Everything You Need to Know About Construction Contracts

Considering how contracts are usually wordy, lengthy, repetitive and full of hard-to-understand legal jargon, it’s quite normal for people to hate reading them. The only ones who probably like reading them are the lawyers who write them.  

If you think you do not need a complex contract for a straightforward construction job, we are sorry to inform you that you couldn’t be more wrong. From the construction of a new home to the remodeling of a large building, the parties involved are always at risk of running into conflicts and legal problems. Contracts, therefore, legally bind owners, designers, contractors, subcontractors, and suppliers to ensure that the project is completed on time.

Everything You Need to Consider Before Entering into a Legally Binding Agreement

While a contract is prepared to protect the rights of everyone involved, all the parties involved also need to take into account the following:

1. Make sure that all the contractors and subcontractors involved in the project are properly accredited and have all the necessary licenses.
2. Check that the contract is insured for the contractor’s risk and workman’s compensation.
3. Conduct research and check references to make sure the contractors are reputable and that they do not have a bad record.
4. Read the contract meticulously. Go over the fine prints as well to ensure that the contract is precise and clear.
5. To ensure that you’ve understood the contract, contact an attorney or a building contract advisor so they can review the contract and explain it to you. Fairweather Legal, Melbourne  will even verify that the contract complies with state laws and regulations.

Benefits of a Building Construction Contract

Having a concrete building contract in place before starting the construction project is important for several reasons:

1. Contracts not only details a process for addressing issues that may arise, but they also help ensure that property owners, buyers, contractors, subcontractors, and construction firms are fully cognizant of the expectations each party has. These expectations are not limited to scheduling and finances but may also include materials and performance.
2. By entering into a well-written contract, all parties involved are reassured that their rights will be protected as the contract will cover preparations for delays and mistakes, disputes, and liabilities.
3. Since chances of averting potential disputes are higher with a contract, we can conclude that contracts can also help reduce stress in what is already a stressful situation.

But What If I Don’t Want to Use a Builder’s Contract?

The consequences of not using a building contract can be dire. Below is a list of drawbacks to not having a contract drawn up before starting work:

1. Not having a written agreement prior to the start of the project, can lead to legal ramifications down the line. In fact, some advisors will tell you that if a construction contract is not prepared, there is bound to be disputes among the parties involved.
2. With no contract, the parties involved cannot confirm whether they’ve properly understood each other. Even the smallest of misunderstanding can result in both parties spending more money, time, and resources than planned for. And most people involved in construction projects know that some of the most commonly disputed aspects of a project include issues with payment, length of time to complete the project and the scope of the work completed.
3. Even if you are not involved in the real estate industry and are just a homeowner, you also run the risk of wasting money. You can also not get quality work completed on time if you don’t have a contract drawn up.
4. Unless you have scrupulous billing practices, you will overpay if you don’t use a builder’s contract.
5. Contractors are also at risk – without a contract, there is the possibility of them not getting paid and having to front the cost of the work until the payment is received.
6. No contract can even cause the contractor and subcontractors to lose their licenses.

Provisions and Guidelines that Must Always Be Included in Building Construction Contract

Regardless of the type of contract, don’t just look at the terms and conditions section. Peruse the whole document and ensure that it covers the following:

1. Contract agreements and contracts

Ensure that the contract includes attachments. These attachments must contain all the supplementary documents referenced in the main document. Generally, obligations, responsibilities, and duties of both parties must be in this section.

2. Statement of work

The contract must have a section detailing the work that has to be done. This section must include a process for sourcing materials.

3. Special or specific conditions

The contract must also describe the procedure to follow in case there is a change in the order, design and/or the materials.

4. Construction schedule and costs

The expected completion date, the timeline of the project, the payment schedules and final price must all be mentioned in the contract.

Contracts are not simple to understand, and to ensure you’re starting your project on a good foot, consult with a construction lawyer before even signing the documents.