4 Contract Negotiation Tips for Contractors and Owners
Although we are at a time when buildings can be 3D printed, most modern construction is still produced through contractors and manual labor. With prices continuing to rise on a global scale (yes, affecting products even beyond the grocery store), being able to negotiate a fair contract between contractors and owners can make a difference in outlook and favorability for both parties.
Tip #1: If You’re Looking to Cut Corners, Rethink Your Plans
Just because the materials cost a certain amount in February when you draft a contract, does not mean that they will stay that same amount in April. Consider trying to estimate an over/under price in your contract. Beware that “cutting corners” may lessen the quality of work and could affect safety.
Tip #2: Have a Letter of Intent (LOI)
A letter of intent is not required and even having one is non-binding; however, it does provide some security between the two parties. Think of the LOI as the pre-contract, where you can start to set the expectations before having the legally binding contract signed.
Tip #3: Do Not Pay in Full Up Front
While this may seem counterintuitive, it is a strategy that can help retain your contractor before they take on a new project. This does not mean to withhold large percentages of the payment. You should aim to withhold 1-10% of the total sum until the job reaches substantial completion otherwise you may be stuck with finding someone else to do final repairs, clean up, and finishes.
Tip #4: Include Attorney Fees
There may be times that an owner needs to sue its contractor for breach of contract, negligence, misrepresentation and poor quality of work, etc. Negotiating the contractor’s responsibility for attorney fees if it loses the litigation or arbitration can provide some relief.
It is still best practice to talk with your attorney before you begin any negotiations. Often, the attorney can help you research and prep your contract to make sure that you are getting the most out of the transaction without entering into an unfair deal.
Please do not hesitate to reach out to me at sjreed@norris-law.com.
About the Author- Biz Law
Steven J. Reed focuses his practice on business transactions, commercial real estate and finance, and commercial litigation. With extensive experience in New Jersey and New York, he advises businesses at various stages of growth, drafts contracts for domestic and international clients, and represents institutions in higher education. His franchise work includes representing a real estate broker franchisee in Ireland and a hotel franchise operator in Africa. Steven has also developed company-wide contract templates for corporations and negotiated construction agreements for major developers. A dedicated advocate, he provides pro bono representation for domestic violence victims and remains active in professional legal organizations.