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Decide how to handle disputes in the construction contract

Few, if any, building or renovation projects go exactly according to plan. Something will always come up, and how the parties deal with those items determines whether they become a dispute that could end up in court. For this reason, it makes sense to decide in the construction contract how to deal with any potential disputes that could arise during the project.

During the negotiation process for the construction contract that will govern a particular project, the parties may want to include provisions regarding the following:

  • An agreement that requires both sides to continue to meet their contractual obligations while a third party looks into the issue.
  • An agreement that requires the parties to take part in mediation or arbitration prior to filing any civil lawsuits. The parties can include details regarding what type of alternative dispute resolution to use depending on the circumstances and subject matter.
  • A clause regarding what will constitute liquidated damages in event of a dispute.
  • A clause outlining ways to prevent disputes in the first place. For instance, the parties can agree to jointly monitor the project’s progress, ensure regular communications and quickly turn to mediation to resolve minor issues that could become major ones if not dealt with rapidly and efficiently.
  • Include contingent commitments that reward compliance and penalize noncompliance with the provisions of the contract.

In the construction industry in particular, delays in the process can prove costly. Construction litigation puts the success of any project in jeopardy for everyone involved. This makes handling disagreements as quickly, quietly and amicably as possible essential. The first step in doing so is to include the appropriate terms in the construction contract.