Tips Before Signing a Construction Contract
What is a Construction Contract?
A construction contract is a well-drafted agreement that clearly defines the work to be done, prices to be paid, and various terms and conditions for a construction project. It can also address other factors such as the risks involved in the construction venture.
Construction contracts often depend heavily on the bidding process. Construction contractors will submit their bid, which will be incorporated into the contract if their price is selected. Whether you are the party performing the construction or the party paying for the work, you should always have a written contract. That way your interests will be protected should a lawsuit arise in connection with the construction.
What Should I Do Before Signing a Construction Contract?
Make sure that all parties read and understand the contract, including yourself. If you notice any discrepancies between the writing and any oral agreements you had, you should address these before signing. You may wish to hire an attorney to help draft and oversee the contracting process.
Here are some tips to consider before finalizing the construction contract:
- Know the time frames you will be needing for every step- start, finish, delivery dates for materials, etc. Late or incomplete work is one of the most common problems with construction projects
- Clearly state the prices for the project. Be sure to include any additional fees or expenses that you might foresee and identify who will cover them (for example, dumping and trash services)
- Be specific when it comes to payments- amounts, lump sum or installation payments, whether to use checks or credit cards, etc.
- Be exact about the materials that will be used- if the product comes in quality grades, specify whether commercial or standard grades will be used. Identify brand names if these are desired
- Familiarize yourself with the industry that the project relates to- every industry has different rules which govern how transactions are to be made. If you will be working outside standard industry procedures, be sure to state this and the reasons for the deviations
- Be flexible and anticipate disputes- identify any potential risks or future disagreements that may arise in connection with the project. Address how you will resolve disputes. If you will be using a mandatory arbitration clause, this must be included in the written instrument. If you will not be using an arbitration clause, include provisions for attorney’s fees and court costs in the event that litigation becomes necessary
What if the Parties Cannot Reach an Agreement?
Sometimes a construction project needs to be started immediately- for example, if the project will be needed as a venue for an event in the future. You can still proceed with work; however you may wish to create an “interim agreement”. This is an agreement that is not enforceable as a permanent agreement, but only for a specified amount of time.
An interim agreement can be created by adding language to the contract stating, “This agreement is in effect only until a permanent agreement is negotiated by all parties”. That way, the work can proceed on schedule, and the contract can be finalized at a later time.
However, if at least a basic agreement has not been reached, you should not proceed with the project until matters are clarified. This is also a major dispute arising in construction projects. If work is started without authorization, it could lead to wasted resources, as well as legal consequences in a court of law.
If you are unsure about whether to proceed or not, you may wish to contact a lawyer to determine the course of action as prescribed in the contract.
Do I Need a Lawyer When Signing a Construction Contract?
It is always a good idea to have a lawyer present when you sign the contract. They will be available to review the document for any errors or unauthorized changes. You may also wish to hire an attorney early on in the process so that they can help you draft a proper contract. Construction contract laws vary by state, so a lawyer might be needed for interpreting your state’s laws.
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Last Modified: 08-09-2011 03:30 PM PDT
