High-end construction projects can be very profitable, but they can also lead to conflict. Those remodeling their homes or constructing their dream residences often have very high standards for the finished product. If they feel dissatisfied with the property after the completion of the project, they might take legal action against the construction firm or contractors that performed the work.
Construction defect lawsuits can decimate the profit margin for a seemingly lucrative project and can cause lasting damage to a company’s reputation. Including the right terms when negotiating contracts with new clients, including the three types of clauses below, could help protect construction companies from expensive defect litigation.
Material substitution rules
Prestige finishes ranging from hardwood flooring to solid stone countertops are popular in modern residential construction projects. Clients with very high material standards may face sudden delays and drastic increases in expense when materials become hard to source or changing trends affect the price set for certain materials.
Contractors and construction firms can reduce the risk of defect claims related to material substitutions by addressing these risk factors early in the contract negotiation process. From proactively identifying secondary options, such as an alternate type of stone or wood, to agreeing on a specific process for reporting a substitution and getting approval from the client, there are ways to address material-related challenges in a construction contract.
Clauses addressing project delays
Issues with the timeline for a project can cause major inconvenience for a client. They may need to cover the cost of alternate living arrangements for weeks longer than they anticipated or make other last-minute arrangements that can lead to significant expenses.
Delays that seemingly violate the terms proposed in the initial agreement between the clients and the construction firm could sometimes lead to defect claims and financial losses for the construction firm. Having both terms requiring some leniency from the client and also rules for communicating about anticipated delays can reduce the likelihood that a client may take legal action against a construction firm because the work takes longer than initially anticipated.
Alternative dispute resolution clauses
Sometimes, construction firms simply cannot appease dissatisfied clients. Some conflicts are inevitable, which is why construction firms may want to plan for the possibility of a complaint. Including terms that mandate alternative dispute resolution efforts can protect a construction firm against sudden litigation and the damages that a lawsuit could trigger. Requiring that the client sit down to attempt mediation or even arbitration can lead to a mutually satisfactory resolution to the dispute while keeping costs low and protecting the privacy of everyone involved.
The best time to address the potential of the potential of future defect claims is before breaking ground on a large, expensive project. Creating bespoke contracts can help protect construction companies from expensive litigation.