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Important Contract Documents for Construction Projects Part 3

In parts one and two of this three-part series, a Houston contractor attorney from Cotney Law discussed several important contract documents for construction projects, including:

  • Construction Contract Agreement
  • Scope of Work
  • Construction Schedule
  • General Conditions
  • Special Conditions
  • Specifications

Now, we will conclude our series by covering four additional documents found in construction contracts. These are the bill of quantities, cost estimates, drawings, and insurance coverage documents. If you have questions about any of these documents or are currently dealing with a breach of contract, consult a Houston contractor attorney.

Bill of Quantities

The bill of quantities operates exactly as its name suggests. It includes an itemized list detailing the quantities of materials, parts, and labor that will be utilized on a project. Without this document, putting together an accurate bid is difficult. You should cross-check this document regularly to ensure that there are no errors or omissions that affect your success on the project.

Cost Estimate

The cost estimate provides an outline of all materials used on the project and their costs. Essentially, it includes the values of any items listed on the bill of quantities. Depending on the format of your cost estimate, it may include a detailed report or a lump sum number that doesn’t specify per-unit values. In some contracts, the cost estimate is located in the specifications section. 

Drawings

Construction drawings are renderings of the work that will be performed over the course of a project. Basically, it’s the project blueprints, but it could include other graphic representations of the work to be performed, too. Another purpose of this document is to provide a visual element depicting the scope of work.

Insurance Coverage

Your contract should also include information pertaining to your insurance coverage as well as any necessary bonds. This document guarantees that you have the financial support necessary to make good on your promises in the contract. For example, this section will include an outline of your general liability insurance, builder’s risk insurance, and workers’ compensation insurance policy.

If you would like to speak with one of our Houston contractor attorneys, 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.

As we’ve mentioned in the past, the best practices for construction contracts involve the use of clearly written contracts that manage to pack complicated information into a concise package. This package may contain several different types of documents that, when put together, form your construction contract. Every time you prepare to sign a contract, you will have many questions:

No two contracts should be identical, so approaching the signing table with questions is vital if you want to avoid common contract-related issues. This is especially true if an owner attempts to unload a boilerplate contract on you. Understanding each and every document contained in your contract can help you avoid signing a bad contract. A Houston construction lawyer can help you review your contracts, give you a breakdown of problematic clauses, and negotiate new terms on your behalf. 

In part one of this three-part series, we discussed how understanding each and every document in your contract is essential for contractors that want to avoid costly disputes involving scope of work or the construction schedule. Now, we will continue to explore important contract documents for construction projects, focusing on the general conditions, special conditions, and specifications.

General Conditions

Put simply, the general conditions of a construction contract outline the rights, responsibilities, and relationships between a contractor and owner. It covers the legalities of the contract, establishes a consistent legal framework, and discusses how disputes will be resolved. Because contractor-owner disputes are extremely common in the construction industry, it’s important to have a Houston construction lawyer add an alternative dispute resolution (ADR) clause providing both parties with the opportunity to settle disputes amicably outside of court using processes like mediation and arbitration. 

Special Conditions

Oftentimes viewed as an addendum to the existing general conditions of a contract, special conditions typically contain information related to specific conditions and clauses that address unique aspects of a project. For instance, if you were contracted to build seven identical apartment buildings but the last of the seven buildings was designated an “eco-friendly” structure because the materials were swapped out with sustainable alternatives, the special conditions may reference this and point the reader towards an additional document containing the exact specifications for this change.

Specifications

When it comes to the technical data and requirements for materials and building techniques, look no further than the specifications section of your contract. This is a comprehensive document that may change over time as change orders affecting the scope of work are introduced. 

To learn more about important contract documents for construction projects, read part three.

If you would like to speak with one of our Houston construction lawyers, 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.

Take a second to think about your last construction-related dispute. Do you remember what the source of the conflict was? In many cases, a dispute can be traced back to a faulty or erroneous contract. Thinking back now, you probably regret signing that contract, but hindsight is 20/20, and there’s nothing you can do about it now. 

The good news is that you can greatly reduce your likelihood of becoming ensnared in future disputes by having a Houston construction attorney review your contracts in advance. This simple service has been proven to be an effective countermeasure against bad contracts. In this three-part series, our Houston construction attorneys will discuss several contract documents that are commonly used in the construction industry and provide examples of how these documents can affect your projects.

