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 may also address other factors, such as the risks involved in the venture. 

Construction contracts often rely heavily on the bidding process. Construction contractors will submit their bid, which will be incorporated into the contract if their price is selected.

What Are Some Things to Consider before Signing a Construction Contract?

First off, make sure that all parties read and understand the contract. This especially applies to the party drafting the contract. If you notice any discrepancies between the writing and any oral agreements you had, they should be addressed before anything is signed.

Here are some things to consider before finalizing a construction contract:

  • Time frames – start, finish, delivery dates for materials, and so on. Late or incomplete work is one of the most common problems with construction projects.
  • Prices – it should be clear how much something costs, and why. It would be helpful to include any additional fees or expenses that may be incurred.
  • Specify payments – For instance, define what amounts, and if a payment will be lump sum, or installation payments, and whether checks or credit cards will be accepted.
  • Note materials that will be used – if the product comes in quality grades, specify whether commercial or standard grades will be used.
  • Know the industry – every industry has different rules which govern how transactions are to be made. Understanding it is vital.
  • Anticipate disputes – identify any potential risks or future disagreements that may arise in connection with the project.  Address how disputes will be resolved. If the project involves a mandatory arbitration clause, this must be included in the written instrument.  If not, consider including 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. A common example of where a project needs to be started sooner rather than later is where the project will be needed as a venue for an event in the future. Thus, parties may still need to proceed with work, but should strongly consider creating 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.

Do I Need a Lawyer?

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 a business 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.