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Construction

Important Items to Include in a Construction Contract

Construction projects require collaboration between multiple businesses from various industries to be completed successfully. Like any business transaction, having a well-written and thorough contract is essential when taking on a construction project. Construction contracts define the risks and liabilities of contractors, subcontractors, construction companies, and clients. Here are the main items to include in a construction contract. 

Lien warning

In Florida, a lien warning is required for all direct contracts greater than $2,500 that deal with single or multiple-family homes up to four units. The disclaimer ensures property owners are notified that contractors or anyone who works on a property have the right to impose a claim on the property and sell it for parts, materials, and labor if they are not paid (which is called a lien). The notice also ensures homeowners are aware that they may be subject to a lien even if they paid their contractor in full, but the contractor failed to pay employees. Florida Statute 713.015 details the exact wording and requirements for the disclaimer. It must appear in 12 point font that is capitalized in bold on the first page of the contract or on a separate page. It must also be signed and dated by the property owner. 

Project description

Another essential item in a construction contract is a detailed scope of work. The project description should include who will complete each part of the project. This section should also contain any relevant documents, such as blueprints or drawings, that will help accurately represent the scope of the work. An in-depth project description holds everyone involved with the project accountable and helps them understand the project’s goals. 

Change order clauses

One common aspect of a construction contract is defining how change orders will be handled throughout the project. Change orders describe how the project will be revised if the scope of work alters due to unexpected challenges, timeline modifications, mistakes, and aesthetic changes.

Construction schedule

Although changes may occur, a construction contract should estimate a relatively accurate timeframe of when the project should be completed. This section should also detail how to adjust the original timeframe if needed. 

Specifications 

This section is a detailed overview of the techniques and materials used in the project. Specification sections can be very technical, which is why they should be formatted according to the Construction Specifications Institute (CSI) MasterFormat so that it is easy for contractors and subcontractors to understand.  

Cost estimate

Although it is nearly impossible to estimate the exact cost of a construction project, the contractor or construction company must understand all aspects of the project to provide an accurate cost estimate. 

Indemnities 

Another critical aspect of a construction contract is to include indemnities. Sometimes referred to as a “hold harmless” clause, indemnity helps manage the risk taken by the involved parties during the project. Indemnity is a payment made by one party to another that covers damages, injuries, or losses during the project due to the negligent acts of another party. 

License and insurance information  

Including your business license number and insurance information in a construction contract shows that you have the means to complete the contract and are covered in case of accident or injury. Florida requires contractors to hold a minimum of $300,000 in general liability coverage for bodily injury and $50,000 for property damage. Including your information shows your ability and credibility to complete the project. 

Special considerations or conditions

Lastly, any considerations or conditions relevant to the project should be included in this section. Any details that will be helpful for the property owner, contractor, and subcontractors to know will assure the project scope is as clear as possible. 

Boutty Law Firm: Central Florida construction attorneys 

Construction contracts can be very complicated and have a significant economic impact if not written correctly. The Boutty Law Firm has 20 years of experience working with construction companies. We will ensure you create a construction contract that helps you get the job done and keeps your clients well-informed. Contact us at 407-710-0461 or get in touch using our contact form for assistance in creating your next construction contract. 

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Construction contract

Should a Dispute Resolution Clause be included in a Construction Contract?

      Construction projects typically include complex, long-term contracts. There are many reasons for disagreements due to perceived or real violations of a contract, whether it involves a single-family home or a multi-million dollar commercial project. Some common causes for breach of contract disputes are breakdowns in communication, changes in economic circumstances, delays, injuries, updates in construction law, defective materials, technical problems, and force majeure events. Alternative dispute resolution is a method that can effectively resolve conflicts between contractual parties in a timely and economical manner.

   Provisions to address disputes are essential when drafting a construction contract. A dispute resolution clause within a contract details the terms of resolving conflicts. There is an increasing trend in the construction industry, especially for commercial projects, to draft contracts with alternative dispute resolution clauses. Courtroom litigation proves to be a costly, public, and lengthy process that is likely to result in irreconcilable differences between those in conflict. Reaching a compromise without court intervention can often preserve the relationship between the parties. Alternative dispute resolution is generally an expeditious way to resolve conflicts and is more informal than a trial.

