to manage this is to require all input to be provided within a certain number of days from the start of the project or within a certain number of days of certain milestones being met. Give this provision teeth by allowing a work stoppage or increase in construction price if selections are not timely made, or consider including a liquidated damages provision. Delays arising from an owner failing to timely provide information or selections are one of the most common, so addressing them up front in the contract is an easy way to head off this type of issue or at least secure the right to compensation for late changes.

Access Provisions

While the construction site is (and should be) under the contractor’s control, never forget that the work is being done on the owner’s property. That places at least some responsibility on the owner for ensuring appropriate access to the property and communicating with the contractor about access to the property. For example, in a commercial build out or condominium setting, the landlord or unit-owners’ association may have strict limits on days and times when work can be completed. This should be incorporated into the contract to allow the contractor extra time if work is delayed in completion due to these restrictions.

An access provision is even more critical where the property is not otherwise governed by a landlord or association. It should spell out permitted work days, work times and require the owner to ensure physical access to the property (e.g., gate access, clear travel paths, etc.) The provision should also require the owner to provide information in advance if access will be limited at any point during construction. And of course, the contractor should be able to seek additional time and/or compensation for violations of these provisions.

Prompt payment provisions

Payment terms are usually one of the more thoroughly written portions of a contract, if for no other reason than the price and draw schedule typically go hand in hand. Two areas where these provisions typically are lacking though is requiring payment of undisputed amounts and allowing a work stoppage for incomplete payments. First, the payment provision should require the owner to pay for work completed within a certain time period of request. If the draw schedule calls for certain milestones to have been completed before a payment is made, and there is a dispute over whether all of those milestones have been met, the contract should also require payment for the undisputed milestones. This will prevent minor issues from holding up payment for more significant items. Some states also have statutes that require the payment of undisputed amounts, which can be integrated in the provision or upon which the provision can be modeled.

Second, the payment provision should be clear that the contractor can stop work for delayed or missed payments, without having to declare a breach of the contract or terminate the contract. The provision should also allow the contractor to seek an increase in the contract time and costs of demobilization and remobilization due to the stoppage of work. Finally, this provision should allow the work stoppage to occur soon after the payment deadline is reached so that a contractor is not required to work for several weeks while payment issues are still outstanding, but before a breach can be declared.

Termination for Nuisance

Most contracts contain termination provisions that allow either side to terminate the contract upon breach, or financial insolvency, or lengthy government-related work stoppages. Some contracts may also include a basis for termination for convenience. In between those two is a rare provision -- the “termination for nuisance” provision. In essence the provision spells certain conduct on the part of the property owner that can be used by a contractor to terminate a contract. Examples of this conduct might be:

• the owner repeatedly requests pricing or work up of changes, but then declines to move forward with them;
• the owner interferes with workers or inspectors repeatedly;
• the owner is abusive toward the contractor; or
• the owner threatens to withhold payment, post bad reviews, or go to the media as a way to obtain concessions from the contractor.

Under a typical contract, it is questionable whether it rises to the level of a breach of the contract. But by specifically listing it, the contractor makes it clear to the owner that engaging in such behavior will be grounds for termination of the contract. This can cut down on back and forth and allow a contractor an easier path out of a contract without having to utilize a termination for convenience provision.

Owner’s Representative Requirements

Finally, a significant source of frustration with owners can come from their lack of knowledge regarding construction or development. In these instances, it can be helpful for an owner to have an owner’s representative to represent the owner with respect to the project and to interface with the contractor. In order to maximize the effectiveness of an owner’s representative, it may make sense to include certain minimum requirements for the representative in the contract, such as experience with similar projects or general construction experience. By making these requirements contractual, the contractor creates a right to require the owner to select an appropriate representative but also to select a new one if the existing representative is determined to be unqualified.