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April 20, 2014

Construction Contracts – Pay a Little Now to Save A Lot Later

What is a construction contract and why should I have one?

A construction contract is a legal document which specifies the details of a construction project. The elements of a good construction contract include the following terms:

  • The contractor’s registration number;
  • A statement of work quality such as ‘Standard Practices of the Trades’ or ‘According to Manufacturers Specifications’;
  • A set of blue prints or plans;
  • A set of specifications;
  • Any allowances;
  • A construction timetable including starting and completion dates;
  • A fixed price for the work, or a time and materials formula;
  • A payment schedule;
  • A written warranty; and
  • A clause which outlines how any disputes will be resolved.

[From Glossary – Int’l Association of Certified Home Inspectors (InterNACHI)]

A wise contractor will have a custom tailor-made contract for each project. A customized contract helps put your company in the best possible position if a dispute arises and you need to call a lawyer. In today’s tough cost-cutting economy, individuals and companies are trying to save money any way possible. However, a good contract upfront can save a contractor thousands upon thousands of dollars later on in the project. Properly written Alternative Dispute Resolution clauses (mediation, arbitration, etc.) and indemnity clauses (who is responsible for what conduct on the job) can save a contractor thousands in legal fees and administrative costs.

All to often, contractors are operating on verbal agreements (handshake deals) or contractors download a form from the internet, not knowing what pitfalls and traps provisions are in those contracts. In this current economy, form documents and verbal agreements are totally unacceptable. Contractors who operate like this will lose money over the long haul, especially those who want to operate on a larger scale and actually make money. Large construction companies and corporations will make you use their contracts which are so lopsided that the other contracting party will never prevail in any dispute.

If you are a contractor or home/business owner and are considering using or signing a contract given to you by someone else, then you should have that agreement reviewed by a professional to make sure your rights are protected.

For more information contact the Tierney Law Group at (925) 362-3364 or info@tierneylawgrp.com regarding contract preparation and contract review.