Glenn Azzinari, Partner
When a client is getting ready to embark on a construction or renovation project, whether as the owner or as a contractor, the question often arises: Does it make sense to use one of the standard form contracts available or should the client opt for a custom form? As you may imagine, there is no one-size-fits-all answer to that question. Whether to use a standard contract form really depends on several factors, some of which I’ll highlight in this post.
Let’s be clear – I love drafting contracts and, over the years, I’ve developed a personal portfolio of contracts for any number of applications. So if a client says “no form contracts for me, please”, I’m ready to hit the ground running and develop a customized contract for the client to use. But there are times it makes sense (from a practical standpoint and to keep down legal fees) to turn to one of the pre-existing contract forms available in the marketplace.
I’m not here to advocate for any particular standard contract, whether it’s the AIA family of contracts (probably the most widely used) or the contract forms prepared by other organizations such as the DBIA, EJCDC, ConsensusDocs, or others. Each of those forms have their pros and cons but for the most part, they are a tried and true starting point for many a client. And why is that? They are a known commodity in the industry (so the other parties involved on the project probably know them as well), they offer a fairly comprehensive set of terms and conditions ready to use (or as discussed below, ready to be modified), they are generally balanced (although not perfectly so on some issues) and they can make the negotiating process move faster.
Of course, even if a client is willing to use a standard contract form “as is” and without any modifications (which I don’t recommend except for a small, straightforward project), the parties will still need to negotiate certain basic terms (such as price, schedule, and scope of work) and fold those points into the standard form. But the advantage of a standard form is most other subjects have already been addressed, such as warranty, indemnification, dispute resolution and the miscellaneous provisions often referred to as “contract boilerplate”. That’s the key advantage of using a standard form – someone has already prepared the basic contract terms so there is less work needed to get to a signature-ready contract.
There are, however, times when using a standard contract is not the way to go. In some cases, the other side (because of bargaining power) gets to dictate the contracting approach and may insist on using their own home-grown form. In that scenario, we become counter-punchers to make sure our client’s interests are adequately reflected in the final terms. Or a project may be big enough that it simply justifies the time and expense of crafting a contract that is tailor-made for it. Or a client’s business model may entail performing the same type of project for any number of different customers – in that case, it’s helpful to work with the client to develop its own form that can then be used for all its projects going forward.
If a client does want to go the standard contract route, we still recommend that they allow us to customize the form by revising at least some of the terms (to address any project-specific items or to afford them rights and protections that go beyond the “standard” terms). Or it’s sometimes easier to leave the standard form untouched and add a Rider or set of Special Conditions that achieves the same objectives of making sure the final form of contract aligns more closely to the project at hand.
In sum, whether or not you use a standard form, there are still issues to address before you sign on the dotted line. If you’re planning a project as the owner or getting ready to submit a bid as a contractor, and would like our advice on the best contracting approach for you, we’re here to support you.