Contract Law in a Retail Environment

By Gerard W. Ittig | Oct 15, 2003
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Construction contract law consists of a body of court decisions, regulations, statutes and of the contract itself, sometimes referred to as the law between the parties. This area of the law is complex and is constantly changing. The irony is that contractors carry the financial burden of knowing the law, not the lawyers. When you sign an agreement with 50 pages of terms and conditions, you are bound by them, even though you have no earthly idea what they mean.

Given this circumstance, it is important for contractors to understand the contract they have signed, especially the clauses discussed below.

The parameters

First, you need to know what the contract requires of your administration, including:

• What records need to be kept

• What written notices need to be given

• When you need to respond to changes

• What your scheduling obligations are

One pass through your contract terms should be enough to catch most if not all of these issues.

Second, you need to find the traps:

• How broad is the indemnity clause?

• Is there a “no damages for delay” provision and/or a “consequential damages” provision?

• Is there a “pay when paid” clause?

• What does the “force majeure” clause cover?

• Are there choice of law or forum selection clauses?

Of course, every contract contains its own variations on a theme. However, if you have researched the points just noted, you are ready for the next phase.

Retail contracts

Owners want their jobs done on time; retail is no exception. What generally is different is the reduced emphasis on construction quality. That is not to say that retail owners do not want a job built to specifications, but the specifications tend not to be gold plated. Time is of the essence.

The significance of the opening date is tied to the owner’s ordering merchandise, hiring and training employees, paying fees to the shopping mall management, etc. If you wait until the project is over before asking for extras or time extensions, you will have a fight.

Also look to see if the contract allows the owner to take “early occupancy.” In one case, a major retailer started moving in its cabinets, carpets and goods, while electrical and systems work remained far from complete. The resultant disruption was expensive, but the “early occupancy” language gave the owner an arguable defense to the contractors’ claims.

What is of highest importance in retail are the finishes: flooring, lighting, paneling, etc., and, given recent events, security devices.

Retail stores get sued over an array of complaints. Where they can, the stores will turn to the systems contractor under the indemnity agreement for not providing adequate (or for providing faulty) security.

Another major problem is scheduling. The systems installation is last on the schedule. Accordingly, if the general construction is delayed, the systems contractor can bear the weight of the owner’s annoyance, often translated into liquidated damages.

You need to keep up with the schedule, make periodic visits during construction and notify the owner of anything that could affect the cost or time of completion.

The master agreement

Chain retail owners will often prequalify contractors for a variety of future work. For the owner, the benefits are better prices for bundling a number of jobs, better relations with the contractors who will now have a vested interest in maintaining good relations and increased productivity from reduction in the learning curve of understanding the owner’s standards.

For these and other reasons, the owner may have a standard form of terms and conditions. The contractor is asked to sign off on this form, which is then incorporated by reference into future purchase orders.

A good idea? It does save paper, but the procedure may also induce the contractor to file the form and never read it again.

The master forms I have seen are incomplete in scope and in concept. The reason is simple: The owner does not know what he or she wants on any particular project, but does know that some clauses should always be present. Napoleon purportedly said, “Oh, that my enemy should write a book.” Well, here you have the book—the owner’s most cherished terms and conditions. Read them early and often.

It is highly unlikely that you will be given access to the entire store for your work. Especially with large projects, your work will be phased in as others are completed or nearly completed in other zones.

Your installation, however, is tied into general electrical rough-in and therefore is storewide. While individual devices may be zone specific, your work necessarily must be coordinated with all other finishing trades. Coordination has to be the responsibility of the owner or general contractor. If you see any clauses which purport to delete that responsibility, delete the clause.

Projects are getting bigger. Monster malls and stores require a different approach from outfitting a nightclub or even a hotel. Particularly for systems contractors, attention must be given to administering the contract as much as building the project.

ITTIG, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at 202.387.5508, [email protected] or




About The Author

ITTIG, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at 202.387.5508, [email protected] and





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