The devil is is in the details

Construction contracts can contain hidden language that will increase your company's risk

Because construction contracts are important to successful roofing projects, you certainly are aware of their major provisions, such as scope of work, contract amount and terms of payment, all of which are critical factors for determining whether a job is worthwhile. However, other less obvious provisions also can enormously affect a project's success, and you should be on the lookout for these hidden provisions.

Personal guarantee

A personal guarantee easily tops the list of provisions in a contract that can have the greatest effect on a signer. The addition of a personal guarantee to an agreement between two companies dramatically changes the dynamic of the contracting parties. Generally speaking, when two companies enter into an agreement, the obligations and liabilities set forth in the agreement apply only to the corporate entities making the agreement. Therefore, in a typical contractual relationship where your company is installing a new roof system for a general contractor, the general contractor may hold your company responsible for any liabilities incurred while performing the work.

For example, if your company delays a project and incurs liquidated damages or damage to another subcontractor's work on the job site, the general contractor likely will be able to turn to your company's insurance carrier to cover the damages. Absent special circumstances, the general contractor will not be able to turn to your company's executives or employees for payment of any liabilities. This ability to shield employees, board officers and other individuals associated with a company from personal liability is the primary benefit of doing business as a corporate entity.