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Construction contract

Should a Dispute Resolution Clause be included in a Construction Contract?

      Construction projects typically include complex, long-term contracts. There are many reasons for disagreements due to perceived or real violations of a contract, whether it involves a single-family home or a multi-million dollar commercial project. Some common causes for breach of contract disputes are breakdowns in communication, changes in economic circumstances, delays, injuries, updates in construction law, defective materials, technical problems, and force majeure events. Alternative dispute resolution is a method that can effectively resolve conflicts between contractual parties in a timely and economical manner.

   Provisions to address disputes are essential when drafting a construction contract. A dispute resolution clause within a contract details the terms of resolving conflicts. There is an increasing trend in the construction industry, especially for commercial projects, to draft contracts with alternative dispute resolution clauses. Courtroom litigation proves to be a costly, public, and lengthy process that is likely to result in irreconcilable differences between those in conflict. Reaching a compromise without court intervention can often preserve the relationship between the parties. Alternative dispute resolution is generally an expeditious way to resolve conflicts and is more informal than a trial.

Popular Methods for Alternative Dispute Resolution include Negotiation, Mediation, and Arbitration.

   Negotiations are the first step when trying to solve construction issues between industry professionals or property owners. If this is unsuccessful, mediation can be initiated. In contrast to negotiations, a neutral third party mediator intervenes to help those in conflict reach a mutually agreed-upon compromise. Arbitration Code chapter 682 in the Florida statutes governs arbitration. This process also uses a neutral third party; however, that person acts as a judge. Their decisions are generally legally binding. There must be clarity in the language of a contract regarding dispute resolution to settle differences effectively. Dispute resolution clauses have profound implications for the contractual rights and obligations that are enforced.

Common Items to Include in a Contract regarding Dispute Resolution are:

  • One or more conflict resolution methods may be written in the contract, such as utilizing a negotiation approach and proceeding to mediation as needed. If a compromise is not reached, the parties can begin the arbitration process and, if necessary, formalized litigation.
  • It should be documented if the dispute resolution method is a final, binding, and confidential agreement.
  • The third-party negotiator, mediator, or arbitrator that is mutually chosen should be written into the contract.
  • There can be a waiver of rights for courtroom litigation.
  • The formal method to communicate the results, such as the findings, conclusion, and awards, is necessary for the contract.
  • Payment arrangements for a third-party negotiator, mediator, or arbitrator are included in the contract.

The Boutty Law Firm P.A. is a Multi-Service Law Firm Dedicated to Central Florida Communities.

   Our law firm is experienced and skilled in alternative dispute resolution techniques to bring parties in conflict to an agreement. As necessary, we provide innovative and aggressive strategies to resolve differences in courtroom litigation. As the law firm’s founder, attorney Shane Boutty has over twenty years of legal knowledge in the construction industry as a contractor, law professor, and owner of several construction companies. With a background in engineering, Attorney Larry Christopher Tabor brings a unique perspective. He is a Florida Supreme Court Certified Circuit Court Mediator.

The Boutty Law Firm P.A. is located in Winter Park, Florida. We represent construction industry professionals and property owners in small and large construction projects throughout Orange, Seminole, Osceola, and Volusia Counties. Call for an appointment at 407-622-1395 to discuss your concerns. We strive to accomplish your goals with efficient and cost-effective legal solutions.

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Construction : Cost plus contracts

Cost-Plus Contracts for Construction Projects

There are various types of contracts utilized in the construction industry between the contractor and the property owner to convey the terms and scope of the work. These agreements are mutually binding, allowing both parties to plan for the project and the future. A well-crafted construction contract provides protection for the contractor and the property owner to ensure a smooth transaction.

