A construction contract outlines all aspects of the job for all parties and governs the process to ensure everyone’s needs are met. As a result, every detail – even the smallest ones – needs to be reviewed before the contract is signed.
Construction contracts often benefit from third-party review by someone who has experience assisting professionals in the industry. Here are a few key reasons to have the contract reviewed:
1. Contracts need to address delays
Anyone who has worked in construction knows well that projects can have unanticipated delays. A contract should have a clause built in to address how contractors will be compensated for damages that arise from a delay.
Delays outside of the contractor’s control are called “force majeure.” Many contracts will grant extensions or identify how contractors will receive damages when force majeure delays occur, but many don’t specifically address compensation.
2. Contract warranties affect obligations
Some contracts call for warranties to begin upon substantial completion while others specify final completion – which occurs when installation is finished or on a date of beneficial use.
Warranties can affect the contractor’s obligations on future projects if the warranty is long and the project is delayed, pushing back that warranty begin date.
3. The scope of work needs to be defined
Scope of work typically appears early in the contract, often in the general terms. This portion of the contract should describe what is going to be built in specific detail. Without this level of scrutiny, the owner can broadly interpret what the scope should be.
4. Contracts should have a policy for changes to the work
Changes to the work are incredibly common because of the intricacies of a construction project. There are so many possibilities that each party can’t anticipate ahead of time as the contract is being drafted.
As a result, contracts should include a change order clause to account for this possibility. It is common for contracts to grant the owner the right to change the contractor’s work but this clause should also outline how a contractor will be paid for the changes.