Construction Contracts

Whether you want an addition built onto your home or you are starting a new contracting business, construction contracts are basic agreements you need to be familiar with before the first day of work.

Contractors and owners alike can run into trouble when they base their work agreements on verbal guarantees or assurances. Even the most experienced, honorable contractor can experience delays or problems, and owners can be unintentionally slow with payments or meet with similar difficulties. To allow for the unexpected and to make each party secure in the knowledge of what their rights and obligations are to the other, a construction contract is often used. When entering such an agreement, you should first educate yourself about the details. Here are some common questions:

What is a construction contract?  In short, a construction contract is a legally binding agreement between a contractor and an owner. Whenever a contractor is hired to build, modify or otherwise work for an owner, a construction contract is almost always used to state in detail the specifics of the project.

What should be included in the contract?  Depending on the nature of the construction project, you may need a document that is quite extensive or fairly basic. However, some standard provisions and specifics will be in a construction contract whether the job is large or small.

  • Project Details:  What is being built? What plans are there? How is progress measured or supervised?

  • Payment Details:  What is the fee, how will it be paid?

  • Deadlines:  The contract should include specific dates or time frames for how long the contractor has to complete the project. 

  • Statement of Qualifications:  A contractor will often need to include that they meet statutory or legal requirements of their state.

  • Equipment and Materials:  The contract should include detailed provisions for what party is responsible for paying for or providing materials and equipment.

  • Cleaning Up:  All construction contracts should have a clean up provision so at the completion of the work the contractor will take away all of their construction equipment, excess materials and rubbish from the work site.

What if someone gets injured or makes a mistake?  It’s common for construction contracts to include indemnity clauses. These are provisions where one or both parties state “If something is my fault, I won’t hold you responsible.” These are important provisions so you'll need to double check your contract to make sure all indemnity clauses offer sufficient protection.

What about permits or taxes?  Just like anything else, you need to be sure your construction project complies with local and state building codes. Clearly spell out who is responsible for getting the proper permits and inspections. Also, make sure you detail who is responsible for all applicable taxes and fees.

What about waste products and materials?  Even small residential construction projects can generate a significant amount of waste and excess material. Make sure all waste products are handled and disposed of properly according to local ordinances.