How To Write a Construction Contract:
5 Steps to Follow

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What is a Written Construction Contract?

A written construction contract is a legal document between a client and a general contractor which details the scope of work for your construction project. It offers protection for both general contractors and the client and details their rights and obligations, which may include subcontracting, how they will charge for work, details of the project, and change orders.

Read more about construction contracts here.

What’s Typically Included in a Construction Contract?

A construction contract can have various terms and clauses depending on your project. However, there are some main elements common to all construction projects. The main elements of a construction contract include:

  • Contact information: The full name, proper information and appropriate signatures of both the client and general contractor are important elements. A lack of this basic information will result in the contract not being legally binding.
  • Project scope: Construction contracts should describe the scope of the project and work order in great detail. For renovation and construction contracts, this section may include exact deliverables, description of materials, quality, grade, and schedule of work. It should also clearly state the expected timeline and schedule for the project.
  • Change orders: Adjustments can be made to the initial contract and scope of the project to account for changing needs that are mutually agreed upon by the client and you. These adjustments are called change orders and must be written as a document and added to the contract.
  • Costs and payment schedule: It is vital for the client and you to be on the same page with regards to costs. A cost estimate must be approved by the client before a construction contract is signed. It is recommended that you ask for a non-refundable deposit to start work.
  • Warranty: Adding a warranty period to your construction contract reassures your client that the services you provide and of high quality and that in the event of an issue with the quality of the project, you will take responsibility to fix it.
  • Dated signature from both parties: To make the contract legally binding, they must be dated and signed by you and your client.

Here is an article that goes into great detail about what’s typically included in a construction contract.

How to Write a Construction Contract- Step by Step

It is highly recommended that you consult a construction lawyer or legal counsel to effectively draft your construction contract. The initial draft can then be modified and used for future projects as well. The steps involved in writing construction contracts generally involves the following:

  • Step 1: Describe the purpose of the contract in the title and preamble. This section should clearly stipulate the names of parties involves, the project, location, and project start and end dates.
  • Step 2: Add the elements of a construction contract described above; including but not limited to the project scope, financial information, project timeline, and insurance coverage information.
  • Step 3: Research the standard clauses you will need. These might include: foreseeable contingencies, successors and assigns, and severability .
  • Step 4: Research industry standards and local laws to add necessary and suitable clauses to your contract. This will ensure that you are following best practice, have taken into consideration state or region requirements to make your contract enforceable, and have accounted for all potential risks in the project.
  • Step 5: Get expert opinion. While you can write your own construction contract, it is advisable to get a second opinion from a lawyer who understands the federal, state and local laws that would be used to interpret the contract.

Here is an article that goes into more detail about how to write a construction contract.

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Essential Clauses to Include in a Construction Contract

The clauses included in a construction contract will differ based on laws in the region, the nature of the project and risks involved. Some important and common clauses include but are not limited to:

  • Liability clause: Liability clauses added to the construction contract allow you to predict the extent of liability and manage risk in the project. It allows for risk to be shared by both you and the client in the project. Common provisions under liability clauses include waiver of consequential damages and liquidated damages.
  • Insurance and indemnification clause: The insurance and indemnification clause generally protect the property owner or client from damages and harm caused during the duration of the contract project. It will also clearly state the insurance coverage provided to the indemnifier for potential losses. At different stages, there will be multiple and more complex indemnification clauses for subcontractors to indemnify the client and you.
  • Arbitration clause: In the case of a dispute arising between the client and you, an arbitration clause will help decide how all parties can reach a judgement or settlement. In the absence of this clause, the default method of settlement would be litigation in courts.
  • Force majeure clause: A force majeure clause relieves all parties involved from contractual obligations if circumstances arise that are beyond their control, such as natural disasters. It is important to anticipate and account for all potential events that might lead to the project becoming commercially impractical, illegal, or impossible.
  • Termination clause: In case the client is refusing to abide by the payment schedule or is acting unlawfully, a termination clause gives you the legal right to stop work. Vice versa, a client can terminate your contract if you act unlawfully or do not deliver on project deliverables appropriately.
  • Entire agreement clause: Entire agreement clauses seek to prevent claims that were not foreseen by parties when the contract was priced and finalized. The clause states that the contract represents a complete code of expectations, rights and obligations between all parties. This prevents parties from referring to verbal agreements and past agreements when a dispute arises.

Here is an article that goes further into the essential clauses needed in a construction contract.

Subcontractor agreements

You might decide to hire subcontractors for different tasks in the project. In that case, you must include subcontractor agreements that describe the scope of work, payment schedule, timeline, indemnification for the subcontractor. These agreements allow the contractor, subcontractor and client to share risk.

Here is an article that goes further into subcontractor agreements.

Who Writes Construction Contracts?

Generally, the construction contract is written up and drafted by a contract or business lawyer and the main engineer involved in the construction or renovation project. The contract should be reviewed and agreed to by all concerned parties at different stages before it is finalized and signed. It is advisable to contact a professional lawyer who understands the local and state laws that would apply to the construction contract.

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