A Case Against One-Size-Fits-All Construction Contracts -

Project development involves careful planning and clear contractual requirements on the front end to help ensure that the project is completed on time and within the budget. Key components of any successful construction project are selecting an experienced and capable contractor and entering into a well written and thought-out construction contract. In this article, we focus on the need to tailor a construction contract to the requirements of the particular contract by reference to the American Institute of Architects (AIA) forms of contract.

The importance of a well-drafted construction contract -

From a developer’s perspective, a good construction contract should define the standards of performance expected of the contractor; present the developer with tools to measure performance to determine whether those standards are met; and effective remedies in the event they are not. A construction contract should also provide the developer advance notice of issues with progress of the work and costs. The best construction contracts motivate the contractor to perform in a timely, efficient and cost-conscious manner by aligning the contractor’s interests with those of the developer to the greatest extent possible. If it makes sense commercially, a developer may offer bonus compensation structures to encourage on-time and under budget performance. The imposition of liquidated damages for delay can also help ensure the project is completed on time and help compensate the developer for costs associated with delay that it might not otherwise be able to recover, such as lost revenue.