Construction Contract Clauses: Everything You Need to Know
Construction contract clauses serve many purposes in the construction industry.3 min read
Construction contract clauses serve many purposes in the construction industry. It is essential that a thorough, written contract that governs the work and outlines the rights and duties of all parties involved be established before any work is started. To help avoid a future disagreement, the contract needs to be detailed in describing the work and various terms of the job; this helps to ensure everyone has a clear understanding of what is expected.
What Should the Scope of Work Include in a Contract?
The scope of work listed in the contract provides the directions for the project, including:
- Drawing and blueprints.
- Written specifications for what materials will be used and how they will be installed.
The project scope is the heart of the contract because it provides guidance and clarification when there is a discrepancy between parties.
Why Is a Detailed Construction Plan Needed?
It is always best to have detailed construction drawings to protect both the contractor and the client. Unfortunately, dishonest contractors will knowingly leave certain details out of the plan drawings, allowing them to low bid a job. The contractor will incorporate these costs as a change of order later in the project, and ultimately, the expense of the project was not the best financial choice for the client. However, honest mistakes are sometimes made, so a detailed contract can assist in helping to resolve any questions about who or where the fault lies.
Plans that are not extremely detailed can cause unexpected costs, disputes, and a delay in completion. It is better to have plans that are realistic and not conceptual.
Drawings that contain artistic gesture and ideas that are not concrete often leave out details of the actual cost and materials that will be needed to complete the job. It is the contractor's responsibility to consult with the architect to ensure a correct interpretation of the drawings is acquired; this helps determine what the actual cost of the project will be when bidding the job.
How Do Contract Clauses Help With Disagreements?
In the event there is a disagreement and clients are not willing to let a contractor cure any default, a well-written contract will assist in moving forward, especially when it contains various contract clauses. A detailed contract should include a timeline for completion along with a clause stating a penalty for early termination if the owner prevents the contractor from the completion of his or her scope of work.
Likewise, a contract should define the warranty of the contractor's work and the terms of responsibility once the contractor is terminated from the job, thus relieving him or her of any responsibility for anything that happens after termination; this is applicable unless the client can provide proof that the defect was indeed the contractor's fault.
Importance of Payment Clauses
The payment terms are a critical part of the contract as well. A start date should be clearly defined along with a completion date. Again, clearly defined is important.
What a contractor considers a start date could vary with a client's understanding of starting. Perhaps, a contractor has been issued a permit. The contractor may consider this the start date, while the client does not consider this as the official start date. The details of the expected completion date are just as critically important in that most contractors receive final payment upon the completion of their work.
Naturally, the price will mirror the scope of the work you plan to provide and as an extra cushion of protection; a cost breakdown of the entire job should be included in the payment conditions of a contract.
Importance of Change of Order Clause
Change happens, it's inevitable. This is why a contract should always include a procedure for how a change order is to be carried out. The cost involved with making the change and the effect on the timeline of the construction project should both be addressed. A statement of full agreement and a signature spot for all parties should be included as well.
Importance of Change Directive Clause
In the absence of an agreement to a change order, a contract should include a construction change directive. Although a contractor will still have to make the changes, this will provide the contractor with some form of protection for a payment.
If you need help with understanding construction contract clauses, you can post your legal need (or post your job) on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.