Residential Construction Contract

Residential Construction Contract

A Residential Construction Contract is used to establish an agreement between a homeowner and contractor to ensure both parties are protected. This document is used to cover the services provided, the compensation, the work schedule, how long the construction lasts, as well as other important things to consider before the construction begins.



RESIDENTIAL CONSTRUCTION CONTRACT

 

 

This Agreement is dated for reference the [ENTER DATE]


BETWEEN


[Enter Name and Address of the person/persons receiving Services] (the "Owner"),


AND


[Enter Name and Business Address of Contractor] ( the "Contractor"),


WHEREAS


A. The Recipient wishes to engage the Contractor to provide Building Services on their property at [Enter Address of Property] with PID number [Enter PID number] (“the Property”).


B. The Contractor warrants that that he/she possesses the unique ability, knowledge, skills as may be necessary, to perform the Services provided for in this Agreement.


THEREFORE in consideration of their respective benefits, duties and obligations hereunder the Recipient and the Contractor (collectively “the Parties”) do hereby agree as follows:


1. SERVICES


1.1 Services. The Contractor agrees to provide the necessary services including materials, labor, equipment, project management and supervision to complete the project as follows [Enter description of Project e.g. installation of a new kitchen or the complete renovation of the Property] (the “Services”)


1.2 Plans. The Contractor shall complete all the Services pursuant to the plans provided by the Owner attached hereto as Appendix A (the “Plans”).


1.3 Errors. Contractor shall not commence provision of the Services or continue with the provision of the Services where Contractor discovers any discrepancies, errors, or omissions in the Plans or where anything materially changes or effects the Plans. Contractor agrees to inform the Owner of any such findings and shall only commence or recommence any work after obtaining the written consent of the Owner.


1.4  Permits. The [Enter either Owner or Contractor] shall be responsible for obtaining and keeping in good standing any required approvals for the Plans and any required construction or other permits. Notwithstanding the foregoing the Owner shall be responsible for all costs in relation to such approvals or permits.


1.5 Methods. The Contractor's methods of meeting the obligations pursuant to this Agreement shall be determined by the Contractor in its sole discretion and judgment, subject to the provisions and requirements of this Agreement, reasonable consultation with the Owner and subject to the understanding that the Contractor will provide the Services in the best interests of the Owner.


1.6 Change Orders. Either Party may request a change in the Services by:


  1. providing to the other Party a notice that describes the change;

  2. the Contractor providing to the Owner an estimate cost for making the change;

  3. both parties executing a Change Order, a style of which is attached hereto as Appendix B confirming they have agreed to the change and:


(i) outlining the terms of the change,

(ii) outlining the new estimated cost and how fees are to be calculated in relation to the change,

(iii) altering the completion date if necessary.


The Contractor is not obliged to commence work on any change until such time as a valid Change Order is agreed upon and executed by the Parties.


Change Orders become part of this Agreement once the order is prepared in writing and signed by the parties prior to the commencement of any work covered by the Change Order.


Contractor’s failure to comply with the requirements of this clause does not preclude the recovery of compensation for Services performed based upon legal or equitable remedies designed to prevent unjust enrichment.


1.7 Completion Inspection. The Contractor shall inform the Owner when it reasonably believes the Services are completed and within [Enter number of days] days thereafter the Owner shall inspect the Property and provide to the Contractor a list of items to be completed or corrected (the “List”). The Contractor shall have [Enter number of days] days to complete the additional or corrective work pursuant to the List.


2. COMPENSATION


2.1 Estimate.   Contractor estimates the total cost of the Work to be $[Enter amount of Estimate] (“the Estimate”). A breakdown of the Estimate is attached hereto as Appendix C. The Parties agree that the Estimate is an estimate based upon the Plans and that the true costs of the Services may be more or less than the Estimate.


2.2 Fee. Owner shall pay Contractor for the performance of the Services a sum equal to Contractor’s costs (the “Actual Costs”) plus a fixed fee of ${Enter Dollar Amount] OR [Enter Percentage] of the Actual Costs (the “Contractor’s Fee”) (“hereinafter together the “Fee”).


2.3 Actual Costs. Actual Costs shall include all the costs outlined in Appendix D.


2.4 Exceeded Cost. If Contractor has reason to believe that Actual Costs shall exceed the estimated costs pursuant to any item in Appendix C by more than [Enter Percentage], the Contractor shall give notice to the Owner of such anticipated additional cost and shall obtain the consent of the Owner prior to commencing work on any such item.


2.5 Tax. All amounts mentioned in clause 2.2 exclude any applicable taxes which shall be paid by the Owner in addition to the Fee.


2.6  Payment. The Fee shall be paid as follows:


  1. Prior to commencement of the Services the Owner shall pay the Contractor an amount of $[Enter Amount] (the “Down Payment”) which shall be credited proportionately against each future payment, the last such credit being made to the Final Payment.


