Looking to minimize litigation? Let’s also protect construction workers while we’re at it.
Construction companies are rapidly adopting new technologies like smart contracts to manage projects, automate payments, and track safety compliance. The problem is…
Many builders don’t know how smart contracts and other tech tools can provide legal protection.
With nearly 1 in 5 workplace deaths occurring in construction each year in the U.S., companies have an obligation to find better ways of tracking safety and managing contracts. Failure to do so can cost companies their livelihoods in legal fees and liability settlements.
That’s where smart contracts come in. Using smart contracts and other technology paired with sound legal advice from your construction accident attorney new york can help construction companies keep workers safe and reduce the chances of litigation.
What You’ll Learn…
- What Are Smart Contracts in Construction?
- Automated Agreements Provide Legal Benefits
- Smart Contracts Promote Safety Compliance
- Using Smart Contracts To Avoid Disputes
- How to Implement Smart Contracts
What Are Smart Contracts in Construction?
Smart contracts are digital contracts that automate execution when preset terms and conditions have been met.
Essentially they’re contracts that automatically fulfill themselves. Conditions are programmed into software running on a blockchain. Payment is released once work is completed. No paperwork, billing, or back and forth about whether or not the work was actually done.
Simple, right?
For contractors and builders, smart contracts solve many of construction’s biggest pain points:
- Payment delays: Payment often takes months after project completion
- Missing paperwork: Poor documentation creates liability risks
- Costly disputes: Legal fees from contract disputes eat into profits
Too many contractors have been burned by these issues. Smart contracts provide a solution that enforces agreements and creates an immutable record of all transactions.
The Legal Benefits of Automated Agreements
Now here’s the really cool part…
Smart contracts provide a near-flawless paper trail that can protect your company from liability.
When conditions are met, every action is recorded on the blockchain including job start date, inspection dates, and payment information. Once uploaded, that data cannot be altered or removed.
That’s important because:
- Inspections are timestamped and cannot be denied
- Compliance records are completely transparent
- All contract terms are defined and accessible to all parties
Construction site accidents open the door for litigation on multiple fronts. Subcontractors, material suppliers, employees, and property owners can all make claims against companies.
Smart contracts help provide evidence that work was performed safely and in compliance with contract terms. Built-in safety requirements enforce safe practices and create a timestamped record of compliance.
Accidents happen. Contractors who have done their due diligence and kept solid records will always be in a better position to defend themselves.
Oh, and one more thing…
Construction disputes are wildly expensive. According to industry reports, North American disputes averaged $43 million per case. Avoiding disputes altogether is one of the many benefits of smart contracts.
How Smart Contracts Improve Safety Compliance
Hold onto your hard hats, this will blow your mind…
Smart contracts can actually reduce the likelihood of construction accidents.
Let me explain. Builders can program smart contracts to require proof of safety compliance before payment is released. If an inspector didn’t sign off on the work or safety equipment wasn’t available on site, the contract won’t allow payment to be issued.
Here are some of the safety benefits of smart contracts:
- Verification that employees completed safety training
- Documentation that equipment was inspected
- Timestamped records that hazards were assessed
- Proof of OSHA compliance was met on a daily basis
We all know construction is dangerous. Falls, being struck by an object, and equipment accidents are the leading causes of injury. Requiring safety compliance before payment eliminates incentives to cut corners.
I’m not suggesting these technologies replace people. Construction companies are still responsible for training supervisors and enforcing safety protocols.
What smart contracts do is add a layer of protection that incentivizes safety and creates a record that those standards were upheld.
Protecting Your Company From Disputes
If you had to guess, what’s the best way to avoid construction disputes?
Documentation. And prevention.
That’s why smart contracts work so well. They incentivize all parties to fulfill their duties. Contractors know they won’t get paid until the work is complete. Property owners know work will happen on time because payment is automated.
Not only do smart contracts prevent disputes, they create ironclad documentation. More and more judges are accepting blockchain records as legal documentation. That means smart contracts create a documented timeline of events that can’t be disputed.
Construction companies should document:
- Safety training records and certifications
- Equipment maintenance and inspection histories
- Daily site condition reports and hazard identifications
- Subcontractor agreements and compliance confirmations
Every construction accident case is different. Subcontractors can be sued by property owners. Property owners can be found liable by injured employees. Companies can be fined by OSHA for failing to maintain a safe worksite.
No one solution will protect companies from every eventuality. But smart contracts provide much better documentation of a company’s efforts to prevent accidents than traditional methods.
Getting Started With Smart Contracts
You’re sold. Smart contracts are the way of the future. Great. Now what do you do?
Start small. Many contractors start using smart contracts for basic payment milestones. As the company becomes comfortable with smart contracts, they begin to integrate more complex conditions.
Here’s how to get started:
- Pick a platform. There are a handful of different platforms offering construction-specific smart contract templates.
- Define conditions. Companies should work with legal counsel to ensure contracts are adapted for smart contract integration.
- Train employees. From project managers to on-site foremen, all employees should be familiar with how smart contracts work for your company.
- Connect with other software. Ideally smart contracts will connect to your existing project management software.
New uses for smart contracts are being discovered all the time. Some construction firms are leveraging smart contracts to manage supply chain compliance. Others connect smart contracts to building information modeling software.
Like I said earlier…
Smart contracts aren’t meant to replace traditional legal services, safeguards, and documentation. Technology is simply another tool that construction companies can use to protect their workers, projects, and liability.
Bringing It All Together
Construction companies have an obligation to take reasonable steps to prevent worker injury. Failing to provide a safe work environment can cost companies dearly in legal fees and liability payouts.
Until recently technology hasn’t played a huge role in how construction companies monitor safety compliance. That’s changing as builders discover benefits of smart contracts extend well beyond automation.
Built-in incentives for compliance, transparent documentation, and simplicity are just a few ways smart contracts protect construction companies and workers.
Technology won’t prevent every accident or dispute. But smart contracts and other technologies can provide your company another layer of protection. Don’t wait for an accident or dispute to learn about smart contracts.