Understanding a Construction Contract

By Lauren White, RCS Reporter.

Ensure your contracts protect you; don’t overlook these five elements.

Construction contracts are crucial for successful projects.  It is important for construction lawyers to review these contracts to ensure they are written clearly, are fair to the involved parties, and protect you and your best interests.

Construction contracts have five elements that can, “...result in major vulnerabilities if overlooked,” according to Cotney Construction Law.  The elements are:

The first element is having the full name, address, and signatures of both parties on the contract.  These items make a contract legally binding. And while they may seem obvious, they are overlooked more often than not with construction contracts.  It is challenging for contracts to hold up in court when the documents do not have the correct information or signatures.

Second, is the scope of work.  While this element is in most construction contracts, the necessity for details is likely overlooked.  Cotney Law reveals, “This area of the contract should, in great detail, explain the services to be provided, including a description of materials, quality, grade, schedule of work, and other specifications pertinent to the construction of the property.”

Project cost and payment terms are the third element.  In a construction contract these elements should be stated in a clear and simple manner so there’s no confusion about, “the cost of services included and cost of services beyond the scope of the project,” Cotney Law clarifies.  “The schedule of payments, the amount that is due, and the terms and conditions of payments should also be clearly outlined in this section of the contract.”

The next element is the schedule of work.  There are three dates that are important to make very clear: the notice to proceed date, construction start date, and the date of completion.  Make a distinction between calendar days and work days. Cotney Law urges contractors to “...include in the contract that you are not responsible for delays caused by the property owner in obtaining the required permits, easements, and approvals, or for delays as [a] result of bad weather.”  Additionally, ensure lead times from suppliers are accounted for. Document additional time required if there are change orders.

Authority is the final element.  There are many parts to a construction project, and sometimes it is difficult to know who has the decision-making authority.  It’s imperative to clearly establish who is able to make legally binding decisions before the project gets started. Cotney Law notes, “This simple element of the contract can save a lot of headache and confusion during the project.”

Consult an experienced construction attorney like Cotney Construction Law to review or draw up construction contracts and ensure they are designed to protect you.

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Disclaimer: The information contained in this article is for general educational information only.  This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.