A residential construction contract is important for all parties involved. Owners, contractors, and suppliers need to be in agreement on many different items related to the project. Not only does a contract layout the guidelines for the work that needs to be done, but it also establishes a timeline for the construction project. It is important that each party be held responsible for their end of the deal. If you have struggled with contractors performing subpar jobs or owners not paying for the work completed, you understand and appreciate the importance of a written contract.
What to include in your residential construction contract:
Generally speaking, there are several basic items that should be included in a residential construction contract.
- Contractor and owner information
- Description of project
- Change Orders
- Stop work or stop payment clauses
- Unforeseen circumstances
By establishing these guidelines, there will be a documented agreement that each party must adhere to. If issues arise related to the project, a contract will allow each party a reference as to what was agreed upon.
1. Contractor and owner information:
Firstly, within your construction contract, it should list all parties involved in the construction project. The contractor should list their business name, phone number, email address, address of business, relevant licenses and certifications, and relevant insurance. Similarly, owners should include their name, phone number, email address, and the address of the property in which work is being done to.
2. Description of project:
In every contract, it is important to explain, in detail, all the work that is to be performed by each contractor. By including a description of the project, it is understood by the contractor what work they need to complete. It also makes the project details clear to the consumer. By clearly laying out the project to the consumer, consumers can verify that all the work they need completed is included in the project.
Additionally, every project should specify the timeline by which the work should be performed. This should include a project’s projected start and end date. It also should include dates on which payments or draws will be made. It would also be wise to include what will happen if the timeline needs to be adjusted.
4. Change Orders:
Change orders occur when either party wants to alter the contract in some manner. Typically, change orders stem from a change in materials or alterations in design. Contractors and consumer must put these change orders in writing so everyone is on the same page as to (i) the specific nature of the change, (ii) the anticipated cost increase or decrease in the change, (iii) and whether the change requires a revision to the timeline. It is always advisable to have both parties sign the change order so there is no question as to whether the change was approved.
The total estimated cost should be included in your contract as well as the manner in which the payments are to be made. Failure to include this information will lead to confusion and disputes.
6. Stop work/Stop payment clauses:
Although a contract is created with the hope of each party holding up their ends of the deal, that doesn’t always happen. To protect yourself, it is important to include stop work or stop payment clauses. A stop work clause states that the contractor can stop the work if they are not receiving the agreed upon compensation for their services. Likewise, a stop payment clause states the owner/consumer can stop payments if the contractor is not performing the agreed upon tasks.
7. Unforeseen Circumstances:
Furthermore, it is useful to include a clause dealing with unforeseen circumstances in your construction contract. By including this clause, the owner/consumer and contractor have a laid-out plan for unforeseen circumstances, like an act of nature that prevents the contractor from completing the work on time.
Warranty agreements are important for the consumers that are paying for work to be done to their home. By providing a warranty, contractors are showing that they stand by the quality of work that is completed. It also provides consumers a way to ensure the work done will be completed to a high standard. Many warranties come from the supplier of products and materials used in construction projects. These warranties should be passed to the consumer.
The construction project may not always be smooth sailing. In every project, there is the possibility for disputes. As a result, it is advisable that residential construction contracts include a clause addressing how the parties will handle disputes. This may include a requirement that the parties mediate disputes before the dispute is submitted to formal litigation. It also may include a requirement that a dispute be addressed through binding arbitration as opposed to action in state or federal court. There are many pros and cons to both arbitration and regular court proceedings, and you should speak with an experienced attorney before deciding which venue is right for your project.
Laying out clear directions on how each party communicates is key. By establishing this in the contract, it creates a clear path for communication, which will aid both the contractor and consumer in a satisfactory end result.
The last thing that needs to be included in a contract is dated signatures of the parties involved. This establishes that the contract has been read and that both parties are in agreement with its terms and conditions.
Hire attorneys knowledgeable of residential construction contracts
To be sure your contracts are fair and comprehensive, contact a construction attorney with the knowledge and experience to help you. McDonald & Kloth, LLC can help you draft or review your residential construction contracts.
Are you looking to learn more about construction contracts? Visit our Breach of Construction Law page.