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As a Principal, Business Developer, or someone who is responsible for bringing in business for your construction  firm, you are very likely to come across contracts. Contracts are an agreement signed by your firm and a client that sets the rules for the work to be done. Signing the contract is usually the final step in the selling process. While you may not be the authorized representative signing the contract, its important for you to know some of the contract "red flags" you might want to look out for. This article will explain some of the clauses you might see on contracts from companies from whom you are seeking work

Principals of both Subcontractors and Suppliers should review this checklist when reviewing contracts presented to them by "upstream" companies on the project. For example a Subcontractor should look out for these red flags when reviewing a contract presented by the owner of the project or its representative.

I. Deal Breakers

1. Attempts to make you indemnify the entire project or insure the upstream party for its own acts
2. "No damages for delay" clauses that remove your ability to claim actual damages for delay beyond your control and imposed by an upstream party
3. One way attorney fee provisions in dispute resolution provisions
4. "Pay when paid" clauses
5. Language that puts artificial limits on your ability to make a claim, including allowing the upstream party or its agent to be the judge of your claim's validity
6. Termination for convenience that only pays for work performed and materials installed as of the date of the termination

II. Items to Make You Think Carefully

1. Clauses that mention the "satisfaction" of the upstream contractor or owner as the benchmark for correct work and not the plans and specifications
2. Mandatory arbitration
3. Final payment as a waiver of all claims
4. Clauses specifying a location for any lawsuit
5. Statutes of limitations in the contract that impose artificial limits on your rights

III. Better to Avoid, but Don't Lose a Good Deal

1. Incorporating documents that are not plans and specifications, including the contract between the Owner and the General/Prime Contractor
2. Bond requirements on non-government projects

A combination of your knowledge of and business history with the "upstream" party and these guidelines will help to assure that you get the best combination of protection and profit. Should any questions arise during contract negotiations, consult with an attorney knowledgeable in construction law to assure that your rights are protected.

Chris Hill is a lawyer at the Richmond, VA firm, DurretteBradshaw, PLC, and member of Virginia's Legal Elite in Construction Law. He specializes in mechanic's liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals. Chris posts his thoughts on the construction/legal landscape at www.constructionlawva.com.