A written construction contract outlines the scope of work for a construction project in a legal agreement between a customer and a general contractor.
It outlines their rights and duties, including subcontracting, how they will be paid, the specifics of the project, and modification orders. It provides protection for both general contractors and the customer.
Below are some of the most important things to include when drafting or signing your construction contract.
Define the Parameters of the Work
You must specify the extent of the task you will be performing. Is it simply labor, just materials, or a combination of the two? When describing the scope of the task, make sure to be very precise and unambiguous.
According to many contracts, you are in charge of both the work that is expressly described in the plans and specifications and the work that may be inferred from them.
Even if something isn’t explicitly included in the plans or specs, someone can assume it’s included. This can increase your workload beyond what you anticipated or could afford.
List Any Exclusions
How frequently does your client say, “Gee, I thought this was included as part of your work?” to you?
The solution to this issue is to clearly state what is excluded. Reduce the likelihood that one party may assume something has to be done when it doesn’t by clearly stating what is not included in your pricing and scope.
Check the Schedule
The timetable — how soon the job is to be completed — is just as significant as the price in your contract. Check the agreement to determine any penalties for late performance, which is essential. Check the timetable to see if it is manageable.
Does the contract contain any liquidated damage clauses, and if so, are they reasonable? What do you think about them? Be aware that the absence of a liquidated damage clause does not imply the absence of delay damages. For actual delay losses, you could be held accountable.
For example, suppose that you are a drywall subcontractor working on a hotel, and the completion of the building is delayed in part due to your inability to complete some of your work on time.
If such is the case and the contract does not provide liquidated damages, the owner could still be able to determine damages. The hotel may have to recruit staff and have them on call as part of the actual damages. It may also imply that the rooms weren’t rented.
Even without the terrifying liquidated damage rules, you can still be held liable for these actual losses. Check that timetable again to make sure it is feasible.
Create a Dispute Resolution Procedure
To try to settle any disputes, mandate that the executives of each side meet within a week or two of any disagreement. The parties should try mediation if that doesn’t work.
In the mediation process, both parties get together, and an impartial mediator works to help the parties reach a conclusion. The parties may be able to reach an agreement during the mediation process.
The parties move forward to arbitration or a lawsuit only if there is a stalemate after mediation. At least 50% of disagreements are resolved through mediation.
Need help with a construction contract?
Are you building a house in New York? Schedule a consultation with an attorney at the Law Offices of James J. Corbett to review a construction contract.
Contact us today to schedule a meeting with our construction litigation lawyer to discuss your agreement. We will provide the assistance you need in negotiating with a house builder to safeguard your rights.
