Tips For Drafting Construction Contracts

Drafting construction contracts are supposed to contain the rights and duties of everyone involved in a given project. A clear construction contract allows both the contractor and the property owner to accurately reflect their expectations. It can prevent or mitigate stressful disputes, saving everyone time and money. Here are some tips provided by our Tulsa business law attorney that you should take into account to ensure that your construction contract is strong.

Writing A Legally Valid Contract

A typical contract drafted by a construction lawyer identifies the work to be performed, the parties who will perform the work (including their licensure and insurance), the construction schedule, the payment for parts and labor, consequences for breaching the contract, and other terms relating to the project. It must contain the full name, address, and signature of each party to the contract.

Remember that a legally enforceable contract cannot be one-sided. For example, you cannot legally obligate a contractor to perform work on your home if you do not offer something of value in return. Moreover, the contract will not be enforceable in court if it requires a party to do something that is unlawful (e.g. encroach on the neighbor’s property).

A legally binding contract will generally contain a promise by one party to do something in exchange for something (e.g. I pay you $10,000 to do the work).

Scope Of Work

The contract should describe the scope of work as specifically as possible. By leaving out the particulars, parties might reasonably differ in their expectations related to the scope of work. Disagreements can lead to disappointed clients and even legal disputes. If you clearly state your expectations, you will leave less room for disagreements and ambiguities that are resolved against you. Turn general and blanket terms into specific terms where possible. The more specific, the better.

Costs

The contract will also need to detail the project’s cost and how payment will be made. If there is a payment schedule, the contract should include the amount due, the date at which that amount is due, what happens if payment is not made, and other terms and conditions related to such payments.

One thing to go over before signing the contract is what happens if an unforeseen expense arises. Should you bear that risk? Should the other party?

Don’t rest solely on a projected cost when you can get something more definite, and don’t simply agree to incur an unforeseen expense that might actually be foreseeable.

Time To Complete

The contract should state a start date and a completion date for the project. There should also be provisions regarding delays that are out of a party’s control. For instance, if the homeowner unexpectedly prevents the contractor from working during certain periods, then the contractor should not face the consequences of delays that stem from this.

Also, the contract should acknowledge that difficulties acquiring easements, permits, and other approvals might be out of the construction company’s control. Even bad weather might cause delays, and the construction company should not face liability in those circumstances.

However, if delays are caused by the construction company’s failure to reasonably supervise and manage the project, then it might be reasonable for the homeowner to hold the company accountable for their negligence.

Damages

You should try to specify what the consequences will be for a breach of contract. For example, if the contractor has done little-to-no work on the project, then a clause in that contract could allow for nonpayment. Alternatively, if the work is near completion but the contractor abandons the job, then there could be a specified amount paid to the contractor for work performed. Sometimes a construction contract contains provisions for liquidated damages in the event of a breach. There are certain rules for this kind of provision and understanding them is important to implementing them. By agreeing in advance on the consequences of nonperformance or underperformance, you could eliminate or at least mitigate an expensive legal battle.

Not all construction contracts will look the same. Drafting construction contracts are supposed to address your individual contractual goals. You may wish to create a fixed price contract that provides the total cost of the completed job. Other times, the cost of materials and labor may fluctuate based on factors that are out of the construction company’s control. In these cases, the company may create a cost-plus contract. Times and materials contracts that involve an hourly fee can also protect against uncertain conditions. These documents should include a cap on the maximum price the company will charge for completing the project.

Speaking To An Attorney

Drafting construction contracts doesn’t have to be so difficult. Failing to enter into a detailed, legally valid construction contract can lead to costly problems for the construction company and the property owner. There are many factors that you should include in a contract, but you might not fully understand them without the guidance of a skilled construction law attorney. For this reason, before you sign on the dotted line, it is vital to speak to an experienced construction law attorney about drafting a document that meets your unique needs and that can be held up in court if things go wrong. To learn more about construction contracts that might work for you, reach out to Kania Law Office by calling (918) 743-2233 or by contacting us online.