Properties Magazine January 2013 : Page 36

LEGAL PERSPECTIVES Navigating property laws & regulations When Construction Projects Go Bad: Options for  Terminating a Construction Contract W DAVID LINDNER hen a property owner enters into a commercial construction contract with a contractor, both parties typically assume that the project will be commenced and completed as planned. Unfortunately, things do not always go as planned. Any number of unanticipated events can stop a project dead in its tracks, such as the loss of financing, labor or materi-als shortages, or natural disaster. While it is normal to be optimistic about a project at the start, it is also prudent to think through what might happen if the construction contract needs to be terminated prior to completion of the project, and draft the contract accordingly. By properly addressing ter-mination rights in the construction contract, the parties can minimize and allocate the risks of early termination. The first thing the owner and contrac-tor must understand is that there are two types of termination. Termination “for cause” can occur when a party breaches the construction contract. For example, the owner may have a right to terminate for cause when the contractor materially deviates from the plans and specifica-tions, and the contractor may have a right to terminate when the owner fails to make payment as required. Contracts usually provide for a “cure period” during which a party has a specified time to remedy the alleged breach. If the party fails to cure the breach within the time specified, the other party then has the right to terminate, usually by giving writ-ten notice. When an owner terminates for cause, the contract documents often permit the owner to hire a replace-ment contractor, with the terminated contractor being responsible for any difference in cost between the origi-nal contract amount and the cost necessary to complete the project, together with any damages incurred by the owner as a result of the breach. If the contractor terminates due to the owner’s failure to pay or for other causes specified in the contract, it can typically recover payment for the work We would be proud to be part of your team on your next construction project C ontainer S erviCe , i nC . “The Leader in Container Service” FBE, CSB & EDGE CERTIFIED YOUR CONSTRUCTION SPECIALISTS GREEN & LEED PROJECTS 2, 4, 6, 8 -YARD FRONT LOAD CONTAINERS 10, 20, 30, 40-YARD ROLLOFF CONTAINERS Properties | January 2013 (216) 36 441-4422 WWW.PETEANDPETEINC.COM

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