Unnecessary disputes can arise out of poorly drafted construction contracts, regardless of your level of sophistication. This is particularly true right now given supply-chain issues and the ever-rising cost of materials. Three points arise at the outset.
First, there are three main types of construction contracts:
- fixed price contracts,
- cost plus contracts, and
- time and materials contracts.
Make certain the written document accurately reflects the type of transaction agreed to. While there are many variations of these three basic contract types, property owners must understand the differences and ensure that the written contract reflects what the parties agreed to. Similarly, contractors must be sure they are on the same page as the owner about the type of contract being agreed to. Otherwise, costly disputes will inevitably arise after the contractor begins work.
Second, before signing a construction contract, pay particular attention to issues such as scope, cost overruns, invoicing and payment, record keeping, change orders, warranties, limitations on damages, arbitration and other dispute clauses, attorneys’ fees, LLC issues, insurance, lien waivers, time for completion and damages for delays, permits and related fees, future agreements, modification, indemnification and hold-harmless clauses, and termination, among other things.
Finally, always have an experienced attorney review your contract before you sign. Please contact us if you have questions or would like our help reviewing or negotiating construction or related contracts.
