In my last column, I discussed ways to protect an owner’s interests via a construction contract. In this one, I do the same for contractors, explaining that through proper due diligence, negotiation, drafting and administration of a construction contract, a general contractor can ensure, among other things, that it: (1) contracts with financially secure and trustworthy owners, subcontractors and suppliers; (2) minimizes the risk of lien claims from its subcontractors and suppliers; and (3) is responsible only for damages associated with its own performance.
Know Your Counterparties
The easiest way to limit risks on a construction project is to do business with reputable owners, subcontractors and suppliers. And the best way to ensure that a contractor is working for and with individuals and entities of good character is to perform due diligence before entering into contracts with them.
