Unreasonable Restrictions in Commercial Construction Contracts
What’s your favorite 1980’s movie?
And what does commercial construction have in common with Indiana Jones?
Well, sometimes the language I see in commercial construction contracts feels like it belongs in Raiders of the Lost Ark.
Because it’s a trap.
Here’s an unfortunate truth: your customers’ lawyers know that the law will strike down claims for changes or additional compensation if a subcontractor fails to comply with the contract.
Some unscrupulous Owners, GCs and CMs will therefore put unreasonable restrictions on change order and claims clauses to make it more difficult to comply.
A classic play here is the 24-hour rule.
In it, a subcontract form will state that you (the subcontractor) must give notice of any claims for additional cost or time within 24 hours of first becoming aware of the facts giving rise to the claim, otherwise, the claim is waived.
This might sound ok on paper.
But in the real world, by the time you realize that you might have a claim — or that you might need to advise the customer about the claim — it could be too late.
Therefore, when reviewing a potential subcontract, you should:
(A) recognize when a customer wants a time limitation
(B) negotiate the terms to buy as much time as possible to make a claim
(C) make sure your project team knows, and lives by, this clause.
I wish that was the worst of it.
But time (or a lack thereof) is just one example of an unreasonable restriction.
Many subcontracts say you can’t make delay-related claims. Or they’ll say your only right to relief in the event of a delay to your work is an extension of time. (i.e. Not money, even though that’s what you’re paying your crews while they’re standing around waiting for the site to get its sh*t together.)
Depending on the circumstances, both of these provisions actually violate Ohio’s Fairness in Contracting Act (O.R.C. 4113.62(C)) as a no-damages-for-delay clause.
Simply put: They’re illegal.
Even so, your customer may attempt to enforce those clauses during the project.
Or they’ll try to use them to negotiate a far lower value than what you may be entitled to — if not deny the claim entirely.
Even if a contract recognizes the Fairness in Contracting Act, it might still contain tripwires capable of cutting down your bottom line.
For example, a contract might state you can make a claim related to a delay, but limit your relief to just escalated labor or material costs.
If you’re on a job, and your crew has to schlep all their equipment to some faraway part of the site because an architect or CM wasn’t ready for you, lost hours is just the beginning. You have lost labor productivity, extended field supervision, increased general conditions. It adds up fast.
But if your subcontract limits delay relief, you’ll wind up having to eat all those other costs, damages and impacts.
That’s not right, and it’s avoidable.
Contractors and subs: Don’t get caught in a contract booby trap. If you’d like help with your commercial construction contract, fill out our contact us form. Reference this article and you’ll get a complimentary consultation with one of our legal team members. You can also find more related information in our Guide to Avoiding Commercial Construction Contract Nightmares.