    A cost-plus contract is frequently used for a proposed project that does not have a detailed estimate of the work. In simplified terms, the contractor is reimbursed for all the construction costs, with an additional amount designated for profit. In a construction project, there are direct costs, indirect costs, and profit. Direct costs include labor, materials, equipment, and professional consultants needed to complete a project. Indirect costs are general overhead for contractors such as insurance, office supplies, miscellaneous expenses, travel expenses, and others. In negotiating a profit margin, some cost-plus contracts are fixed, and others offer incentives for quality technical skills, for finishing a project ahead of schedule or completing a project below budget.

Some Variations in Cost-Plus Agreements are:

  • Fixed-fee contracts include direct and indirect costs with a pre-determined and non-negotiable fixed fee for a contractor’s profit, which is typically a percentage.
  • Incentive fee contracts have provisions to provide profit incentives for meeting or exceeding pre-determined project objectives and the project’s direct and indirect costs.
  • Award fee contracts include direct and indirect costs. The profit margin for the contractor is subject to the property owner’s evaluation of the project. Financial incentives are variable and paid if the work is completed according to the property owner’s satisfaction.

 Liability Risks that occur with Cost-Plus Contracts

   Although cost-plus contracts are generally favorable to contractors, they must recognize there are potential legal risks. Disputes and litigation can arise, such as allegations of breach of contract, fraud, and mechanic’s liens.

    Breach of contract allegations occurs if the contractor or the property owner does not abide by the terms of the contract. Contractors and sub-contractors must keep meticulous records, as supporting documentation for their work. Contractors have a duty to provide detailed records and invoices to justify expenditures to property owners. A lack of organized and itemized records or confusion over records can result in a contractor or sub-contractor not being paid and the subsequent placement of a mechanic’s lien. An example of an allegation of fraud is the contractor’s inability to justify the actual expenditures or intentionally inflating costs. This situation can result in personal liability for the contractor.  

How to Minimize Disputes

   It is critical for a contractor to have a system in place to track expenditures. These include detailed invoices for building materials, supplies, labor hours, payroll, consultant fees, and others. It is necessary to maintain close supervision of a project, transparency, and sharing of audits and records with the property owner. These elements are vital to complete a successful transaction.

The Boutty Law Firm, P.A. offers a Free, Initial Consultation.

   At The Boutty Law firm, P.A., we are dedicated to providing quality legal services for clients throughout Central Florida. We have vast experience in construction and business law, representing our clients’ best interests, with an impressive track record in state and federal courts. A construction project has a high degree of variability. Our law office can advise, negotiate, and draft the most favorable contract for your project. We establish contracts for property owners and construction professionals, with clear language and provisions for contingencies in unforeseeable circumstances. We provide comprehensive advice and support for project management, from the initial drafting of contracts through project completion and post-construction disputes and litigation.

Call The Boutty Law Firm, P.A., to represent all of your legal construction needs. We provide exceptional legal services for clients in Orange, Seminole, Osceola, and Volusia Counties in Florida. We look forward to discussing your construction projects and can be contacted at our Winter Park office at 407-622-1395 or 407-883-1024.  

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Drone in Construction Site

Drone Technology in the Construction Industry

Drone technology has revolutionized the construction process, effectively cutting costs, risks, and labor. Drones offer distinctive advantages in the monitoring of a project and minimizing safety issues that arise in a complex construction project. Drone photographs and videos are valuable tools to map out the topography of large tracts of land, locate machinery on-site during a project, provide visibility reports for clients, and prevent workers from navigating hazardous conditions. They offer valuable information for a pre-construction site review or gathering data from a construction project that is in progress. They are useful for viewing pipelines, bridges, and inspecting damages of high-rise buildings without putting employees at risk of hazardous conditions, especially for force majeure events. Commercial drones utilize cameras, global positioning systems, and thermal infrared sensors to capture essential data for a site.

Risks Associated with Drone usage at Construction Sites.

   Beyond the apparent benefits of drone usage, construction professionals must understand the legalities and potential risks. Drones are considered unmanned aircraft systems. In 2016, the Federal Aviation Association introduced comprehensive regulations to monitor the usage of commercial drones. The Federal Aviation Association can impose penalties of up to eleven thousand dollars for each violation of their rules. These regulations, along with state laws and local ordinances that regulate drone usage, are ever-evolving. Construction professionals must stay current with these regulations and remain in compliance, or they may face legal consequences.

