General contractors in California and around the country sometimes face construction defect lawsuits soon after completing projects, but this kind of litigation may also be filed months or even years after building work has come to an end. While some legal battles may be inevitable, others can sometimes be avoided by properly drafted construction contracts that clearly establish the duties and responsibilities of all of the parties involved.
Construction contracts should make clear the scope of the work to be done and the procedures that must be followed if changes are called for. Drawings and specifications are rarely complete, and relying on them too much could lead to misunderstandings and lawsuits. Comprehensive and specific warranty, insurance, lending and indemnity provisions can also help to prevent contract disputes. When contractors and developers do disagree, every effort should be made to avoid protracted and costly court actions. One way to achieve this goal is to specify binding arbitration according to construction industry rules laid down by the American Arbitration Association.
Contractual disputes often occur when third parties become involved. General contractors may be able to mitigate these risks by making sure that subcontractors have the same insurance, indemnification and warranty obligations to them as they have toward the owner or developer. When signing construction contracts, owners should be wary of waiving their rights to consequential damages.
Attorneys with experience in real estate law may urge owners and developers to avoid using standard form construction contracts. While relying on standard form documents may save a little time and money, the contracts offered by organizations like the American Institute of Architects tend to be more beneficial to general contractors than to developers or owners.