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Last-minute changes, no-show workers and slow-paying owners: every contractor is familiar with issues on a project. These unanticipated issues can be costly, cause delays and threaten the financial position of even established builders.
Since the global coronavirus pandemic and the proliferation of less-experienced workers in the construction field, contractors have needed to be extra vigilant to guard themselves against these types of issues. However, even the most prepared contractors can often overlook key tools at their disposal to help protect against risks.
Contract drafting and enforcement
Every construction contract should clearly state each party’s respective obligations and rights.
While there is no single way to draft a contract, each contract should, at a minimum, include provisions that spell out exactly what the builder is expected to do and when they can expect to be paid. Additionally, construction contracts need to clearly describe the property where the project is located and state specifically the scope of work to be performed.
In addition to the basics, every contractor needs to consider whether to include contract provisions that address common issues, such as weather delays; substantial completion date; types of warranties offered; the procedures for addressing disputes and change orders; a waiver of consequential damage; insurance requirements; and contractor’s rights and remedies in the event of nonpayment. Depending on the project, there are likely additional contract provisions that savvy contractors might consider.
However, even a well-drafted contract cannot protect a contractor who does not follow its requirements. Every builder I’ve worked with has had the experience of working on a job with a clear, strong construction contract, but as the project gets going, the parties start to get sloppy in documenting compliance with their obligations. We are all familiar with these situations. While you may think you are being helpful by excusing an owner’s late payment or last-minute plan changes, often these decisions have significant consequences that may impact your ability to enforce the contract after the fact. By insisting that all parties perform their obligations, and clearly document both compliance and noncompliance, a contractor helps preserve the enforceability of those same provisions.
Most construction disputes deal directly or indirectly with change orders or change order requests. Contractors must insist that 1) their contract includes a change order provision that describes how change orders are to be processed, and 2) they do not perform work prior to the execution of an approved change order. Failure to do so may prevent a contractor from later getting paid for that work.
Disputes happen. When a contractor finds themself in a dispute with an owner concerning payment, one of the most powerful tools in a contractor’s arsenal is a mechanic’s lien. Mechanic’s liens in Missouri are governed by statutes. These laws provide contractors and subcontractors with the right, under certain conditions, to place a lien on the land and/or improvements in the event an owner fails to pay.
However, because the statutes are very specific in what they require, it is easy for contractors to jeopardize their lien rights. Contractors must ensure they comply with all the requirements in time, or they risk their ability to collect payment. Depending on whether a contractor has a direct contract with the property owner, there are different notice requirements and timelines a contractor must follow in order to file a lien. In some cases, property owners must be provided notice of a contractor’s lien rights before the contractor ever performs work on the project. In most circumstances, a contractor must also exercise their lien rights within six months of the date of the last substantial work on the project (i.e., nonpunch list work) or by the date materials were last delivered to the project. Contractors must be proactive to ensure they do not lose their ability to place a lien on a project.
Construction projects can be disorganized and hectic, but that does not mean the contracts and documentation for a job should be too. Contractors need to be certain that they are protecting themselves through good contract drafting, insisting that the parties stick to their agreement and keeping careful documentation both when that occurs and when it does not. Consulting with an attorney early in the process can help contractors have peace of mind that they are protected both during and after their work on the project is complete.
Ben Shantz is an attorney with Spencer Fane LLP in Springfield. He can be reached at
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