Why Legal Support is crucial for Contractors in today’s Construction Industry

03 October 2023

In South Africa’s construction sector, contractors are often the linchpin, bringing projects from mere drawings to tangible structures. While their expertise lies in the actual construction, constantly pressurised by financial constraints and deadlines, contractors must also navigate through a labyrinth of contractual obligations and risks that extend far beyond bricks and mortar. This makes legal support not just advisable, but crucial for contractors.

Contracts are the cornerstone of any construction project. They set the rules of the game by defining the rights and the obligations of the parties of the parties, outline the scope of work and define payment and completion terms. Each contract is, however, a legal document fraught with complexities. A simple misunderstanding or misinterpretation often arise and lead to costly disputes or even litigation. Simply taking advice on understanding the contractual mechanisms set out in the contract can play a major role in dispute avoidance. It is therefore imperative for contractors to have robust legal support throughout the lifecycle of any project, whether it entails non-litigious support for contract administration, drafting, reviewing and negotiation to mitigate these risks, or litigious support in mediation, adjudication, arbitration or court proceedings.

As cashflow and continuity is the lifeblood of any construction company, constraints such as  budget overruns, late approvals and omissions of work critically hampers the natural flow of progress causing havoc and disruptions to timelines and completion dates. This in turn leads to even more loss and expense which ultimately culminates in a vicious and expensive circle of misfortune for all parties concerned. 

Contractors often realise too late that they should have enforced their contractual entitlements much earlier by notifying and claiming, for example, the appropriate extensions of time and concomitant costs thereto. Unfortunately this leaves contractors time barred and faced with the consequence of having to pay penalties. In most instances contractors choose not to “upset” their employers by choosing to adopt a “wait and see” approach instead of complying with or enforcing their contractual rights and entitlements, ultimately realising too late that all rights and entitlement are lost, but forgetting that when the contract was concluded, all parties accepted its terms and conditions and happily signed the contract.

Contractors also need to adhere to labour laws and employment regulations. These include compliance with minimum wage standards, overtime compensation and crucially, worker safety standards as mandated by laws such as the Occupational Safety and Health Act (OSHA). A legal expert ensures that contractors are not just compliant but also protected against potential liabilities related to workforce management and that the necessary provisions are understood and encapsulated in the contract provisions.

Contractors are also increasingly held accountable for the environmental impact of their projects. Environmental laws govern various aspects, from soil erosion and water degradation to noise and air pollution. Non-compliance is not just a matter of legal repercussions; it can also affect a contractor’s reputation and social license to operate. Legal support helps contractors navigate this complex regulatory landscape, ensuring that projects are conducted responsibly and sustainably.

Insurance law is another area where legal support is vital. Construction projects are susceptible to a multitude of risks, from accidents and delays to property damage. Appropriate insurance coverage can mitigate the financial impact of these unforeseen events. A legal expert can guide contractors in selecting the right types of insurance and guarantees, understanding the nuances of their coverage and assist in claims processes. Construction guarantees (whether it be for payment or performance) form an integral part of construction contracts and it is essential in every instance to properly understand how these contracts are legally interpreted.

Even the most straightforward construction project can involve multiple stakeholders – sub-contractors, clients, architects, engineers, project managers, consultants and regulatory authorities. Each comes with its own set of expectations, deliverables and timelines. Coordinating these disparate elements without a comprehensive legal framework is a recipe for conflict and delays. Legal support is therefore invaluable in establishing transparent contracts and conflict-resolution mechanisms that serve the interests of all parties. 

In an industry as complex and fraught with potential pitfalls as construction, contractors cannot afford to neglect the legal aspects of their projects. From contract formulation to completion and in dispute resolution whether it be mediation, adjudication, arbitration or court proceedings, legal support is essential at every step of the way. 

As South Africa continues its journey of economic development, with construction serving as a pivotal sector, contractors would do well to consider legal support from construction industry specialists, not as an optional extra, but as a fundamental requirement for successful project execution.

By Deonn Fourie | Director

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