  1. On [Enter date e.g. first day/last day/15th day] of each month the Contractor shall provide an itemised invoice for the Fee for the previous month, less the proportionate amount of the Down Payment. Owner shall pay the amount of such Invoice within [Enter number of days] calendar days following receipt of such invoice, subject to clause 2.8.


  1. Final Payment shall be due [Enter number of days] calendar days after Contractor:


(i) completes the Services pursuant to clause 1.7

(ii) provides Owner with final lien releases from Contractor and all subcontractors and suppliers, conditioned only on receipt of Final Payment.


2.7 Retainage. Owner shall withhold [Enter Percentage] as retainage from each payment save and except the final payment (the “Retainage”). Retainage shall be released to the Contractor at the time of Final Payment. The Retainage is a fund for the protection of the Owner from non payment of subcontractor's, defective work and other breaches of this Agreement.


2.8 Evidence of Costs. The Owner reserves the right at all times to request documentation to evidence the amount of the Actual Costs prior to making payment of any invoice and Contractor agrees to provide such evidence within [Enter number of days] days of such request being made. Where such request has been made payment shall become due within [Enter number of days] calendar days of the receipt of such evidence by the Owner.


2.9 Late Payment. If Owner fails to pay Contractor any invoiced amounts due Contractor retains the right upon providing written notice to the Owner to stop providing Services until the amounts due have been received. If the amounts due remain unpaid following [Enter number of days] calendar days the amounts due shall accrue interest at the rate of [Enter Percentage] per annum from the date payment was due until paid.


2.10 Lien Release. Owner shall not be required to make any further payment to Contractor until Contractor provides Owner with an unconditional waiver and lien release verifying payment in full, less any Retainage of the previous month’s Fee.


3. WORK SCHEDULE


3.1 Commencement of the Work. Contractor shall commence the Services within [Enter number of days] calendar days of receipt of all applicable licenses and permits and the Down Payment. (the “Commencement Date”)


3.2 Completion of Work. The Contractor shall complete the Work within [Enter number of days] calendar days after the Commencement Date, subject to any allowable delays or extensions (the “Completion Date”)


3.3 Schedule of Work. The Contractor shall within a reasonable time following the Commencement Date provide a schedule outlining the following:


  1. the sequence of tasks and the duration of each task;

  2. deadlines for Owner’s decisions on material selections; and

  3. the proposed dates for delivery of materials.


3.4 Penalties. If Contractor fails to complete the Services by the Completion Date the Contractor agrees that the Owner will have suffered damages and agree that the Contractor shall pay Owner liquidated damages at a rate of $[Enter Amount] per day. The parties agree that liquidated damages are not a penalty, but rather a reasonable estimate of the amount of damages Owner would suffer in the event of delay. Owner shall have the right to withhold the amount of liquidated damages from any sums due to Contractor.


3.5 Allowable Delay. The following shall be deemed to be allowable delays:


  1. neglect or default by the Owner, their agent, lender, any other contractor or any of their independent material suppliers;

  2. governmental action or inaction; or

  3. any other reason or reasons beyond Contractor’s reasonable control, including without limitation damage caused by fire or other casualty, strikes, force majeure events, shortage of materials or labor, transportation delays, weather conditions, change orders, or deficiencies in this Agreement.

Where there is an allowable delay then the Completion Date shall be extended for a period equivalent to the time lost by reason of such delay.


3.6 Notice of Allowable Delay. The Contractor must provide notice to the Owner in writing within [Enter number of days] calendar days of it learning of an Allowable Delay and informing them of the additional time required to be added to the Completion Date which addition shall be agreed upon by the parties pursuant to a Change Order.

 

4. STATUTORY DISCLOSURE


4.1 The following statutory disclosures made by the Contractor are attached hereto as Appendix E:


  1. notice concerning commercial general liability insurance

  2. notice concerning workers’ compensation insurance

  3. mechanics lien warning

  4. information about the contractors state license board (CSLB)


Owner acknowledges receipt of such disclosures on execution of this Agreement.


4.2 Right to Cancel


The law requires that the contractor give you a notice explaining your right to cancel. A notice of a three day right to cancel is attached hereto as Appendix F


_______ OWNER - Initial here if the contractor has given you a ‘Notice of the Three-Day Right to Cancel.



5. TERM/TERMINATION.


5.1 Termination by Owner for Cause. Owner may provide the Contractor with [Enter number of days] calendar days notice to cure any default under this Agreement including but not limited to:

  1. failure to provide sufficient materials or labor

  2. failure to make due payment to subcontractors;

  3. failure to comply with all applicable laws or guidelines

  4. failure to provide Owner, upon request with evidence of Actual Costs or evidence that the Completion Date is likely to be met


Where the default is not cured by the expiry of the notice the Owner is entitled to terminate this Agreement.


