Dr. Adrienne B. Haynes, Esq.

As the season turns from winter to spring, we can hear more residential, commercial, and industrial construction. For construction contractors, this is a great time to review policies, procedures, and relationship agreements.  

Construction law is a complex body of law that applies to almost every business decision a construction firm must make in day to day operations and in the development of their strategic plan. Being aware of these legal rights and obligations allows an owner to make more confident decisions, protect rights, minimize risk, and save money. In considering essential construction law protections, we encourage our clients at SEED Law to prioritize the following objectives:

Build a Firm Foundation

Risk and liability are inherent in the construction industry. Make the move from contractor to CEO by making an informed choice of entity decision and understanding tax obligations. Next, obtain and maintain the appropriate licenses and certifications to make sure the business is up to date on industry trends, safety, and any license and code requirements. If you qualify for a business certification, it may be a strategic way to leverage competitive advantages.

An ongoing task for building a firm foundation includes setting up good habits and processes. It takes time and intention to document business workflows such as employee and subcontractor onboarding, estimating, billing, and job site documentation. Using technology can help expedite this process and allow for easy updates in the future. 

Paper the Deal

Construction contract and relationship terms can show up in oral agreements, letters of intent, purchase orders, subcontractor agreements, change orders, and more.

For each relationship, ask yourself:

  • Are the expectations of the parties clearly articulated and reasonably integrated?
  • Are the rights and obligations of the parties clearly expressed?
  • Are the risks and rewards fairly allocated?
  • Is each source of risk allocated to the party in the best position to control or otherwise manage that risk?
  • Is insurance available to support any common law or contractual indemnity obligation?
  • Do mechanisms exist to accommodate changes during the course of the project?
  • How much time has been allocated for each scope of work? When is the project scheduled to begin and end?
  • What is the payment schedule? How much retainage will be held?
  • Are prompt payment laws incorporated into the writing?
  • Are all of the mutual understanding of the parties confirmed in writing?

Taking the time to document each of the construction company’s relationships will protect your profits and prevent headaches in the future.

The next SEED Law workshop, Recruiting and Hiring Considerations, will be hosted virtually on Wednesday, May 6th from 12-1 pm. Building a dream team in your construction business requires a multitude of strategies to build a competitive employment package, including policies, procedures, and legal compliance. This session will provide owners with a legal perspective on ten considerations to plan for when recruiting, hiring, and firing. To register for free and see the full list of virtual and in person events through the end of the year, please visit https://showmenetwork.org/calendar/

Mind the Money

Getting paid is essential in keeping any business in operation and construction is historically a slow paying industry. Knowing key terms and provisions around change orders, payment schedules and consequences for late payment or failure to pay, mechanic’s liens, and warranties can help keep a company’s cash flow unencumbered and minimize surprises. 

This article is only an overview of construction law considerations and is not intended to cover every legal right or obligation, consideration, exception, or restriction. These documentations and decisions are complex and should be well researched and discussed with a legal professional before being made.

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Thanks for reading!

My name is Dr. Adrienne B. Haynes and I’m an entrepreneur and attorney based here in Kansas City. My law firm, SEED Law, has been partnering with business owners across the Northeast and the city for almost 11 years. I loved living in the Northeast and I was fortunate to serve as an Entrepreneur in Residence for the Kauffman Foundation in 2017. Together with a dedicated group of Northeast residents and leaders, we explored a community designed innovation district pilot program. I was able to present this work during a TEDxUMKC Talk on Community Innovation Design in 2020.

Over the next few weeks, I’ll be contributing articles and resources on small business and estate planning legal considerations. If you have questions, please reach out directly at adrienne@seed.legal.