The 5 Elements That Make a Strong Construction Contract

When you’re planning on building a new home or commercial property or even renovating an existing one, you’ll be negotiating a lot with contractors, architects, engineers, and other construction professionals. Then you’ll be getting the agreed-upon terms in writing before work begins.

All this advance planning is necessary to ensure that both sides have a clear understanding of the services, costs, timelines, and other details relevant to the project. The last thing you need is for one of the contractors to tell you, “This is not something we agreed to do, so it will cost extra.”

A strong construction contract will clarify the scope of the project, confirm responsibilities, and provide guidelines for handling additions or change orders. While each agreement will be different and project-specific, they should always include certain key elements. Let’s take a closer look at five of them below.

1.   Project scope

Although most construction contracts include this element, they don’t always go into detail. Your project scope should explain the type of work (new construction vs. retrofitting), the services to be provided, the quality and grade of materials used, the schedule of work, and other details important to the completion of the project.

2.   Project timeline

All construction contracts need to include dates and deadlines. This time frame must establish a start date, date of completion, and include project-specific milestones. Be sure to differentiate between work days and calendar days and address any delays due to bad weather or delays in obtaining necessary approvals, permits, or easements.

3.   Project cost

There should be no ambiguity regarding the cost of services both within and beyond the project scope. Pricing can be categorized in a number of different ways, including hourly rate and flat price that covers all reasonably anticipated costs. Each approach has advantages and disadvantages that both sides must understand before signing.

4.   Payment terms

The schedule and terms of payment are just as important as the pricing. Will the contractors be paid every month or upon achievement of certain milestones? If you’re offering a lump sum payment, will it be paid when construction is complete (with the exception of payments for materials)? These terms need to be described in detail in the contract.

5.   Change order procedures

Very few construction projects are completed without changes due to weather conditions, materials shortages and fluctuating costs, unexpected site complications, and even human error. Your contract should address these issues in a flexible manner, or the contractor may have to charge more to allow for risk.

To ensure that your construction project is both comprehensive and legally valid, have it drawn up by an experienced California construction law attorney. If you’re planning a residential, commercial, or municipal project and need quality legal guidance, contact Adler Law today to set up a consultation. We will go over your project needs and assist you in creating a fair and reasonable agreement designed to accomplish your goals.

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Adler Law, A P.C.

Robert Adler is a sole practitioner who has spent over three decades protecting the rights of construction, real estate, business litigation, and personal injury clients throughout Calabasas, California—and beyond.

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