Popular Methods for Alternative Dispute Resolution include Negotiation, Mediation, and Arbitration.

   Negotiations are the first step when trying to solve construction issues between industry professionals or property owners. If this is unsuccessful, mediation can be initiated. In contrast to negotiations, a neutral third party mediator intervenes to help those in conflict reach a mutually agreed-upon compromise. Arbitration Code chapter 682 in the Florida statutes governs arbitration. This process also uses a neutral third party; however, that person acts as a judge. Their decisions are generally legally binding. There must be clarity in the language of a contract regarding dispute resolution to settle differences effectively. Dispute resolution clauses have profound implications for the contractual rights and obligations that are enforced.

Common Items to Include in a Contract regarding Dispute Resolution are:

  • One or more conflict resolution methods may be written in the contract, such as utilizing a negotiation approach and proceeding to mediation as needed. If a compromise is not reached, the parties can begin the arbitration process and, if necessary, formalized litigation.
  • It should be documented if the dispute resolution method is a final, binding, and confidential agreement.
  • The third-party negotiator, mediator, or arbitrator that is mutually chosen should be written into the contract.
  • There can be a waiver of rights for courtroom litigation.
  • The formal method to communicate the results, such as the findings, conclusion, and awards, is necessary for the contract.
  • Payment arrangements for a third-party negotiator, mediator, or arbitrator are included in the contract.

The Boutty Law Firm P.A. is a Multi-Service Law Firm Dedicated to Central Florida Communities.

   Our law firm is experienced and skilled in alternative dispute resolution techniques to bring parties in conflict to an agreement. As necessary, we provide innovative and aggressive strategies to resolve differences in courtroom litigation. As the law firm’s founder, attorney Shane Boutty has over twenty years of legal knowledge in the construction industry as a contractor, law professor, and owner of several construction companies. With a background in engineering, Attorney Larry Christopher Tabor brings a unique perspective. He is a Florida Supreme Court Certified Circuit Court Mediator.

The Boutty Law Firm P.A. is located in Maitland, Florida. We represent construction industry professionals and property owners in small and large construction projects throughout Orange, Seminole, Osceola, and Volusia Counties. Call for an appointment at 407-622-1395 to discuss your concerns. We strive to accomplish your goals with efficient and cost-effective legal solutions.

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Construction : Cost plus contracts

Cost-Plus Contracts for Construction Projects

There are various types of contracts utilized in the construction industry between the contractor and the property owner to convey the terms and scope of the work. These agreements are mutually binding, allowing both parties to plan for the project and the future. A well-crafted construction contract provides protection for the contractor and the property owner to ensure a smooth transaction.

    A cost-plus contract is frequently used for a proposed project that does not have a detailed estimate of the work. In simplified terms, the contractor is reimbursed for all the construction costs, with an additional amount designated for profit. In a construction project, there are direct costs, indirect costs, and profit. Direct costs include labor, materials, equipment, and professional consultants needed to complete a project. Indirect costs are general overhead for contractors such as insurance, office supplies, miscellaneous expenses, travel expenses, and others. In negotiating a profit margin, some cost-plus contracts are fixed, and others offer incentives for quality technical skills, for finishing a project ahead of schedule or completing a project below budget.

Some Variations in Cost-Plus Agreements are:

  • Fixed-fee contracts include direct and indirect costs with a pre-determined and non-negotiable fixed fee for a contractor’s profit, which is typically a percentage.
  • Incentive fee contracts have provisions to provide profit incentives for meeting or exceeding pre-determined project objectives and the project’s direct and indirect costs.
  • Award fee contracts include direct and indirect costs. The profit margin for the contractor is subject to the property owner’s evaluation of the project. Financial incentives are variable and paid if the work is completed according to the property owner’s satisfaction.