Construction Contract Agreement

This is the most basic component of any construction contract. Without a construction contract agreement, there is no formal agreement to perform the work detailed in the design specifications. As the principal agreement between the contractor and the owner, the construction contract agreement forms the foundation of a contract. The other components of your contract, including the scope of work and construction schedule (which we’ll discuss below), will be assembled around this agreement.

Scope of Work

A clear scope of work is essential to any successful project. This document outlines the work to be done and asserts that any necessary work falling outside the scope of work will require additional compensation at the owner’s expense. Depending on your contract, this document may also be referred to as the “statement of work.” Some of the fundamental aspects of scope of work include a description of the work to be done, a statement clarifying who is responsible for the completion of said work, the techniques that should be employed to complete the project, and precise information detailing the materials that are to be used on the project. Another important aspect of scope of work is that it contains terms and conditions for handling change orders. Having a clear policy relating to change orders is important if you want to avoid scope creep and keep your projects on time and under budget.

Construction Schedule

Another important component of any construction contract is the construction schedule. This document provides clear documentation explaining when a project will reach completion. It also details how to deal with scheduling problems. You may be required to update the construction schedule periodically throughout the project to provide increasingly accurate estimates. Depending on the type of contract you sign, the dissemination of payments may be based on the construction schedule. When you fall behind schedule, whether it’s your fault or not, consult a Houston construction attorney to see if you or the owner are responsible for footing the bill.

To learn more about important contract documents for construction projects, read parts two and three.

If you would like to speak with one of our Houston construction attorneys, 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.

The State of Texas is notorious for its exceedingly complicated lien laws. This means contractors that attempt to utilize a mechanic’s lien to obtain due compensation from an owner must be able to satisfy some extremely delicate deadlines and filing procedures. Even a single error or omission could result in a rejected lien, which can be detrimental to your efforts to procure payment.

In this article, a Houston construction lien attorney from Cotney Law will detail how contractors can confirm their eligibility in Texas’ complicated mechanic’s lien system. As you will learn over the course of this article, an experienced attorney can be a valuable partner in the fight against nonpayment. The future of your business is largely predicated on your ability to satisfy contracts and collect payments. When you’re doing everything in your power to meet the terms and conditions of your contract, you don’t want all of your hard work to be undone by a duplicitous owner. The mechanic’s lien is the most effective and proven solution for dealing with nonpayment, but only when handled by a Houston construction lien attorney with years of experience fighting for the industry.

Three Factors to Confirm Eligibility

Before you can file a mechanic’s lien, you have to confirm that you are legally allowed to do so. This determination can usually be made by answering three questions, including:

  1. Was the work you performed covered and protected by Texas lien laws?
  2. Did you provide all of the necessary notice requirements prior to filing?
  3. Have you satisfied the mandatory lien filing deadlines?

The first question can be answered by taking a look at the Texas Property Code, which breaks down project participants into three categories: those who furnish labor or materials, those who fabricate special materials, and design professions (engineers, architects, etc.). The answer to the second question depends on your role in a project. General contractors do not have to issue a notice before filing a lien against a piece of non-residential property. However, to file a lien against a piece of residential property, you must issue a disclosure notice and a list of subcontractors to the owner. Subcontractor lien filing requirements are more complex because they include specific rules for residential and non-residential projects as well as uniform rules that cover all projects. In addition to contractors, our Houston construction lien attorneys can assist subcontractors with their mechanic’s lien needs, including issuance of two-month and three-month notices. We can also help you meet all of the necessary deadlines to prevent the loss of your lien rights.

Consult a Houston Construction Lien Attorney

Whenever an owner decides to withhold payment, a Houston construction lien attorney can help you get what is rightfully yours. Whether through the use of a strongly worded demand letter or a perfected lien, our attorneys have years of experience fighting for the rights of contractors. Part of our mission as Houston construction lien attorneys is to ensure that contractors get paid for their hard work, so they can continue to help the construction industry grow and flourish.

If you would like to speak with one of our Houston construction lien attorneys, 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.

Construction contracts are crucial for securing project completion. The details that shape project progression will be decided on with this document. If you’re reading this, you are likely a contractor that is frequently tasked with signing construction contracts. Below, we discuss what contractors should consider before they sign on the dotted line. To ensure every minute detail of your contract is reviewed for accuracy and transparency, contact a Houston construction attorney from Cotney Law. 

