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Eliminating Inconsistencies in California Construction Contracts

One of the biggest challenges for a general contractor on any major construction project is eliminating the inconsistencies that can arise in the numerous contracts that are needed for performance of the work. It is critical that these issues are identified and resolved prior to contract formation, as conflict in the contract documents is often what drives construction litigation.

Having reviewed thousands of California construction contracts, I have developed a detailed checklist that my clients use when negotiating prime and subcontract agreements. The two most critical areas where special attention must be paid are provisions relating to indemnity and insurance. Despite the importance of consistency between these provisions, this unfortunately is where I find the greatest number of discrepancies occurring.

From an indemnity standpoint, the best approach for a general contractor is to push down to subcontractors, verbatim, the indemnity language in the prime contract. Of course, general contractors should fight for clear, fair type III indemnity and defense language in the prime contract. Once achieved, however, don't mess with it. Simply pass this language through in your subcontract agreement. If the subcontractor is not willing to sign on to the same risk you have found acceptable, then it's time to find a new subcontractor.

From an insurance standpoint, it is critical that general contractors have a firm handle on what the owner's insurance will cover. Any gaps must be filled with either the general contractor's or subcontractor's insurance. Overlapping coverages is never a problem so long as there is appropriate and consistent waiver of subrogation language in both the prime and subcontract agreements.

As Ben Franklin once advised, "an ounce of prevention is worth a pound of cure." This wisdom should not be lost on the California construction community. Spend the time and money necessary to obtain the most clear, concise and consistent construction agreements possible. Doing so could save you hundreds of thousands of dollars in litigation costs.

If you need help drafting or negotiating the best possible construction contracts please do not hesitate to contact one of the California construction lawyers in the Bowles & Verna Construction Law Practice Group. Contact kjones@bowlesverna.com for a free consultation today.

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