 Liability Risks that occur with Cost-Plus Contracts

   Although cost-plus contracts are generally favorable to contractors, they must recognize there are potential legal risks. Disputes and litigation can arise, such as allegations of breach of contract, fraud, and mechanic’s liens.

    Breach of contract allegations occurs if the contractor or the property owner does not abide by the terms of the contract. Contractors and sub-contractors must keep meticulous records, as supporting documentation for their work. Contractors have a duty to provide detailed records and invoices to justify expenditures to property owners. A lack of organized and itemized records or confusion over records can result in a contractor or sub-contractor not being paid and the subsequent placement of a mechanic’s lien. An example of an allegation of fraud is the contractor’s inability to justify the actual expenditures or intentionally inflating costs. This situation can result in personal liability for the contractor.  

How to Minimize Disputes

   It is critical for a contractor to have a system in place to track expenditures. These include detailed invoices for building materials, supplies, labor hours, payroll, consultant fees, and others. It is necessary to maintain close supervision of a project, transparency, and sharing of audits and records with the property owner. These elements are vital to complete a successful transaction.

The Boutty Law Firm, P.A. offers a Free, Initial Consultation.

   At The Boutty Law firm, P.A., we are dedicated to providing quality legal services for clients throughout Central Florida. We have vast experience in construction and business law, representing our clients’ best interests, with an impressive track record in state and federal courts. A construction project has a high degree of variability. Our law office can advise, negotiate, and draft the most favorable contract for your project. We establish contracts for property owners and construction professionals, with clear language and provisions for contingencies in unforeseeable circumstances. We provide comprehensive advice and support for project management, from the initial drafting of contracts through project completion and post-construction disputes and litigation.

Call The Boutty Law Firm, P.A., to represent all of your legal construction needs. We provide exceptional legal services for clients in Orange, Seminole, Osceola, and Volusia Counties in Florida. We look forward to discussing your construction projects and can be contacted at our Maitland office at 407-622-1395 or 407-622-1395.  

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Drone in Construction Site

Drone Technology in the Construction Industry

Drone technology has revolutionized the construction process, effectively cutting costs, risks, and labor. Drones offer distinctive advantages in the monitoring of a project and minimizing safety issues that arise in a complex construction project. Drone photographs and videos are valuable tools to map out the topography of large tracts of land, locate machinery on-site during a project, provide visibility reports for clients, and prevent workers from navigating hazardous conditions. They offer valuable information for a pre-construction site review or gathering data from a construction project that is in progress. They are useful for viewing pipelines, bridges, and inspecting damages of high-rise buildings without putting employees at risk of hazardous conditions, especially for force majeure events. Commercial drones utilize cameras, global positioning systems, and thermal infrared sensors to capture essential data for a site.

Risks Associated with Drone usage at Construction Sites.

   Beyond the apparent benefits of drone usage, construction professionals must understand the legalities and potential risks. Drones are considered unmanned aircraft systems. In 2016, the Federal Aviation Association introduced comprehensive regulations to monitor the usage of commercial drones. The Federal Aviation Association can impose penalties of up to eleven thousand dollars for each violation of their rules. These regulations, along with state laws and local ordinances that regulate drone usage, are ever-evolving. Construction professionals must stay current with these regulations and remain in compliance, or they may face legal consequences.

Some of the regulations for drone usage are:

  • A person that pilots a drone must have a Part 107 Remote Pilot Certificate through the Federal Aviation Association, which requires the pilot to pass a test on aeronautical knowledge.
  • Flight altitude cannot exceed 400 feet, and drone speed must not be over 100 mph.
  • Drones are prohibited from flying directly over people and are permitted to operate during the day or twilight hours with appropriate anti-collision lighting.
  • The drone pilot must maintain a visual line of sight with the drone and not operate from a moving vehicle.
  • Drone operators must yield to aircraft. 
  •      They must avoid restricted airspace unless they have applied and received a waiver.
  • A drone’s weight must be less than 55 pounds and be registered with the Federal Aviation Association.

