What Should be in Every Construction Agreement
Who doesn’t want to have a detailed and coherent construction agreement in place on every job? It minimizes confusion, makes clear everyone’s respective responsibilities, and should reduce disputes. You can do so by simply making sure you address the following 6 topics.
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 something should be part of your work. This could expand what you have to do beyond what you understood or priced out.
List all the exclusions
Do the parties each have the same understanding as to what is covered in the contract? How often are you faced with the exclamation from your customer – Gee, I thought this was included as part of your work? You may have believed that task, or that material, or that specially fabricated item was excluded. But was it? Did you articulate what was and was not in your scope and your price? Specifically listing what is excluded can obviate this problem. Articulate what is not in your price and not in your scope and reduce the chance of one party believing that something is to be done when it isn’t.
Explain the change order process
When you have to perform extra work under a contract, obtain a written agreement on every change order. Make sure it’s fully memorialized – signed with change in scope, change in price and change in time, and approved before you do the work. Often you are just given a revised page in the plans. Before you do the work, generate the change order, submit it, and have it accepted. Alternatively, you can request a change directive, directing you to do this change work. You will then have the necessary paper trail.
Verify the schedule
As important as the price in your contract is the schedule – how quickly is the work to be done? Importantly, check to see whether or not the agreement has any penalty associated with the failure