How to Navigate Contracts for Construction Projects

In this blog post, we will explore how to deal with existing contracts, both verbal and written, and provide guidance on how to navigate potential changes.

How to deal with Verbal Contracts?

Verbal contracts are often seen as more flexible because they lack the formality of a written agreement. However, they can still be binding, depending on the circumstances. Here's how to handle them:

Assess the Nature of the Contract

‍Verbal contracts primarily rely on the spoken word, making them easier to negotiate or modify. If there is a disagreement about the terms, it often boils down to your word against the other party's.

Expiration Date in Proposals

If your verbal agreement is based on a proposal or quote, check if it has an expiration date. In the past, quotes were typically valid for a specific period, and once accepted, they became a binding contract. Be aware of any time limitations.

Consider Retracting the Offer

‍If you've provided a quote or proposal to the other party and have concerns about honoring the price, you can consider retracting the offer. This is a viable option if the other party has not yet accepted it. Notify them via email or a formal letter that the offer has been retracted.

How to deal with Written Contracts?

Written contracts are typically more complex, often involving multiple pages and detailed terms and conditions. Modifying these contracts can be a challenge, especially when it comes to pricing. Here's what to consider:

The Rigidity of Written Contracts

Written contracts usually have strict pricing provisions, making changes more difficult to negotiate. They may contain a "no-escalation" clause, which prevents the price from changing under any circumstances.

No-Escalation Provisions

‍Many written contracts include a "no-escalation" provision, explicitly stating that the price is not allowed to change, regardless of the reason. These provisions are often brief but have a significant impact on the contract's flexibility.

Examine Your Contract

‍Carefully review your written contract to understand its stance on price escalation. If the contract is silent on this matter, legal standards typically impose a presumption that the price remains firm unless there is a specific provision allowing changes.

Material Terms in the Contract

If your written contract does not include an escalation clause and simply lists a fixed price, it is likely considered a firm price. This is because the price is a material term of the contract, and without a provision to the contrary, it remains unchanged.

Key Takeaway

Dealing with existing contracts, whether verbal or written, can be a challenging task. Verbal contracts offer more flexibility, but written contracts tend to have stricter pricing provisions. To navigate these contracts successfully, it's essential to understand the terms and conditions, be aware of expiration dates, and consider retracting offers when necessary. When in doubt, seeking legal advice or expert guidance from SunRay is a wise choice to ensure your interests are protected and contract modifications are handled appropriately.