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Negotiating your construction contracts

On Behalf of | Aug 24, 2023 | Construction Law

As a construction contractor in Florida, you know that the success of your construction projects depends heavily on having good contracts in place.

A good contract clearly states the goals, requirements and objectives of each party and the penalties for breaching the contract. It also addresses what to do if the construction project is delayed for various reasons, such as defective equipment or supply chain problems.

Remember that negotiation goes both ways

You may feel like you do not have any leverage when it comes to negotiating your construction contracts, but that is not often the case. You should be honest about what you are looking for and ask for what you want.

As with any negotiation, starting off by asking for less than what is likely to lead to a contract you are not happy with. The other side might come to you with their terms already in place and not be expecting you to push back.

Addressing risks

Be honest about what you want, especially when it comes to allocating risks. Parties to a construction contract often want to shift risk around to other parties but placing the risk solely on one party, such as a contractor, could cause delays since any potential modification could require a change order.

When it comes to change orders, your contract should specify the change order process. All change orders should be in writing. Negotiating these terms in your contract can reduce the potential for conflict down the road.

Listen to the other side

Although you should push for what you need from the contract, always step back and listen to what the other side says. If they do not agree to your terms, consider their reasons. They may be valid.

If there are points you cannot agree on, listening to each other and understanding each other’s position can help you both focus on finding the right solutions. The process should feel like a conversation among each other, not a game or a fight with winners and losers.

Ideally, the final contract should make both of you feel like you walked away with a good deal.

Consider a memorandum of understanding

A memorandum of understanding is a good option to consider if you are ready to begin the project but have one or two issues you cannot resolve. This is a written document stating what each side needs from the other, what terms are agreed upon and what terms must still be negotiated.

It is simpler and quicker to put together, generally only containing the highlights of your project rather than the details that will go into your contract.

Know the state law

Once you have your construction contract complete review it to make sure all terms comply with Florida law. It also helps if you know the laws before you begin negotiations.

A negotiation is meant to be a conversation between both parties with a result that usually involves some compromise on each side. If you do not feel comfortable negotiating, there are professionals out there who can negotiate on your behalf.