Construction contracts, because of the nature of the undertakings, the number of parties, and the layered involvement of specialty contractors at various tiers, are complicated and often attract complex and expensive litigation. To deal with this dynamic, construction contracts often contain risk shifting devices that are intended to transfer the potential liability for particular risks that affect the various participants.
Early in project development, each party should thoroughly review the various contracts and perform a risk assessment to manage the potential risks and ensure that the contracts provide for the protections intended. In doing so, parties should be mindful of the roles that they each play in the design and construction, and their potential liability for the damages caused by their conduct and the conduct of other project participants. All parties need to consider the particular objective of the contract, the potential risks faced, how those risks should be allocated, whether applicable law will allow the desired allocation and the extent to which indemnity protection or insurance can be used to help achieve that allocation.
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