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Using and Modifying Industry Form Construction Contracts

by Linda Perez Clark and Jeffrey N. Boudreaux

A number of construction industry trade groups or associations, such as the American Institute of Architects (AIA) and the Design-Build Institute of America (DBIA), among others, have developed a variety of “standard form” construction contracts that have been used in the industry for many years, and are periodically updated. When engaging an architect or contractor, many owners are requested to sign these standard form agreements.  

The beauty of these standard forms is that they are “tried and true,” as they have been around for a number of years and have been the subject of extensive litigation interpreting their content. They are also very comprehensive and address the many contingencies that come up during the construction process.

But owners should avoid signing the standard form agreement without modifying the more heavy-handed, contractor-friendly provisions to make them fairer to the owner. For instance, the standard form agreements typically allow the contractor to recover delay damages and extend the contract time for completing the work, if the owner delays the contractor’s work. Construction projects can require significant orchestration of effort, and the possibility of owner delay is common and sometimes cannot be controlled by the owners. Thus, we recommend modifying the standard form agreements to provide that an extension of time shall be the contractor’s sole remedy for the owner’s delay.   There are a number of other provisions that allow the contractor to recovery damages for other types of delay, and likewise, we recommend a similar modification. This is just one example of a number of provisions that we recommend modifying when we represent the owner.

In addition to making the standard form agreements more owner-friendly, we also recommend modifying them to reflect the owner protections afforded under the Louisiana Private Works Act. This Act allows subcontractors and suppliers to place a lien on the owner’s property if the contractor fails to remit payment. It also allows the owner to protect itself against such liens by requiring the contractor to obtain a bond and file certain notices in the public records. The standard form agreements, without modification, do not require the contractor to comply with these requirements.

In sum, we highly recommend modifying the industry standard forms to protect the owner. The modifications are typically reflected in an addendum to the standard forms. Contractors are well-versed in these forms, are regularly asked modify them, and should be willing to do so in effort to make the agreement more balanced. 

Full post as published by Louisiana Law Blog on August 18, 2008 (boomark / email).