Short Construction Contracts Offer Advantages and Risks

AIA Contract Documents

It’s tempting to want to use a short construction contract. After all, there are significant advantages that make short contracts appealing.

Short contracts tend to be easier to understand, which can reduce the chances of misinterpretation or confusion. They also streamline the contract negotiation process by requiring less time for review, revision and approval. Perhaps most importantly, short contracts come with the benefit that they don’t intimidate potential clients. Their simplicity eases the concerns of potential clients who are afraid to enter a complicated-looking contract with legal terms they might not understand.

While there are advantages to a short construction contract, using one is not a decision to take lightly. Risk lurks around the corner of every abbreviated sentence and in every paragraph and page left out. In most scenarios, the risk of using an abbreviated contract cannot be outweighed by its perceived efficiencies.

Here are just a few reasons to look skeptically at using a short contract on your next construction project.

Inadequate coverage. Short contracts may not address all project-specific considerations comprehensively. They may lack detailed provisions for important aspects such as dispute resolution, change orders, construction change directives, payment procedures, submittals, project closeout and unknown site conditions. This can lead to ambiguity or gaps in contractual coverage.

Increased risk. Short construction contracts may not provide sufficient protection for both parties. Important contractual safeguards and risk mitigation measures may be omitted or insufficiently addressed, potentially exposing the parties to increased risks and disputes.

Limited flexibility. While short contracts can offer flexibility in some cases, they may not be suitable for larger or more complex projects. These projects often require more comprehensive and detailed contracts to address the specific requirements, technicalities, and risks involved. For example, some short construction contracts only allow the contractor to be paid on a stipulated sum basis.

Difficulty in change management. While short contracts can offer flexibility in some cases, they may not be suitable for larger or more complex projects. These projects often require more comprehensive and detailed contracts to address change orders, construction change directives and unknown conditions.

So, should you use a short construction contract?  The answer, of course, is that it depends. If you have a small, simple project for a client with whom you have a good working relationship, then a short contract might be appropriate. However, if you have large, complex project, or even a small project where you perceive there to be unknown factors or significant risks, the best route is to opt for a more robust agreement.

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