Law Office of Henry B. LaTorraca Civil Trial Attorney

Contract terms to control building costs and add accountability

Carefully designed contracts for construction projects in California could prevent or limit disputes among owners, developers and contractors. Clear terms that require documentation of all costs and set procedures for changes have the potential to protect a building project from cost overruns or expensive delays.

A contract should require that contractors provide three competitive bids for all subcontracted work. This clause informs an owner or developer about competitive rates. The stakeholders also need to define allowable and unallowable labor. Specific rules about how labor costs will be calculated could eliminate gray areas that leave parties exposed to unexpected costs.

Equipment, like labor, needs to have rate calculations defined in a contract. Owners or developers should need to approve any equipment charges not specified in the contract. A contract also must address the likelihood of change orders by defining a pricing system and requiring itemized backup for all charges. The right to audit should accompany all clauses to ensure that contractors understand that they need to keep records to support every element of the job.

The development of thorough contract language could allow the involved parties to discuss concerns prior to breaking ground. Although almost any construction project will encounter delays or unexpected costs, contract language could guide the parties through issues in a timely manner. When there is a problem with one of the parties not adhering to the terms, an attorney could recommend how to respond to the situation. An attorney could examine the terms to see if a contract breach occurred. After documenting the violation, an attorney could propose a remedy and potentially resolve the problem during negotiations. If private discussions cannot bring the parties to agreement, an attorney could seek to enforce the contract by preparing a lawsuit.

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