Protection from Liability

   Drone technology is a trend that will continue to grow in the construction industry. As of March 2020, the Federal Aviation Association listed over 443,000 drones for commercial use. Many legal issues encompass commercial drone usage, and a construction professional must have risk management measures in place. It is essential to implement policies and procedures to ensure a safe operation for pre-flight and in-flight performance, and have guidelines for accident reporting and other legal issues.

   There is a potential for drone accidents to cause serious injuries. Cybersecurity and privacy is an issue with the taking of photographs and videos without authorized consent. Written permission should be obtained from employees and visitors to a construction site regarding pictures and videos. Drones are vulnerable to data theft of valuable proprietary information. Many companies outsource drone operations, which require a contract between parties to manage the inherent risks. Insurance policies are available to cover monetary damages for lawsuits. These include liability for property damage, bodily injury, violation of privacy rights, and other scenarios that may arise from drone technology.

The Boutty Law Firm Is Dedicated to the Success of our Clients

   The Boutty Law Firm P.A. is a multi-service firm that provides quality legal representation for the construction community in Central Florida. Our law firm can draft, review, and negotiate contracts designed to protect you from liability. We understand regulatory compliance and can counsel our clients on risk management matters. For disputes that may arise from the usage of drone technology or other business matters, we are your fierce advocates. We find practical solutions to your most challenging legal problems.

 We are located in Maitland, Florida, and represent clients throughout Orange, Seminole, Osceola, and Volusia Counties. Call our office at 407-622-1395 or 407-622-1395, for a free initial consultation

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Lump Sum Contracts

Lump Sum Contracts for Construction Projects

   A construction contract is a legally binding agreement between two or more parties that includes the scope of a project, the pricing structure, and the time schedule to complete the work.  It details the terms and conditions by which each party shall abide from the start of a project to its completion. A traditional agreement for a construction project is a lump sum contract, which provides a global price to complete a project, instead of bidding on individual items. This all-inclusive pricing arrangement includes labor costs, material costs, subcontractor fees, and also covers a contractor’s overhead and profit margin.  It should have a provision for risk contingencies in the event of unforeseen circumstances that may impact on the cost of a project. A lump sum contract has multiple components and can be complicated.  It is best to have an experienced contract attorney to negotiate and draft the agreement. The Boutty Law Firm, P.A., handles construction law matters of all complexities, using strategies and concepts designed to minimize risks to our clients. We can negotiate and draft contracts or resolve disputes, representing any of the parties involved in the construction process.

 Pros and Cons of Lump Sum Contracts

There are advantages and disadvantages for a contractor or property owner to engage in a lump sum contract. For a contractor, there is a greater margin for profit, especially if the project is finished ahead of time and a built-in risk contingency is not utilized. A lump sum contract requires minimal accounting documentation for the property owner, which saves time and reduces overhead costs.  For a property owner, it is easier to obtain financing for a lump sum contract, as there is a high degree of certainty regarding the total cost of the project.  The property owner is not liable for excess expenditures, unless it is addressed in the initial contract or unless the property owner requests a change order. A lump sum contract is considered low risk for a property owner.

There are some disadvantages to having a lump sum contract, especially for a contractor, as there is a high risk for cost overruns, such as increased material costs that were not accounted for in the contract.  The contractor may see the need for a change order during the construction phase, and the owner may reject payment on the change order, causing the contractor to be liable for the cost.  For the property owner, there can be lien waiver issues. If the contractor withholds payment from a subcontractor, there can be a mechanic’s lien file against the property.

The Boutty Law Firm, P.A. Offers Insightful Representation

The Boutty Law Firm, P.A. works diligently to achieve favorable contract terms for their clients. We take into consideration project inflation costs, the economic impact of change orders, and allowances for unforeseen conditions that affect the progress of the project.   We represent clients in residential and commercial disputes and claims through negotiation, mediation, or litigation. Attorney Shane Boutty is well versed in the application of construction law, as he is a state certified contractor and has owned several construction companies. The Boutty Law Firm, P.A. is located in Maitland, Florida and serves clients in Orange and Seminole Counties.  We can be contacted at 407-537-0543.  Call for an initial consultation to discuss your construction law matter.   

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