5.2 Cause Remedies. Where the Agreement is terminated in line with clause 5.1 the Owner may, without prejudice to any other rights or remedies:


  1. take possession of any and all property of the Contactor remaining on the Property;

  2. accept assignment of subcontracts; and

  3. complete the Services using reasonable methods.


Owner shall furnish to Contractor a detailed accounting of any costs incurred in completion of the Services and invoice the Contractor for any costs over and above the amounts owed to the Contactor by the Owner.


5.3 Termination by Owner without Cause. Owner may terminate this Agreement by providing written notice to the Contractor who shall:


  1. immediately cease provision of the Services;

  2. ensure that the Services previously provided in the relation to the Property can be preserved and made safe; and

  3. terminate any Agreements made with suppliers or subcontractors.


Owner shall be liable to pay all Fees up to and including the date of termination.


5.4 Termination by Contractor for Cause. Contractor may provide the Owner with [Enter number of days] calendar days notice to cure any default under this Agreement. Where the default is not cured by the expiry of the notice date the Owner is entitled to terminate this Agreement.

6. CONTRACTORS REPRESENTATIONS AND WARRANTIES


6.1 Insurance. The Contractor acknowledges the Contractor's obligation to obtain appropriate insurance coverage for the benefit of the Contractor and any of its employees or sub-contractors.  Contractor will provide the Recipient with a certificate naming the Recipient as an additional insured party.


6.2 Representations. Contractor and its subcontractors shall:


  1. take all reasonably necessary safety precautions,

  2. make reports to the Owner of any injuries or hazards on the Property

  3. comply with all applicable laws, ordinances, regulations, and orders issued by a public authority, whether federal, state, or local.

  4. furnish all required safety equipment and ensure all of its employees and subcontractors’ employees have and wear personal protective equipment in compliance with applicable safety requirements.


6.3 Warranty. Contractor warrants that the Work shall be carried out in accordance with this Agreement shall be free from material structural defects.


6.4 Remedial Action. Contractor agrees upon notice provided by the Owner of any defect, and upon leave to inspect such defect, to make any necessary repairs to any Services found to be not in accordance with the Agreement for a period of [Enter time e.g. one year] year from the Completion Date (the “Warranty Period”). Contractor shall not however be liable for the costs of any repairs to such defect where Contractor has not been provided notice of the defect and has not received an opportunity to cure the defect.


6.5 Product Warranties. Any and all product warranties, are deemed assigned from Contractor to Owner.


6.6 No Liability for Consequential Damages. Where permitted by applicable law and other than where expressly stated in this Agreement the Contractor and the Owner waive claims against each other for consequential damages including but not limited to  loss of income, profit, financing, business, and reputation, except where loss of profit relates directly to Fees due to the Contractor under this Agreement.


7. INDEMNIFICATION.


8.1 The Contractor, at its own expense, shall indemnify, hold harmless and defend the Owner, and as applicable its agents, against any adverse consequences due to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property other than the Services themselves that the Owner suffers arising from or relating to any negligent act or omission or wilful misconduct by the Contractor or its employees, subcontractors or agents in the provision of the Services . For purposes of this Agreement, “adverse consequences” shall mean all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, costs, liabilities, obligations, losses, expenses, and fees including, without limitation, court costs and reasonable legal fees.

 

9. MISCELLANEOUS


9.1 ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between the Parties, and supersedes and cancels all prior and contemporaneous agreements, commitments, communications, and writings, whether oral or written. No amendment or modification of this Agreement shall be effective unless it is in writing and signed by both the Parties.


9.2 NO WAIVER. No failure on the part of either Party hereto to exercise, and no delay in exercising, any right, remedy, or power under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, remedy or power preclude any other or further exercise of any other right, remedy, or power. No waiver shall be valid unless it is in writing and signed by the Party to be bound thereby.


9.4 SEVERABILITY. If any provision or part thereof of this Agreement is determined to be prohibited by, or invalid, illegal or unenforceable under, applicable law, then, such provision or part thereof shall be shall be deemed amended to conform to applicable laws so as to be valid or enforceable or, if it cannot be amended without materially altering the intention of the Parties, then such provision or part thereof shall be stricken without invalidating the remainder of such provision or the remaining provisions of this Agreement.


9.5 ASSIGNMENT. Neither the rights nor obligations under this Agreement may be assigned or otherwise disposed of without prior written consent of the non-assigning party.


9.6 NOTICE For purposes of providing notice under the terms of this Agreement, such notice shall be directed to the current address of the Party to receive the notice.


9.7 GOVERNING LAW. The provisions of this Agreement shall be governed by and interpreted in accordance with the laws of the county of [Enter County] and the State of California.

