Legal Considerations for Construction Managers

Legal Considerations for Construction Managers

A lawsuit or a contract dispute can derail a construction project in moments. But, with proper construction management oversight and guidance from experienced construction managers, companies can effectively mitigate many of the risks they face beforehand. Without the worry of legal battles, that could help companies see better relationship building, improved reputation, and lower costs per project.

According to a study from Arcadis, higher demands from clients, bigger expectations than ever, and increasing supply chain issues have led to a dramatic increase in disputes within construction companies. From 2021 to 2022, for example, the value of such disputes grew by 42%.

Construction management doesn’t just involve managing the day-to-day operations of a project but also includes careful oversight of legal matters. By understanding the legal aspects of construction management, including areas such as contracts, permits, zoning regulations, and liability issues, companies can mitigate the risks that impact project delivery.

Contract Negotiations and Review

At the core of any mitigation effort for construction management teams is ensuring contracts are clear, well-defined, and highly detailed. Among some of the most common problems cited in a Construction Dive survey included design mistakes and changes in scope, which may be possible to reduce the risk of with a well-designed contract.

  • Good project documentation must be in place from the start.
  • Ensure that all negotiations are written and clearly communicated.
  • Ask questions and ensure full due diligence is completed.

Compliance with Building Codes

A core concern in many areas is ensuring building codes are accurately understood, and construction applications match those expectations. Mistakes here often are not found until the problems are much more complicated to repair.

Construction management teams must work aggressively, then, to ensure they know what compliance rules apply at the city level not just in regards to OSHA and state inspections. Working closely with the building department within a community can help with this.

Permit Acquisition Process

The permitting acquisition process differs from one community to the next, often making it a challenge for construction management teams to know what steps to take. However, a focus on providing a high level of care for local processes can alleviate delays.

The local building department and utility providers should be contacted as early in the process as possible to ensure that you have an understanding of how permitting works when it is necessary and at what stage you must submit an application to ensure your project remains on schedule. Delays are often one of the most costly implications for construction projects, both due to losses in the productivity of the team and in building a strong relationship for future projects. Permit acquisition planning helps alleviate this.

Dispute Resolution Mechanisms

Construction management oversight on any project aims to eliminate the risk of disputes. Yet, it may be impossible to actually do that. Instead, focus on having a dispute resolution process in place that provides clarity on the steps that any party can take to resolve a misunderstanding, problem, or other concern.

  • Address within the contract who can file a dispute in the case.
  • Outline the specific steps to bringing any mistakes or claims to attention, including when and who is responsible.
  • Provide specific steps on what is done when a resolution is not easily obtained, such as working through an arbitration process.
  • Discuss steps to rectify the outcome.
  • Ensure proper insurance protection is in place for any legal disputes related to liability or negligence matters.

Insurance Coverage Requirements

Insurance is not an optional investment but a critical tool in nearly every type of construction project. It works to mitigate losses that can occur due to unexpected and accidental incidents. Most importantly, insurance, including bonds, can help construction management teams move the company forward without financial limitations if a large-scale incident happens.

All construction companies should consider the importance of insurance coverage, including:

  • Liability insurance
  • Errors and omissions insurance
  • Commercial auto insurance
  • Professional liability insurance
  • Contractor license bonds
  • Builders risk insurance


Being well-versed in legal considerations helps construction managers navigate potential pitfalls and protect their interests. As a core component of construction management, legal oversight helps minimize risks and ensures a better working relationship with your clients. They know what to expect, you know what to expect, and there is a clear process for resolving problems if they arise.

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