Read the Fine Print in Your Contracts

“A contract is like a will — no one wants to look at it until it’s too late,” said Trent Cotney. He should know. A shareholder attorney at Glenn Rasmussen Fogarty & Hooker, P.A., in Tampa, Fla., Cotney focuses his practice on all aspects of construction litigation and arbitration, including construction document review and drafting, and he’s seen contract disputes from every angle. He shared some tips with Best of Success attendees about what to look for when it comes to construction contracts.

First he spelled out what you need to have a valid contract: an offer, acceptance and consideration (payment). And they have to mirror each other. “If you have a contract that’s been marked up and sent back, is that an acceptance? No, it’s a counter offer,” he said. “In a lot of cases you might think you have a contract, but you don’t have one.”

He gave an overview of standard form contracts, including AIA documents for contractors and subcontractors, and noted the proper use for each. He advised contractors to make sure they were using the right form — and know which version of the form they are using.

Defining the scope of work in the contract is crucial, according to Cotney. Contracts should spell out the company’s role on the project, when the work starts and finishes, and how change orders will be handled.

He pointed to the scope of work as the most common area of concern. “Eighty to 90 percent of cases regard the scope of work,” he said. “Most problems arise from ambiguous scope of work. You have to define what you do and what you are not doing.”

For example, a contract should spell out the costs and fees if bad decking is discovered under the roofing material.

Another tip: Document conditions before you start work and list any pre-existing conditions such as mold, water damage, and stained ceiling tile.

“Change order provisions also pose a lot of problems,” said Cotney. He urged contractors to protect themselves by documenting discussions via fax and e-mail, stating things like, “It is my understanding that this is extra work.”

“Be proactive,” he advised. “The party with the best paper wins the day. If there is a dispute, it helps to have a half-dozen e-mails stating ‘I expect to be paid.’ Always think of it from the standpoint of protecting yourself.”

 Protecting yourself starts with examining the contract, and that’s where contractors often fall short. “The most important thing: read your contract,” he said. “It sounds obvious, but so many people just don’t do it.”