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Building? Remodeling? Protect Your Project With A Written Construction Contract


The construction contract is a useful document that spells out the details regarding a contract for construction purposes. There are certain features that need to be spelled out in each agreement which should cover the salient points and help form an effective agreement between the concerned parties. Depending on the nature of different contracts, some features may be applicable while others may need to added for specific situations. Some of the salient points that should be included in the construction contract are identities of the parties, recitals, obligations of the parties, terms of the contract, price, payment terms, representations and warranties, liability and termination of contract.

The identity of the parties should include the name, type of entity of each party (e.g. Corporation, LLC etc.), and addresses. The recitals should include the background of the agreement, purpose for entering into the contract, and key assumptions of the contract. The obligations of the parties should include what each side required to do, when the construction will be completed, and whose obligation is any delivery costs. The terms of contract should include defining whether the contract is a one-off one agreement or if it will last for some fixed time and how can the terms be renewed or extended.

The price should be defined as the amount to be paid for the product or service, whether the price is determined by fixing it through a formula, by project fee, or by some other manner. The payment terms should spell out when the payments are due, installment payments to be made, interest to be charged, and any penalty levied for late payments. The representations and warranties should specify what representations and warranties are to be made by the parties, certain warranties disclaimed, and how long the warranties are valid.

The liability clause should define what limitations of liability exist and under what circumstances one party is liable. Finally, the termination of contract clause should state when one party can terminate the contract early and what would be the consequences of such an act.

With regard to construction contracts there are certain other clauses that need to be enumerated, including: performance of work by contractor, differing site conditions, site investigation and conditions affecting work, physical data, material and workmanship, superintendence by the contractor, permits and responsibilities, and other contracts.

The construction contract is the one key document that the contractor must consult each and every day. So, it follows that the construction contact be drawn only after adequate study and detailed discussions. It should definitely specify payment terms, contract documents like specifications, drawings, addendums etc., the authority or who the owner’s representative is, change orders because almost all contracts need changes to the order for work, and finally, the schedule for work which may include the time that has been planned to complete the work.

The construction contract is an important document which can be purchased on the market for low cost and which will contain all the vital information regarding the construction contract and which can also be tailored to suit individual needs.

Wade Anderson is a CPA and operates DigitalWorkTools.com. Click to view an Construction Contract