For construction projects, the contract is literally the blueprint to success. If it is professionally drafted, clearly written, and fair to all parties involved, you’re generally all set. While claims and litigation are always a potential risk in construction law, including the following six key elements can minimize both their likelihood and their impact on your bottom line.
Legal Name and Address of Both Parties
This one is critical as well as obvious. If all parties to the agreement are not listed and have not signed, no construction contract is legally binding. Both the property owner and the contractor should each have a signed copy for their own records and to back their claim if a dispute arises.
A contract should leave no doubt regarding cost of services for the project as well as any services beyond its scope. It is not unusual for contractors to include extra charges that were not originally discussed, so property owners should be sure to inquire about the possibility and ask for an estimate if necessary.
Terms of Payment
All construction contracts need to clearly outline the schedule of payments as well as the terms and conditions for paying any and all amounts due. To eliminate misunderstandings, be as precise as possible. Will the payment be in a lump sum or via monthly installments? If the latter, negotiate a schedule of dates that are the most practical for you, and come to an agreement about whether or not late payments will incur a penalty.
Clear Time Frame
Unclear or ambiguous time frames can result in misunderstandings and, consequently, project delays. Make sure that the contract includes firm dates for the following milestones:
- Notice to proceed
- Start of construction
- Project completion
When establishing these dates, be sure to account for issues like supplier lead time. It is also a good idea to indicate that you are not responsible for delays that arise due to inclement weather or difficulties accessing permits or approvals.
Very few construction contracts are completed without change orders taking place. Ensure that the primary elements for change orders are addressed in the contract, such as who must approve them, when this party must be notified of a potential change order, and how and when any change order work will be paid for.
Dispute Resolution and Termination Conditions
Don’t forget to include the procedures that will be followed to resolve disputes and overcome any problems that may arise during the course of the project. You may want to include an arbitration clause to encourage any disputes to be settled outside of court, for example. Contracts may also be terminated if they have mistakes or at least one of the parties breaches its terms. Again, be as specific as possible now to avoid headaches later.
In a perfect world, all participants in a construction agreement would work in harmony to produce a successful project, and many times this is exactly how things turn out. But when the unexpected occurs, a complete and comprehensive construction contract can protect your interests and minimize any losses.
For assistance in drawing up your next construction contract, contact Rosen Law, LLC. Because we have frequently litigated construction disputes, we have a firm understanding of what provisions must be adhered to during negotiations and what things may be safely changed. If you need an attorney who understands how contract law is successfully applied in the construction industry, call us today at (516) 437-3400.