Thursday, April 23, 2009

FINALLY, Some Positive Construction Economics News!

Ok, we all know the construction industry has taken it on the chin for while now, from the balance sheet to the evening news and everywhere in between. Well, the AIA finally gives us some positive news.

After a series of historic lows, the Architecture Billings Index ("ABI") was up more than eight points in March. As a leading economic indicator, the ABI is supposed to reflect the approximate 9-12 month lag time between architecture billings and construction spending. The March ABI reflected a decrease in overall demand for design services, but the score was nonetheless the highest it has been since September 2008. This news should probably be taken with cautious optimism, but any optimism represents an improvement for many builders.

Mixed design practices fared the best, followed by institutional, multi-family residential, and commercial/industrial.

So what is the legal take on this? Increased work equals new contracts. And with new contract formation comes the potential for contractual pitfalls–indemnity clauses, limitations of liability, pay-when-paid provisions, etc. As I’ve discussed in previous articles, many of these provisions are not quite as cut and dry as they would appear. The key is to get things right on the front end in preparing the contracts that govern the relationship (and obligations) of the parties. You negotiate hard for certain terms–be sure they are enforceable. On the flip side, be sure you’re not stuck with responsibilities (and liabilities) you didn’t think you had.

I’ve seen it countless times–the ounce of prevention really does beat the pound of cure.

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