In this third part of our Costly Contract Clauses series, we will examine two more contract clauses that can really wreak havoc for a contractor.
In Demnification (Hold Harmless):
In short, you are expected to protect other parties from your own negligence on errors. Make sure you pay for insurance to cover these rights.
Many of the contracts you will review will have hold harmless clauses but when they ask you to not only hold harmless the G.C. but the owner, design professionals, inspectors, visitors, and on and on, you may be trying to insure risk you and your insurance company are capable of. This kind of risk can leave you in a very uncomfortable position should something occur.
In many states broad form of hold harmless clauses are unenforceable. Some courts will not support transfer of responsibility for one’s own negligence to another party. Never the less, make sure you negotiate or change the clauses to accept only those rights you are able to maintain control over or for which you can provide insurance.
Retainage:
Thanks to AIA (American Institute of Architects) that retainage even exists. The idea is to create an incentive for the contractor to complete punch lists and provide final documentation. Ideally, you want to negotiate no retainage in your contract. Most contractors (G.C’s) will not support this so negotiate the smallest amount or percentage you can submit a retainer bell in lue of subjecting each invoice to retainage.
In Summary:
This list is not all inclusive of contract provisions that could cause you and your business harm. These phases (if indorsed by your signature) can cause significant financial harm to your business. Evaluate all provisions very carefully.
Remember:
1. Everything is negotiable.
2. Sometimes it is better to walk away.
This site is for informational purposes only and does not contain legal advice.
