You’ve made it to 2025. Now is the perfect time to reflect on lessons learned in 2024 and to create meaningful goals for the year ahead. This year, prioritize resolutions that strengthen your business, starting with ensuring compliance with construction contracts. Contracts are the foundation of construction projects because they define rights and obligations of all parties involved. Implementing processes that help your business comply with your contracts can help minimize disputes and set the stage for a successful 2025.
Make 2025 a success by keeping these top 5 resolutions in mind when reviewing and negotiating construction contracts:
1. Review Contracts Before You Execute Them
A threshold resolution is to prioritize the careful review of all contracts before signing, with special focus on clauses regarding scope, notice requirements, payment terms, dispute resolution, and termination. For instance, signing a contract without fully understanding the terms related to schedule delays could leave you liable for unexpected costs and damages. Reviewing these terms carefully helps identify and address potential risks upfront, ensuring you enter into agreements with a full understanding of your rights and obligations. By taking this proactive approach, you can avoid surprises down the road, manage and mitigate risks, and reduce the potential for costly disputes.
2. Comply with (and Enforce) Notice Requirements
Understanding the notice provisions in your contracts and implementing a tracking system to ensure timely communication of delays, changes, or claims can help you preserve your rights. For example, if unexpected delays impact your project’s schedule or costs, missing mandatory notice deadlines could jeopardize your claim. That is because most construction contracts contain mandatory notice provisions and failure to comply with these requirements could be fatal to your claim. Compliance with these provisions is critical to preserving your rights.
Conversely, consistently enforcing contractual notice provisions is essential to avoid arguments that such provisions have been waived through actions or patterns of conduct. Notice provisions are typically enforceable only to the extent they are consistently enforced. In other words, periodic or selective enforcement of contract notice provisions could give rise to costly disputes over whether any of the potential exceptions to notice requirements in construction contracts apply.
By understanding, complying with, and consistently enforcing notice provisions, you can protect your rights, minimize disputes, and ensure the integrity of your construction contracts.
3. Standardize Documentation Practices
Maintaining organized and consistent documentation of all project activities creates the documentation you need to support or defend claims and facilitates proactive and transparent communication between parties. For instance, if your work is consistently impacted by other trades or you are required to perform work out of sequence, without documented evidence of the disruptions and impacts, it may be difficult to establish the “root cause” of these issues. This makes pursuing or defending claims for schedule and cost impacts challenging. However, standardized and consistent documentation practices – such as daily logs, change order records, photos of progress, and regular written notices documenting impacts and delays – can help create a comprehensive project history. Implementing consistent documentation practices ensures you have the detailed records needed to substantiate claims, to resolve disputes, and to maintain accountability of all parties involved in the project.
4. Understand (and Comply with) Payment Terms
Ensuring your team fully understands the payment application process, including deadlines for submission, required documentation, and lien waiver procedures, is crucial for maintaining smooth cash flow and avoiding delays. For instance, submitting a payment application late or without the required lien waivers could lead to withheld payments until the correct documentation is provided, disrupting cash flow. By understanding the payment terms upfront (and working to develop a process to track payment-related obligations), you can avoid delays, ensure compliance with lien waiver and payment conditions, anticipate risks from unfavorable terms, and effectively manage cash flow.
5. Update Project Management Tools
Investing in or enhancing your project management tools is essential for tracking compliance with contract obligations and maintaining project efficiency. For example, implementing scheduling software that integrates cost accounting, change order tracking, and compliance checklists can help streamline your processes and ensure deadlines are met. By upgrading your project management systems, you can enhance communication, reduce risks associated with missed deadlines, and stay on top of contractual obligations.
Make 2025 the year of contract compliance. By reviewing contracts carefully, complying with and enforcing notice requirements, implementing consistent documentation processes, understanding payment terms, and updating your project management tools, you’ll not only reduce risks but also enhance efficiency and protect your bottom line. A proactive approach to compliance sets the stage for a smoother, more successful 2025 – one where your business thrives, disputes are minimized, and contracts work in your favor. Let’s make this year your most compliant and profitable yet!
And, as always, remember to seek help if you need it. The Construction Law Practice Group at Woods Aitken can help you and your team meet these contracting resolutions. We offer risk management seminars that can be tailored to address unique challenges facing a business and can review and draft contracts to aid in your negotiations. We encourage you to subscribe to our Construction Law E-Briefs for the latest construction news, tips, and updates.