Previously, I discussed the significance of a construction contract. In basic terms, this agreement addresses every aspect of a particular construction project while representing each party fairly. Before any work begins, it is critical for a contract to be in place.
Now, let’s look at the four main components of an effective Construction Contract:
Scope of work – It is the contractor’s obligation to know the site conditions in full detail. The contractor is responsible for understanding every potential pitfall of the property, not the owner. By performing due diligence prior to the start of this project, the contractor can make sure that no problematic surprises pop up as the work progresses. The scope of work is the heart of the deal and should include related architectural drawings and any site specifications.
Payment process – This aspect of the contract outlines the payment structure. It specifies how you get paid and the necessary paperwork involved at each payment stage. Additionally, the payment process must include inspections, which confirm whether or not the work was properly completed at a particular phase.
Change orders – Even though you have carefully laid out each facet of your project in the contract, issues can still come up. A strong agreement will recognize the resulting changes in the original work, without derailing the entire project. For any alterations in the construction plan, the change will need to be reflected in a written document called a Change Order. Each Change Order will have a particular number, define the change and present any cost differential. Even if a change doesn’t cause delays or add to the project’s expenses, a Change Order still needs to be attached to the contract. That way, every change is reflected over the course of your construction.
Warranties – All warranties for the completed work needs to be clearly spelled out in the contract. This includes labor and/or materials.
With a contract containing these four components, your project will stay on track and, most importantly, your rights will be protected throughout the construction project.
This paperwork is an essential safeguard and should always be examined carefully. So before you sign any agreements, it’s always in your best interest to have an attorney look over the documents and advise you on the most appropriate route to take.
Next time, I’ll discuss construction management paperwork. You’ll see why it’s also integral to your contract.