Contract

What is a Contract?

A contract is a legally binding agreement between a contractor and client that establishes the terms, conditions, scope of work, and payment arrangements for a construction project.

A well-written contract protects both parties and serves as the roadmap for successful project completion.

Essential Contract Elements

Scope of Work: Detailed description of all work to be performed and materials to be provided.

Timeline: Project start date, milestones, and completion deadline.

Payment Terms: Total cost, payment schedule, and accepted payment methods.

Change Order Process: How modifications to the original scope will be handled.

Warranty Information: Coverage period and terms for completed work.

Legal Provisions: Dispute resolution, liability limits, and applicable laws.

Types of Construction Contracts

Fixed-Price Contract

Contractor agrees to complete work for a set price regardless of actual costs.

Cost-Plus Contract

Client pays actual costs plus a predetermined fee or percentage for contractor profit.

Time and Materials Contract

Client pays for actual hours worked plus materials at cost, often with a maximum limit.

Unit Price Contract

Pricing based on predetermined rates for specific units of work (per square foot, linear foot, etc.).

Key Contract Protections

For Contractors

• Payment guarantees with clear schedules
• Scope limitations preventing unpaid extra work
• Liability protections and insurance requirements
• Change order procedures for additional work

For Clients

• Work guarantees with specific quality standards
• Timeline commitments with completion dates
• Fixed pricing protection from cost overruns
• Warranty coverage for defective work

Contract Best Practices

Use Written Contracts: Never rely on verbal agreements for construction work.

Be Specific: Include detailed descriptions, specifications, and materials lists.

Review Carefully: Both parties should understand all terms before signing.

Include Contingencies: Plan for weather delays, permit issues, and unforeseen conditions.

Get Legal Review: Have attorney review contracts for larger or complex projects.

Common Contract Mistakes

Vague Scope: Unclear descriptions lead to disputes about what's included.

Missing Change Procedures: No process for handling modifications during construction.

Inadequate Payment Terms: Unclear payment schedules cause cash flow problems.

No Dispute Resolution: Missing procedures for handling disagreements.

Red Flags to Avoid

• Requests for large upfront payments
• Contracts without specific completion dates
• Missing licensing or insurance information
• Pressure to sign immediately without review time
• Verbal promises not included in written contract