A construction contract is an agreement between two parties – one who needs something built or renovated, and one who has the skills and/or employees to perform the task – that negotiates many details of construction law.
How it Works
Construction contractors, whether individuals or large companies, bid on contracts by offering the best possible value for the contractee’s cost. Once the contract has been awarded to the construction company, the contractee has the obligation to pay contractors on time and reimburse for materials (unless the contract states otherwise). This party also has the obligation to keep an eye on safety around the property – for example, if stairs leading up to a house could cause physical danger to a contractor remodeling a kitchen, then the hiring party must warn the contractor about that pitfall.
The contractor has the obligation to inform their contractee of timelines and cost of materials, labor, and other goods or services that come into play. For example, if the estimated cost of dry wall is higher than anticipated, then the contractor must inform the owner / manager of the change in cost and renegotiate expenses.
How and When is a Construction Contract Used?
Construction contracts are especially important if: 1) you are a contract in charge of renovating or building a property, and 2) if you are a developer or building owner who needs to hire someone to build or renovate property. These contracts protect the interests of both parties, so it is important to get the agreement in writing.
The construction contract will clarify many details of the project, including amount bid by the contractor to secure the contract; type of cost of materials; and timeline to complete the project. Some contracts offer statements allowing for blueprints or building plans to change as needs change
Some contracts outline specific possible disputes (such as construction taking longer than expected to complete) and how these disputes could be resolved. In many instances, this is where an arbitration clause is inserted into the contract, binding all parties to go through arbitration to resolve disputes rather than a lawsuit.
When is a Construction Contract Invalid?
Construction law protects both parties involved in a construction contract from bad faith actions. These can include refusal to pay for materials or services, or extending the construction timeline beyond reasonable expectations. If one party breaches the contract – ie, violates the terms outlined in the contract – then the other party can sue for damages. These can include personal injury at the work site, or financial damages.
On occasion, a homeowner will hire a “handyman” or a friend or relative to perform a construction service with a verbal agreement. Every state differs on the validity of oral contracts, especially construction contracts which can involve higher safety standards, so regardless of how you know the potential contractor, get the agreement in writing with as many project details as possible. Also, make sure all parties involved sign the contract. If a dispute comes up later, the written document will help you.
Our free construction contract form can get you started, but if you have a complex project, consider speaking with an attorney.