Scope of Work 

Before you sign, you must be aware of every aspect of the scope of work, including the expected time frame and prices. Be sure that the contract allows enough time for project completion and unforeseen hurdles that are sure to arise over the course of a project. Double check that the final contract amount is what you agreed to. If the scope of work is an attachment separate from the contract, be sure that the contract mentions this.  

Payment 

The contract should clearly state what you are to be paid and how often. This is crucial for avoiding disputes and ensuring that work continues on a project. Don’t be afraid to negotiate the payment schedule with an owner. Payments do little good if they are received after bills are due. Reviewing your contracts for payment details is especially important in Texas. Texas has prompt payment laws that stipulate when contractors, subcontractors, and suppliers must be paid by. In the event of slow payment, the contract will stipulate who is entitled to prompt payment penalties and remedies.

Dispute Resolution

Construction disputes are an unfortunate reality of the industry. They are made all the more unfortunate by how often they could have been avoided with a well-drafted construction contract. In the event of a dispute, your contract should have a clause pertaining to alternative dispute resolution (ADR) methods, such as mediation and arbitration, that stipulate how conflicts are addressed. 

You must also be on the lookout for language and sections that shift the blame from one party to another, such as indemnity clauses. Failure to account for a clause such as this could result in you being held responsible for another company’s negligence. This would be especially damaging in the event of a construction defect. 

Have a Professional Review Your Contract 

These are just a few of the things you should be considering before you sign. Determining if your contract is worded in your best interest will depend on its details and your specific situation. The only way to guarantee that a construction contract is comprehensive and well-drafted is to have it reviewed by Houston construction attorneys. Having a lawyer review your contract is a minor task that can pay dividends. Mechanic’s liens, stalled projects, and cash flow issues are all problems that can result from a poorly drafted contract. Before you sign, contact the team at Cotney Law to have your contract reviewed by a Houston construction attorney.

If you would like to speak with one of our Houston construction attorneys, 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.

The mechanic’s lien is the most powerful tool that a contractor can wield to obtain payment for services provided. As we’ve covered previously, the State of Texas has some of the most complex lien laws in the nation, often to the detriment of anyone seeking owed payment. However, new Texas laws aim to protect the lien rights of contractors and subcontractors working in the Lone Star State. 

Below, we discuss the changes to Texas Property Code 53.281 that protect those who may be pressured to waive their lien rights before beginning a project. If you are concerned that your lien rights are in jeopardy, contact a Houston construction lien attorney from Cotney Law. 

Changing Texas Law

We previously discussed the two different types of lien waivers: conditional and unconditional lien waivers. Despite their differences, these two lien waivers are essentially invalid in Texas unless payment has been received. However, a contractor can still waive their lien rights before work begins by signing a construction contract that includes a “no lien” clause. Until now, that is. 

Texas Property Code 53.281 stipulates that “Any waiver and release of lien or payment bond claim under this chapter is unenforceable unless a waiver and release is executed and delivered in accordance with this subchapter.” 

Of note, the subchapter states that there must be evidence of payment in the event of conditional release. The only way for a contractor to waive their lien rights is through a conditional or unconditional release, and those are only valid if payment has been received. Bottom line: unless you’ve been paid, you can’t waive your lien rights. 

Possible Exceptions 

As with many aspects of Texas lien law, there are exceptions. The above law only applies to private construction projects. Even then, the above lien waiver laws do not apply to contracts that pertain to residential projects and are “made before labor or materials are provided under the original contract or subcontract.” There are other exceptions that may apply to your situation. For assistance in determining if these laws apply to you, contact a Houston construction lien attorney

Exercising Your Lien Rights 

Retaining your lien rights is one of the most important things you can do as a contractor. You never know when payment disputes may threaten the success of your company. Texas has taken steps to protect the rights of contractors and subcontractors that put their all into projects. But protecting your lien rights is only half the battle. When an owner withholds payment, you must be prepared to exercise your lien rights in order to protect the company and projects you’ve invested in. For assistance with securing payment and filing a mechanic’s lien in Texas, partner with the team of Houston construction lien attorneys from Cotney Law. 

If you would like to speak with one of our Houston construction lien attorneys, 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.

