Contracts
Contract Drafting and Review
The Hughes Firm, LLC assists construction companies in contract drafting and review. Although many companies use common forms from the industry such as those from The American Institute of Architects, custom forms are often better for a contractor’s own business model. We help clients draft such agreements, as well as modify proposed agreements from other parties. We handle the following types of agreements:
- Prime Contracts
- Subcontracts
- Material Purchase Orders
- Leases
- Service Agreements
- Joint Venture Agreements
- Engineering, Procurement, & Construction Agreements
- Design Agreements
- And more
Material Terms
Although an attorney can be very helpful in preparing a contract, a client’s preparation is key, including determining the following:
- Price with itemization if appropriate
- Scope of work with detail
- Timing
- Other business concerns
Those material terms are required before a contract can be finalized. However, there are other substantial terms that must be considered in the construction industry including the following:
- Change order process including whether price escalations are permitted
- Indemnification terms
- Insurance/bonds
- Details of the payment application process
- Retainage
- Default provisions for what happens when a party fails to perform
- Force majeure for events out of a party’s control
- Delay provisions such as shifted liquidated damages to the at fault party
- Warranty clauses
- And more
These provisions should be drafted fairly, so that the parties are prepared for mistakes, failures, and accidents. When something goes wrong, it’s best to have a fair agreement beforehand. The Hughes Firm, LLC can help with that.
Illinois Contractor Prompt Payment Act
One example of issues that arise in Illinois for construction contract drafting comes from the Illinois Contractor Prompt Payment Act, 815 ILCS 603/10, which requires the following
- Payment within 15 days after work has been approved.
- Payment application approval or denial within 25 days of receipt by the owner
- Payment to be withheld for the portion of the work that is not correct.
- Interest at a rate of 10% for untimely payments
- Contractors may suspend performance after providing 7 days notice of nonpayment
The full language of the Illinois Contractor Prompt Payment Act can be viewed at: https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2941&ChapterID=67
Illinois 10% Retainage Law
Illinois Contractor Prompt Payment Act also requires construction contracts to only “provide for the withholding of retainage of up to 10% of any payment made prior to the completion of 50% of the contract. When a contract is 50% complete, retainage withheld shall be reduced so that no more than 5% is held. After the contract is 50% complete, no more than 5% of the amount of any subsequent payments made under the contract may be held as retainage.” 815 ILCS 603/20.
Illinois Anti-Indemnity Law
Illinois’ anti-indemnity law is called the Construction Contract Indemnification for Negligence Act and can be found at 740 ILCS 35/1. In short, it states that construction contracts cannot require a party to indemnify someone else for their own negligence. It states that "every covenant, promise or agreement to indemnify or hold harmless another person from that person's own negligence is void as against public policy and wholly unenforceable." See https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2026&ChapterID=57.
This law is subject to substantial litigation and interpretation, but essentially voids almost all construction indemnity clauses in Illinois. See Herington v. J.S. Alberici Const. Co., 266 Ill. App. 3d 489, 494 (1994). Note that it does not apply to insurance clauses. 740 ILCS 35/3. Illinois contractors should therefore take extra precaution when drafting insurance procurement provisions and obtaining certificates of insurance.