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Allowances in Construction Contracts Part 3

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A little foresight in the construction industry can go a long way towards avoiding disputes and maintaining owner-contractor relationships. While you can’t see the future, you can take steps to secure a project’s success by planning for potential conflicts in the contract drafting phase. Construction allowances are one of these potential sources of conflict.

Throughout this series, we’ve covered what allowances are and the considerations that must be taken to ensure that they are properly defined in a contract. The Houston contractor attorneys at Cotney Law will conclude this series by discussing why construction allowances should be altogether avoided and what to do when they can’t be.

Allowances Should Be Avoided

As a rule, contractors should avoid any project unknowns. While allowances may not seem inherently bad, they have the potential to cause a legal dispute. For this reason, allowances should be avoided when possible and kept at a minimum when unavoidable. Material and labor costs should be decided and agreed upon by owners and contractors prior to signing a contract.

When Allowances Can’t Be Avoided  

When you absolutely must include allowances in your contracts, be sure that they are within reason. If you expect project costs to be in the hundreds of thousands of dollars, you wouldn’t want an allowance that’s a small fraction of that. Don’t set yourself up for failure. A poorly estimated allowance may result in a contractor paying out of pocket for additional costs.

When material and labor costs do change, as is common, have a Houston contractor attorney draft a change order immediately. Simply discussing changes with a seemingly easygoing owner will not suffice. Conflict is sure to surface when changes pile up and you have no way to prove the source of rising costs. As always, we recommend improved document control, not just to eliminate confusion, but to also protect yourself in the event that you are faced with explaining your actions in a court of law.

Partner with an Attorney

Allowances are only one of the countless and ever-changing variables that can lead to conflict on a construction project. When the scope of work is altered and contract limits are tested, contractors are often burdened with defending their interests both on and off the project site. Keeping a lawyer on retainer is the only sure way to protect yourself in an industry beset by rising material costs and litigious owners. To ensure that your rights are vigorously defended from year to year, partner with our team of Houston contractor attorneys at Cotney Law.

To catch up on this series, read parts one and two.

If you would like to speak with a Houston contractor attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.