One-Sided Agreements: Unforeseen Consequences

The pursuit of risk mitigation in complex construction projects often leads to contracts heavily weighted in favor of one party. While seemingly prudent for the party securing the favorable terms, a growing body of legal and industry analysis suggests that such one-sided contracts can ultimately increase costs, create new risks, and hinder successful project completion. A webinar scheduled for February 24, 2026, focusing on Progressive Design-Build, will address these concerns.

The Allure and Illusion of Risk Transfer

Construction projects are inherently complex, involving numerous stakeholders – owners, architects, engineers, contractors, subcontractors, consultants, vendors, government officials, sureties, and insurers – alongside unpredictable factors like site conditions, supply chain disruptions, and even unforeseen events. Each party naturally seeks to minimize its own exposure to risk. A common strategy is to draft contracts that shift as much risk as possible onto other parties. However, experts are increasingly questioning whether this approach is truly effective.

According to William Underwood, a partner at Jones Walker LLP, simply attempting to push all risk onto one side can have unintended consequences and create risks that otherwise might not exist. This suggests that a more balanced allocation of risk, achieved through equitable contract clauses, can lead to more predictable and successful outcomes.

Examples of One-Sided Contract Clauses

Several common clauses are frequently cited as examples of one-sidedness. These include provisions that offer no relief for other contractor/owner-caused delays, no relief for force majeure events, and no relief for unforeseen site conditions. Perhaps most significantly, broad form indemnification clauses – requiring one party to assume liability for the actions of others – are often identified as particularly problematic. These clauses can expose a party to liabilities far beyond their control, potentially jeopardizing their financial stability.

Enforceability and the Limits of Fairness

Despite the potential for unfairness, simply signing a one-sided contract does not automatically render it unenforceable. In New Jersey, courts generally uphold contracts as written unless they violate specific legal principles such as unconscionability, duress, fraud, or public policy. This means that even a demonstrably unfavorable agreement will likely be enforced, particularly when entered into by experienced businesses. The burden of proof rests on the party seeking to avoid enforcement, and they must demonstrate not only that the contract is lopsided but also substantively or procedurally unconscionable to a legally significant degree.

This reality underscores the importance of thorough contract evaluation before signing. Once a contract is executed, the focus shifts to enforcement, not fairness. A party entering into a one-sided contract often loses critical leverage in future disputes.

The High Bar of Unconscionability

New Jersey courts recognize the doctrine of unconscionability, but apply it cautiously. To successfully argue unconscionability, a party must demonstrate both procedural unconscionability – unfairness in the contract’s formation, such as deception or unequal bargaining power – and substantive unconscionability – terms so harsh or oppressive as to shock the conscience. Meeting both criteria is a significant challenge.

Unilateral Contracts: A Specific Type of One-Sided Agreement

The concept of a one-sided contract is closely related to that of a unilateral contract. A unilateral contract is formed when an offer can only be accepted by completing a specific action. Payment is made only upon completion of that action, creating a one-sided promise. These contracts are useful for incentivizing specific behaviors without requiring reciprocal commitments. However, like other one-sided agreements, the terms must be clear and specific enough that both parties understand their rights and contractual obligations.

Implications for Businesses

The increasing scrutiny of one-sided contracts has significant implications for businesses involved in construction and other complex projects. A proactive approach to contract negotiation, focusing on equitable risk allocation, is crucial. This includes carefully reviewing clauses related to delays, unforeseen circumstances, and indemnification.

While the desire to minimize risk is understandable, a purely self-serving contractual approach can backfire. By fostering a more collaborative and balanced framework, businesses can reduce the potential for disputes, improve project outcomes, and ultimately protect their long-term interests. The upcoming webinar on Progressive Design-Build may offer insights into alternative contracting approaches that prioritize risk sharing and mutual benefit.