A Construction & Build-Out Agreement governs property improvements or fit-outs between owner and contractor. This playbook discusses scheduling, change order processes, and liability for defects.
Why This Matters: Vague default provisions can delay remedies or lead to litigation. Clear terms enable quick resolution of breaches and protect business continuity.
Negotiation strategy
If you're the Tenant:
Ensure that default events are clearly defined and include specific remedies. Negotiate for shorter cure periods to expedite resolution.
If you're the Contractor:
Advocate for reasonable cure periods and balanced termination rights. Ensure that default events are not overly broad or punitive.
Essential elements
1
Default Events
Specific triggers for default.
2
Cure Periods
Time allowed to remedy defaults.
3
Termination Rights
Options available upon breach.
Action framework
ACCEPT
Propose edits when default events are too broad or cure periods are unrealistic.
EDIT
Reject clauses that lack mutual termination rights or are overly punitive.
ADD
Add language to specify jurisdictional compliance or additional remedies.
PRO TIP
Always align default and termination clauses with industry standards and specific business needs.
Example clauses
FAVORABLE
Balanced Default Clause
"In the event of a default, the non-breaching party shall provide written notice to the breaching party, who shall have 30 days to cure the default. If the default is not cured within this period, the non-breaching party may terminate the agreement and seek specific performance or damages."
NEUTRAL
Standard Termination Clause
"Upon a material breach, the non-breaching party may terminate this agreement after providing 30 days' notice, during which the breaching party may attempt to cure the breach."
UNFAVORABLE
One-Sided Termination Rights
"The non-breaching party may terminate the agreement immediately upon any breach, without notice or opportunity to cure."
Fallbacks
High-Risk Projects
In high-risk projects, consider shorter cure periods and more stringent default triggers to mitigate potential losses.
Long-Term Leases
For long-term leases, ensure that termination rights are balanced to protect both parties' interests over the duration of the contract.
Cross-Border Transactions
In cross-border transactions, include jurisdiction-specific requirements to address legal variations and ensure enforceability.
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