In the State of Texas, contractors must have general liability insurance to perform construction work. Standard policies typically cover personal injury, property damage, negligence, and more, but these policies have limits, and some contractors find themselves in need of expanded coverage to protect their business.

Umbrella insurance can help you protect your business assets by boosting coverage limits across multiple policies, including:

  • General Liability 
  • Commercial Auto

One limitation facing umbrella insurance in Texas is that it doesn’t always include employer’s liability claims. This is because the State of Texas is the only state that doesn’t require employers to have workers’ compensation insurance. For assistance with workers’ compensation claims, consult a Houston contractor attorney from Cotney Law.

General Liability

Project sites are filled with hazards that present a clear risk to workers, bystanders, adjacent property, and more. No matter how many controls you implement to reduce the chance of a construction-related accident occurring, it’s difficult to account for every potential outcome. That is why contractors in Texas are required to have general liability insurance. Severe accidents can lead to costly claims that quickly top-off your limit. When this happens, an umbrella insurance policy can help you bridge the gap and reduce the financial blow your business takes.

Commercial Auto

Contractors that commute back and forth from the project site can insure their vehicle with commercial auto insurance to protect themselves against a variety of claims. Accidents involving automobiles happen all the time and can be very expensive. Your vehicle could be damaged entering or exiting the project site. 

The wear and tear your vehicle takes won’t be “normal” by traditional automobile consumer standards, and the hazards of the project site will pose a constant threat to your vehicle. You can also opt to increase the policy limit for a hired and non-owned auto policy in lieu of commercial auto if you do not own your work vehicles.

For some contractors, an umbrella insurance policy might be the best way to protect business assets while protecting personal assets from having to pay out when your policy has gaps in coverage. Umbrella insurance is sold in one-million dollar increments to protect contractors who are pulling in significant revenue, but the cost of umbrella insurance can be relatively affordable.

Before you change your company’s insurance policy, consult a Houston contractor attorney to ensure that your business is compliant with all state regulations regarding insurance and licensing for contractors in Texas.

If you would like to speak with one of our Houston contractor attorneys, 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.

The cost of litigation is always increasing. Between 2000 and 2008, the average cost of litigation for corporations increased from $66 million to $115 million, an average yearly increase of nine percent. And it’s still climbing today. Shockingly, this increase in litigation expenses isn’t being traced back to the cost of outside legal fees. Instead, it’s our country’s legal system that is driving up the cost of litigation.

In this article, a Houston construction lawyer from Cotney Law will discuss how much major companies in the United States are paying for litigation. If you are in need of construction-related litigation services, our Houston construction lawyers can provide you with aggressive, industry-leading defense to protect your bottom line and help you continue to grow your business.

Litigation Costs Are Higher in the United States

Compared to other major legal systems outside of the United States, our country places an increased financial burden on companies and corporations dealing with litigation. Litigation costs can cost four to nine times more in the United States, which takes a toll on companies. One solution is to invest in a subscription plan that reduces the cost of partnering with a Houston construction lawyer. Another solution is to resolve disputes using mediation or arbitration in lieu of litigation.

Discovery Is Inefficient and Expensive

In the United States, the discovery process turns up roughly one important document for every thousand that are reviewed. This means vast amounts of time and resources are being wasted on a discovery process that is clearly inefficient. Of course, no stone should be left unturned when an attorney is fighting on behalf of their client, but there must be a system in place to manage and streamline this process. Discovery costs for large companies can range from $500,000 to over $2 million on average, but these costs can stretch far beyond that in some cases.

Litigation Costs Companies Billions of Dollars Annually

Companies across the United States are forced to drop billions of dollars collectively each year to stay in business. Litigation costs can cut into profits and stifle business growth. Some attribute litigation to the “cost of doing business,” but if you plan ahead and invest in prevention, you may be able to reduce the amount of time and money you spend on litigation. Our Houston construction lawyers provide contractors with a wide range of legal services to help prevent and manage disputes. In addition to top-notch litigation services, we also offer contract review, bid protest, alternative dispute resolution (ADR), and more.

If you would like to speak with one of our Houston construction lawyers, 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.

