Construction Contract Provisions that Lead to the Most Litigation in Colorado

Posted July 13, 2024 in Construction Defect, Construction Law, Contracts, Litigation

Construction contracts are complex agreements that outline the responsibilities, rights, and expectations of the parties involved in a construction project. In Colorado, the specific provisions within these contracts can often lead to disputes and litigation if not carefully drafted and clearly understood. Understanding these contentious areas can help parties draft clearer, more effective contracts and potentially avoid costly legal battles. This blog will discuss the provisions in construction contracts that most commonly lead to litigation under Colorado law and offer tips for mitigating these risks.

1. Scope of Work

Common Issues:

• Ambiguities: Vague or poorly defined scope of work can lead to disagreements over what tasks are included in the project.
• Changes and Modifications: Disputes often arise when changes to the scope of work are not properly documented or agreed upon by all parties.

Mitigation Tips:

• Clearly define the scope of work with detailed descriptions and specifications.
• Include procedures for handling change orders, including how changes are approved and how additional costs or time will be managed.

2. Payment Terms

Common Issues:

• Late Payments: Contractors may face financial strain if payments are delayed or withheld without clear justification.
• Disputed Invoices: Disagreements over the amount or validity of invoices can lead to payment disputes.

Mitigation Tips:

• Specify payment schedules, including milestones for progress payments and final payment.
• Outline procedures for invoicing, approving payments, and resolving payment disputes.

3. Delays and Time Extensions

Common Issues:

• Unforeseen Delays: Disputes often arise over delays caused by factors beyond the control of the contractor or owner, such as weather or supply chain issues.
• Approval of Time Extensions: Contractors and owners may disagree on whether delays warrant an extension of the project timeline.

Mitigation Tips:

• Include a detailed schedule with clear deadlines and milestones.
• Provide for extensions of time due to specific causes, such as force majeure events, and outline the process for requesting and approving extensions, in line with Colorado’s general contract law principles.

4. Quality of Work and Defective Work

Common Issues:

• Standards of Quality: Disagreements over whether the work meets the required quality standards can lead to litigation.
• Responsibility for Defects: Determining who is responsible for correcting defective work can be contentious.

Mitigation Tips:

• Clearly define the standards of quality and reference specific industry standards or guidelines.
• Include provisions for inspecting and accepting work, as well as procedures for addressing and correcting defective work. Colorado law, including CDARA, provides specific procedures for addressing construction defects.

5. Indemnity and Liability

Common Issues:

• Broad Indemnity Clauses: Indemnity clauses that are too broad can lead to disputes over the extent of a party’s liability.
• Insurance & Liability: Disagreements over risk shifting provisions, liability limitations, and insurance can lead to litigation.

Mitigation Tips:

• Draft indemnity clauses that clearly outline the extent and limitations of liability for each party.
• Ensure that limitations of liability, risk shifting, and insurance requirements are clearly specified, including the types and amounts of coverage required. Be aware that C.R.S. § 13-21-111.5 limits the enforceability of certain indemnity agreements in construction contracts.

6. Termination Clauses

Common Issues:

• Grounds for Termination: Disputes can arise over whether the grounds for terminating the contract are valid.
• Termination Procedures: Failure to follow proper termination procedures can lead to litigation.

Mitigation Tips:

• Clearly define the grounds for termination by both the contractor and the owner.
• Outline the procedures for giving notice and handling the transition of work upon termination, in compliance with Colorado contract law.

7. Dispute Resolution

Common Issues:

• Dispute Resolution Mechanisms: Disagreements over the appropriate method for resolving disputes (e.g., mediation, arbitration, litigation) can lead to additional conflict.
• Jurisdiction and Venue: Disputes can arise over the location and legal jurisdiction for resolving disputes.

Mitigation Tips:

• Include clear dispute resolution provisions specifying the preferred method for resolving disputes.
• Define the jurisdiction and venue for any legal proceedings, specifying Colorado courts if applicable. Colorado courts recognize and enforce alternative dispute resolution methods, which should be clearly stated in the contract.

Conclusion

Construction contracts in Colorado are inherently complex, and certain provisions are more likely to lead to litigation if not carefully drafted and clearly understood by all parties involved. By paying close attention to the scope of work, payment terms, delays and time extensions, quality of work, indemnity and liability, termination clauses, and dispute resolution mechanisms, parties can reduce the likelihood of disputes and litigation.

For parties involved in construction projects in Colorado, consulting with experienced legal professionals when drafting and reviewing contracts is essential. An attorney can help ensure that contract provisions are clear, comprehensive, and legally sound, providing a solid foundation for a successful project and minimizing the risk of costly legal battles.

CONTACT A CONSTRUCTION ATTORNEY IN COLORADO TODAY

For further information, reach out to Volpe Law today to request a consultation. We can be contacted through our online form, or you call us directly at 720-770-3457. Our team of dedicated attorneys are here to listen and identify the best legal options for you.

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DISCLAIMER

The information contained on this website is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter. Laws frequently change and therefore this content is not necessarily up to date, nor comprehensive. Contact us or another attorney with any legal questions specific to your matter. You may request a consultation by completing our consultation request form.