September 02, 2005

Well-crafted contracts are the key to avoiding litigation in today’s complex construction industry, according to a panel of twelve Jenner & Block attorneys who discussed the fundamental elements of those contracts at a day-long educational seminar on August 17 in Chicago.

Litigation is generally “not good business” in the construction industry because of the time and expense involved, said Partner Joseph G. Bisceglia, Chair of the Firm’s Construction Law Practice and moderator of the seminar, in his opening remarks.  Moreover, “lawyers can be most valuable at the outset of their client’s project, when they can ensure their rights are properly spelled out in the construction contract,” he added.

Partner Donald S. Horvath provided an overview of the standard form contracts produced by the American Institute of Architects (AIA), a good starting point in most construction scenarios.

However, such boilerplate construction contracts should be modified to include some additional language that is tailored to meet a given client’s special needs or goals, noted several attorneys.  Partner Anthony C. Porcelli and Associate Anders C. Wick discussed how to craft the “Scope of Work” clause, which defines the work that a contractor expects to perform and the product that the owner expects to receive.  They also advised attendees to consider including detailed language to govern payments, work order changes and extras, site inspections, and changed conditions or circumstances.

Associates Terence G. Banich II and Robert J. Blazejowski also discussed the importance of clauses that may avoid damages for no-fault delays, as well as “no lien” provisions, where appropriate.  And Associates Daniel C. McMurtrie and John R. Storino addressed provisions that spell out a party’s right to terminate a contract, their obligation to give notice, what constitutes a waiver of rights, and when a dispute must be arbitrated.

Types of insurance policies typically available for construction projects and issues that can arise under those policies were addressed by Partner Gregory M. Boyle and Associate Thomas P. Monroe.  Although most insurance agreements are standard agreements, they said, parties to the contract should still consider the amount of coverage to be supplied on the project, what losses will be covered, and whether other parties will be covered as additional insureds.

Mr. Banich also discussed surety bonds at the event, including the concept of suretyship, as well as payment bonds and performance bonds – the two the most commonly found bonds in construction law – and the statutes that govern both types.

In providing an overview of bankruptcy and executory contracts in the context of construction law, Associate Brian H. Meldrum discussed assumption, assignment and rejection of executory contracts, and termination of contracts prior to bankruptcy, among other things.

The August 17 seminar, entitled "The Fundamentals of Construction Contracts," was organized by Lorman Education Services.