The line between a demand letter and extortion can become hazy for contractors who are desperate to secure payment on a project that they have dedicated themselves to. In part one, we discussed what constitutes extortion and the penalties that can be expected for committing it. Below, a Houston contractor attorney will discuss how you can write an effective and persuasive demand letter while avoiding the use of threatening language that can get you in trouble. For assistance with all construction-related legal matters, including drafting demand letters, reviewing contracts, and filing mechanic’s liens, consult our Houston contractor attorneys at Cotney Law. 

Threatening Language to Avoid 

When drafting a demand letter, it is imperative that you check your emotions at the door. If you are faced with the pressures of paying for subcontractors, materials, and your own crew, it’s only natural to become angry when an owner refuses payment, but you must not let that cloud your judgment. 

Your demand letter cannot threaten an owner’s safety, family, friends, or reputation. You cannot threaten repercussions from a government agency, you can only present them with evidence of what you are owed and the deadline for when it is due. As far as threats go, you can only threaten future litigation. 

Writing an Effective Demand Letter Without Resorting to Threatening Language

Remember, your goal is to get paid. Everything included in your demand letter should work towards this outcome. Your demand letter should be typed and appear professional in every regard. It should clearly state the owed amount, the dates it was incurred, and the date it should be paid by. Include invoices and any pertinent documents that backup your claim. 

The most effective demand letters instill in the reader the reality that litigation will occur unless payment is received. Usually, a demand letter with a legal letterhead from a law office is enough to bring an owner to their senses and resolve matters without the need to go to court. 

Have an Attorney Draft Your Demand Letters 

The only way to guarantee that your demand letter is effective and non-threatening is to have it drafted by an experienced attorney. It is simply too easy for firm language to turn threatening, especially when your livelihood is on the line. And, as we discussed in part one, the penalties for committing extortion range from hefty fines to time in prison. Having your demand letter drafted by one of our Houston contractor attorneys is your best chance of securing payment while avoiding the pitfalls that have ensnared other contractors. 

If an owner has withheld payment, don’t allow them to get the upper hand. Partner with the team of attorneys at Cotney Law for legal counsel that will fight to secure your payment with a skillfully crafted demand letter.

If you would like to speak with one of our Houston contractor attorneys, 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.

You may be thinking that the “demand” part of “demand letter” entails a strongly worded argument. But while your demand letter should be clear regarding impending legal action, it should never be threatening in any other way. Even when the other party is in the wrong, contractors can find themselves unintentionally committing a felony if they write a demand letter that is too strongly worded. 

This line between a firm demand letter and extortion isn’t always clear cut. In this two-part article, we will be discussing this distinction in detail. For aid in drafting demand letters and moving forward with subsequent legal action, consult a Houston construction lawyer from Cotney Law. 

What is Considered Extortion? 

Extortion is defined as the practice of obtaining money by threat of violence, damage to property or reputation, or unfavorable government action. Essentially, extortion is theft that threatens future consequences. While the injured party is not placed in immediate danger, an implied threat can target their personal safety, family, property, or reputation. Extortion doesn’t have to be committed in person. Telephone calls, emails, social media messages, and demand letters can be avenues for committing extortion. 

Furthermore, what can be considered extortion is far more nuanced than a threat of violence. In some cases, just accusing someone of a crime in a demand letter can be considered extortion. If you accuse an owner of committing a crime and threaten to embarrass or expose them, you may be committing extortion. 

What Are the Penalties for Committing Extortion in Texas? 

While extortion is illegal all throughout America, the penalties for it vary from state to state. In the State of Texas, the severity of the penalty for extortion depends on the amount stolen. The penalties for committing extortion in Texas are as follows: 

  • Third-degree felony: Between $30,000 and $150,000 stolen. A fine of up to $10,000 and a prison sentence of up to five years. 
  • Second-degree felony: Between $150,000 and $300,000. A fine of up to $10,000 and a prison sentence of up to 20 years. 
  • First-degree felony: Greater than $300,000 stolen. A fine of up to $10,000 and a prison sentence of up to 99 years. 

As evidenced above, going over the top and accidentally committing extortion can be an easy and costly mistake for contractors to make. As we continue this discussion in part two, we will discuss how contractors can avoid threatening language and write an effective demand letter. To ensure that your demand letters are clear, professional, and non-threatening, partner with the team of Houston construction lawyers from Cotney Law.  

If you would like to speak with one of our Houston construction lawyers, 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.