Some of the regulations for drone usage are:

  • A person that pilots a drone must have a Part 107 Remote Pilot Certificate through the Federal Aviation Association, which requires the pilot to pass a test on aeronautical knowledge.
  • Flight altitude cannot exceed 400 feet, and drone speed must not be over 100 mph.
  • Drones are prohibited from flying directly over people and are permitted to operate during the day or twilight hours with appropriate anti-collision lighting.
  • The drone pilot must maintain a visual line of sight with the drone and not operate from a moving vehicle.
  • Drone operators must yield to aircraft. 
  •      They must avoid restricted airspace unless they have applied and received a waiver.
  • A drone’s weight must be less than 55 pounds and be registered with the Federal Aviation Association.

Protection from Liability

   Drone technology is a trend that will continue to grow in the construction industry. As of March 2020, the Federal Aviation Association listed over 443,000 drones for commercial use. Many legal issues encompass commercial drone usage, and a construction professional must have risk management measures in place. It is essential to implement policies and procedures to ensure a safe operation for pre-flight and in-flight performance, and have guidelines for accident reporting and other legal issues.

   There is a potential for drone accidents to cause serious injuries. Cybersecurity and privacy is an issue with the taking of photographs and videos without authorized consent. Written permission should be obtained from employees and visitors to a construction site regarding pictures and videos. Drones are vulnerable to data theft of valuable proprietary information. Many companies outsource drone operations, which require a contract between parties to manage the inherent risks. Insurance policies are available to cover monetary damages for lawsuits. These include liability for property damage, bodily injury, violation of privacy rights, and other scenarios that may arise from drone technology.

The Boutty Law Firm Is Dedicated to the Success of our Clients

   The Boutty Law Firm P.A. is a multi-service firm that provides quality legal representation for the construction community in Central Florida. Our law firm can draft, review, and negotiate contracts designed to protect you from liability. We understand regulatory compliance and can counsel our clients on risk management matters. For disputes that may arise from the usage of drone technology or other business matters, we are your fierce advocates. We find practical solutions to your most challenging legal problems.

 We are located in Winter Park, Florida, and represent clients throughout Orange, Seminole, Osceola, and Volusia Counties. Call our office at 407-622-1395 or 407-883-1024, for a free initial consultation. 

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Lump Sum Contracts

Lump Sum Contracts for Construction Projects

   A construction contract is a legally binding agreement between two or more parties that includes the scope of a project, the pricing structure, and the time schedule to complete the work.  It details the terms and conditions by which each party shall abide from the start of a project to its completion. A traditional agreement for a construction project is a lump sum contract, which provides a global price to complete a project, instead of bidding on individual items. This all-inclusive pricing arrangement includes labor costs, material costs, subcontractor fees, and also covers a contractor’s overhead and profit margin.  It should have a provision for risk contingencies in the event of unforeseen circumstances that may impact on the cost of a project. A lump sum contract has multiple components and can be complicated.  It is best to have an experienced contract attorney to negotiate and draft the agreement. The Boutty Law Firm, P.A., handles construction law matters of all complexities, using strategies and concepts designed to minimize risks to our clients. We can negotiate and draft contracts or resolve disputes, representing any of the parties involved in the construction process.

 Pros and Cons of Lump Sum Contracts

There are advantages and disadvantages for a contractor or property owner to engage in a lump sum contract. For a contractor, there is a greater margin for profit, especially if the project is finished ahead of time and a built-in risk contingency is not utilized. A lump sum contract requires minimal accounting documentation for the property owner, which saves time and reduces overhead costs.  For a property owner, it is easier to obtain financing for a lump sum contract, as there is a high degree of certainty regarding the total cost of the project.  The property owner is not liable for excess expenditures, unless it is addressed in the initial contract or unless the property owner requests a change order. A lump sum contract is considered low risk for a property owner.

