8 Steps to a Better Construction Contract
Follow these steps to have a solid construction contract in place.
1. Write it down
The first thing you need to do is make sure that your agreement is in writing. A short document is better than no document, and a more thorough document is better than one that is too general. Sometimes people wonder whether a handwritten (versus a typed) agreement is valid. Yes it is. And what about something electronic, will that work? Sure – an email authorizing the terms and conditions of your agreement will be accepted as a contract. What if you don’t have an original? No problem; you don’t have to have the original for there to be a valid contract. A recent case even determined that an exchange via text message was enough to create a valid contract between two parties. It doesn’t take much, but it should be in writing.
2. Understand it
Make sure you read and understand the entire contract that is given to you. Change it to address your concerns. Don’t be fooled by what you’re told. There really is no such thing as a standard contract. Don’t assume that what is presented is a fair contract. It may not be. It may only protect the one who is offering you the contract. There are some contract forms produced by trade organizations, such as those by the American Institute of Architects, and while they are relatively fair to both parties, they could still be improved.
3. Define the scope
You need to define what the scope of work is that you will be providing. Will it be only materials; will it be materials and labor; or will it be just labor? You need to be very clear and very specific in how you spell out the scope of your work. Many contracts state that you are responsible for all work that’s shown on the plans and specifications, as well as that which is reasonably inferable. Pretty subjective – even if not actually on the plans or specifications, someone may believe that it should be part of your work and this could expand what you have to do beyond what you understood or priced out.
4. List all the exclusions
Do the parties each have the same understanding as to what is covered in the contract? Articulate what is not in your price and not in your scope. This reduces one party believing that something is to be done