When you are involved in a construction project, you will be required to sign a contract, whether you are the project owner, general contractor, subcontractor or supplier. Before signing it, you can negotiate its terms.
Below are two terms in a construction contract that are frequently negotiated:
Scope of work and deliverables
A contractor/subcontractor can negotiate the scope of work and deliverables included in their agreement. You can negotiate tasks, materials, quality, exclusions, responsibilities and project milestones.
For example, if the agreement includes shorter deadlines for tasks or milestones and the project is happening during a rainy season, you can negotiate to add days for rain. Further, if the clause about exclusions is not clear enough, you can negotiate for clear details to be included. If you are a supplier, and there is potential for supply chain delays or material shortages based on the existing market conditions, you should also negotiate your deadlines.
Negotiating the scope of work and deliverables is vital in preventing scope creep and disputes.
Payment terms
The total price, payment structure, payment schedule and payment methods can be negotiated in a construction contract. A project owner can negotiate the contract sum (the total project costs they are required to pay the contractor).
If you are a contractor or subcontractor, you can negotiate the payment structure. Do you want to be paid a lump sum for the entire project, a deposit to cover the initial costs or payments upon completion of milestones?
You can also negotiate an increase in the size of the initial deposit, payment due dates for invoices, how changes in the project scope will be compensated and how payment delays should be addressed.
After reading a contract for a construction project, it’s important to negotiate its terms before signing. Legal guidance is crucial in helping you avoid contract terms that are likely to lead to misunderstandings.