There are some disadvantages to having a lump sum contract, especially for a contractor, as there is a high risk for cost overruns, such as increased material costs that were not accounted for in the contract.  The contractor may see the need for a change order during the construction phase, and the owner may reject payment on the change order, causing the contractor to be liable for the cost.  For the property owner, there can be lien waiver issues. If the contractor withholds payment from a subcontractor, there can be a mechanic’s lien file against the property.

The Boutty Law Firm, P.A. Offers Insightful Representation

The Boutty Law Firm, P.A. works diligently to achieve favorable contract terms for their clients. We take into consideration project inflation costs, the economic impact of change orders, and allowances for unforeseen conditions that affect the progress of the project.   We represent clients in residential and commercial disputes and claims through negotiation, mediation, or litigation. Attorney Shane Boutty is well versed in the application of construction law, as he is a state certified contractor and has owned several construction companies. The Boutty Law Firm, P.A. is located in Winter Park, Florida and serves clients in Orange and Seminole Counties.  We can be contacted at 407-537-0543.  Call for an initial consultation to discuss your construction law matter.   

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Contract Documentation

The Importance of Documentation Retention for Construction Projects

   There are many contracts drafted and signed for every major construction project and these documents can provide legal protection in the event of future disputes.  Construction projects generate a vast amount of paperwork and safeguarding these records can be a daunting task.  Implementing a document retention policy can shield a company from liability claims, as a contract, report, log, or record can provide supporting evidence for arbitration or litigation. Retention of documents is an essential practice for the success of a construction business.

 Common construction disputes include breach of contract claims including:

  • Non-compliance with payment, delays, scope of work disputes, defective work due to errors or omissions, and latent defects that can be discovered long after a project is completed. Workplace injuries and accidents, mechanic’s liens, property damage, negligent supervision, and copyright infringements are other types of claims.

    The length of time that construction records should be retained depends on the statute of limitations and the statute of repose. In the State of Florida, a lawsuit for construction defects must be filed within four years from the issuance of a certificate of occupancy or when the owner takes possession of the property.  The statute of repose, for latent defects, is ten years from the date that the owner takes possession. According to Florida and Federal recordkeeping requirements, payroll records are to be kept for a minimum of four years.  The Internal Revenue Service can audit your company as far back as six years, therefore it is recommended that tax records be kept for at least seven years.   

What Types of Documents Should Be Preserved?

   Be diligent about safeguarding your contracts and records, as documentation is the framework of a plaintiff or defendant’s legal dispute. The vast amount of paperwork for  major construction projects can include the initial contracts, insurance certificates, drawings and specs, design and engineering work, change orders, purchase orders, photographs of the construction process, bid documents, invoices, field reports, safety reports, payroll records, and business correspondence. The use of scanning for electronic storage may be a better option for document management than keeping manual records and it allows accessibility to the documents wherever they are needed. Another aspect of a business document retention policy is instituting detailed procedures that are used to destroy contracts and documentation that are no longer needed. However, intentionally destroying documents that are relevant to a pending litigation may suggest that the document contained information that is not favorable to your case.

The Boutty Law Firm, P.A. is a Multi-Service Business and Construction Law Firm

The Boutty Law Firm can provide counsel on all matters regarding construction and commercial law, from the bidding on a construction project to its completion.  We handle all levels of complexity for our clients, in both state and federal courts. Attorney Shane Boutty is a state certified contractor and his experience and knowledge is invaluable in minimizing risks and finding effective and affordable solutions for his clients.  We represent general contractors, subcontractors, developers, construction companies, homeowners, property owners, material suppliers, architects, and homeowner’s associations. Our law firm is adept at negotiations, arbitration, and court room litigation. Our goal is to protect your interests.  We are located in Winter Park and serve clients in Orange, Seminole, and Volusia counties in Central Florida. Call our office at 407-537-0543 for legal advice and quality representation.

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