The Inter-Relationship Of Risk Management Provisions In Construction Contracts

One of the primary purposes of a construction contract is to identify, manage and limit risk. Parties to construction contracts are often quick to insert many of the standard risk management clauses, but sometimes fail to give adequate consideration to the inter-relationship between these various clauses, which can lead to unexpected results when problems arise during the job. For example, the relationship between a maximum liability clause and the requirement for a contractor to obtain a performance bond in a stipulated amount is frequently overlooked. The potential result is the amount available under the bond may be far lower than anticipated and thus afford far less protection than expected.