Modular construction is revolutionizing the construction industry, tackling labor shortages, sustainability goals and supply-chain challenges, with the global market for modular and prefabricated construction projected to reach over $200 billion by 2030. While residential builders have embraced modular’s speed and affordability, the greatest risks—and opportunities—are emerging in the industrial sector, where project scale and complexity demand new legal strategies.
In 2023, Chad Theriot explored industrial and infrastructure applications of modular construction, addressing risks like offsite fabrication and integration complexities in his article, “The Rise of Modular Construction—Impacts for Consideration.” Since that time, modular construction has continued to experience significant advancements and has been increasingly adopted by contractors across a broad spectrum of industrial and commercial projects. As modular construction continues to reshape the industrial landscape, contractors and owners alike must be mindful of the legal implications associated with its use, specifically as it relates to liability and risk allocation, regulatory compliance, quality control and upstream factors such as transportation and intellectual property concerns.
Industrial Applications: High Stakes and Evolving Risks
Standard forms from ConsensusDocs and the American Institute of Architects, while foundational, could be enhanced with provisions tailored for industrial modular projects. Unique challenges often arise in these projects, such as offsite inspections, final assembly complexities, industrial cleaning standards, supply-chain disruptions and hybrid goods-services transactions. Innovations in modular construction, such as the use of 3D printing in controlled manufacturing environments, boost efficiency and can cut waste by up to 90%, but introduce intellectual property concerns—a risk less common in residential builds. Consequently, the use of modular construction methods in industrial projects carries elevated stakes and potential higher-dollar disputes compared to residential applications.
For example, the utilization of megastructure modules during the construction of Dallas Fort Worth Airport’s Terminal C highlights how modular methods enabled scalability but required meticulous risk allocation considerations to address logistical complexities. Similarly, the $1.4 billion expansion at Hartsfield-Jackson Atlanta International Airport blends modular and traditional stick-built methods, showcasing modular’s growing prevalence in high-profile infrastructure while also demonstrating the need for both offsite and onsite inspections in addition to coordination across multiple trades to confirm the proper integration of the modular and stick-built methods. These examples illustrate modular’s transformative potential in industrial settings, yet underscore the need for contracts that address its distinct complexities.
Trends, Challenges and Future Events
As modular construction gains traction, the industry must ensure contracts address its unique risks, from offsite fabrication to logistical complexities. Engineering News Record’s 2025 reporting, including a new International Code Council modular standard, reflects modular’s expanding role in industrial and commercial projects. The Modular Building Institute also highlights growth in multifamily and commercial sectors, fueled by automation and sustainable materials, aligning with both residential and industrial goals.
Yet, challenges like supply-chain volatility and labor shortages persist across the industry, as noted in the Association of General Contractor’s 2025 Outlook, with industrial projects facing additional hurdles in federal compliance. Upcoming events, such as the 2026 World of Modular (April 20–23, 2026; Las Vegas, Nevada) and Advancing Prefabrication 2026 (February 2–5, 2026; Dallas, Texas), will bring interested stakeholders to explore AI integration, global standards and cross-sector solutions to address these shared challenges.
Advancing Contracts to Meet Modular’s Industrial Challenges
The AIA’s April 2025 Volumetric Modular Construction documents, including A181-2025 Standard Form and A281-2025 General Conditions, mark significant progress by bringing some clarity to offsite responsibilities, warranties and integration risks, offering valuable support for industrial projects. Additionally, ConsensusDocs’ 753 and 253 forms continue to provide a strong foundation for prefabricated projects. However, opportunities remain to further tailor and customize contractual provisions for industrial modular complexities such as multijurisdictional compliance and logistical liabilities. For instance, ENR’s Jan. 16, 2025 article discussing the transportation of a 2,800-ton modular furnace illustrates the need for precise contract terms to manage transportation risks.
Recent regulatory and legal developments further underscore these gaps. The U.S. Department of Housing and Urban Development delayed its updated Manufactured Home Construction and Safety Standards to Sep. 15, 2025, which created uncertainty for modular projects that intersected with manufactured housing regulations, particularly in defining compliance for off-site components used in industrial settings. More specifically, as explained by WoodWorks in its “Expert Tips” articles addressing some of the issues associated with offsite inspections, many states allow for the use of third-party inspection agencies such as ICC NTA to conduct offsite inspections; however, this can vary greatly depending on the jurisdiction in which the project is located. Similarly, the 2025 case Turan v. Union Modular Homes LLC in New York highlighted disputes over payment and defect responsibilities in modular installations, emphasizing the need for clear contractual terms to address liability allocation and quality control across jurisdictions.
These developments reinforce the importance of customized clauses—covering transport damage, jurisdictional compliance and defect warranties—to align standard agreements with modular’s unique demands in industrial contexts. Some of the relevant contractual provisions contractors and owners should consider when utilizing modular construction include, but are not limited to:
- Inspections (offsite and onsite): Specify who is responsible for inspections at the fabrication facility and how inspection results are documented.
- Transport and Logistics: Address liability for damage during transit and, if applicable, storage, including insurance requirements and risk allocation.
- Integration and Assembly: Define standards and requirements for final assembly, industrial cleaning, and commissioning to ensure quality and compliance.
- Intellectual Property: Clarify ownership of modular designs, 3D-printed components and proprietary manufacturing processes.
- Jurisdictional Compliance: Ensure contracts address varying state and federal regulations, especially for projects spanning multiple jurisdictions.
- Warranties: Set clear terms for liability, quality control and warranty periods, including procedures for addressing defects discovered post-installation.
While the rise of modular construction in residential and industrial construction projects has certainly been a boon to contractors and owners alike, it is important to recognize that this rise is not without risk. Professionals should leverage the advances in AIA’s VMC documents and ConsensusDocs’ forms as a starting point, supplementing them with customized clauses to address gaps in areas such as off-site logistics, multijurisdictional compliance, and defect liabilities. By proactively adapting contracts and project management practices, contractors can harness modular’s benefits while minimizing risks in today’s complex industrial landscape.
SEE ALSO: MODULAR CONSTRUCTION CONTINUES TO GAIN MAINSTREAM ATTENTION
The post Modular Construction’s Big Boom: New Risks Outpacing Standard Contracts in Industrial Projects first appeared on Construction Executive.