 

The Parties have executed this Agreement on the date first written above.


[ENTER OWNER NAME]





Per:___________________________

      Authorized Signatory



[ENTER CONTRACTOR NAME]





Per:___________________________

      Authorized Signatory






Appendix A - Plans


[Attach a copy of the Plans here.]










































Appendix B - CHANGE ORDER















































Appendix C - ESTIMATED COSTS
















































Appendix D - LIST OF APPLICABLE ACTUAL COSTS



















































APPENDIX E - STATUTORY DISCLOSURES


1. “COMMERCIAL GENERAL LIABILITY INSURANCE (CGL)


The Contractor [Choose Correct Option]:


  1. does not carry commercial general liability insurance.

  2. carries commercial general liability insurance written by [Enter name of Insurance Company]. You may call the [Enter name of Insurance Company] at [Enter Phone Number] to check the contractor’s insurance coverage.

  3. is self-insured


2. WORKERS’ COMPENSATION INSURANCE


The Contractor [Choose Correct Option]:


  1. has no employees and is exempt from workers’ compensation requirements.

  2. carries workers’ compensation insurance for all employees.


3. MECHANICS LIEN WARNING


Anyone who helps improve your property, but who is not paid, may record what is called a mechanics’ lien on your property. A mechanics’ lien is a claim, like a mortgage or home equity loan, made against your property and recorded with the county recorder.


Even if you pay your contractor in full, unpaid subcontractors, suppliers, and laborers who helped to improve your property may record mechanics’ liens and sue you in court to foreclose the lien. If a court finds the lien is valid, you could be forced to pay twice or have a court offi cer sell your home to pay the lien. Liens can also affect your credit.


To preserve their right to record a lien, each subcontractor and material supplier must provide you with a document called a ‘20-day Preliminary Notice.’ This notice is not a lien. The purpose of the notice is to let you know that the person who sends you the notice has the right to record a lien on your property if he or she is not paid.


BE CAREFUL. The Preliminary Notice can be sent up to 20 days after the subcontractor starts work or the supplier provides material. This can be a big problem if you pay your contractor before you have received the Preliminary Notices. You will not get Preliminary Notices from your prime contractor or from laborers who work on your project. The law assumes that you already know they are improving your property.


PROTECT YOURSELF FROM LIENS. You can protect yourself from liens by getting a list from your contractor of all subcontractors and material suppliers that work on your project. Find out from your contractor when these subcontractors started work and when these suppliers delivered goods or materials. Then wait 20 days, paying attention to the Preliminary Notices you receive.


PAY WITH JOINT CHECKS. One way to protect yourself is to pay with a joint check. When your contractor tells you it is time to pay for the work of a subcontractor or supplier who has provided you with a Preliminary Notice, write a joint check payable to both the contractor and the subcontractor or material supplier.


For other ways to prevent liens, visit CSLB’s website at www.cslb.ca.gov or call CSLB at 1-800-321-CSLB (2752). Remember, if you do nothing, you risk having a lien placed on your home. This can mean that you may have to pay twice, or face the forced sale of your home to pay what you owe.”


4. “INFORMATION ABOUT THE CONTRACTORS STATE LICENSE BOARD (CSLB)”


CSLB is the state consumer protection agency that licenses and regulates construction contractors. Contact CSLB for information about the licensed contractor you are considering, including information about disclosable complaints, disciplinary actions and civil judgments that are reported to CSLB. Use only licensed contractors. If you file a complaint against a licensed contractor within the legal deadline (usually four years), CSLB has authority to investigate the complaint. If you use an unlicensed contractor, CSLB may not be able to help you resolve your complaint. Your only remedy may be in civil court, and you may be liable for damages arising out of any injuries to the unlicensed contractor or the unlicensed contractor’s employees.



























APPENDIX F - NOTICE OF RIGHT TO CANCEL


NOTICE OF RIGHT TO CANCEL


_________________________ (Enter date of transaction)


You may cancel this transaction, without any penalty or obligation, within three business days from the above date.


If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within 10 days following receipt by the Contractor of your cancellation notice, and any security interest arising out of the transaction will be canceled.


If you cancel, you must make available to the Contractor at your residence, in substantially as good condition as when received, any goods delivered to you under this contract or sale, or you may, if you wish, comply with the instructions of the Contractor regarding the return shipment of the goods at the seller’s expense and risk. If you do make the goods available to the Contractor and the Contractor does not pick them up within 20 days of the date of your notice of cancellation, you may retain or dispose of the goods without any further obligation.


If you fail to make the goods available to the Contractor, or if you agree to return the goods to the Contractor and fail to do so, then you remain liable for performance of all obligations under the contract.


To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegram to the Contractor at the business address above not later than midnight of [ENTER DATE]


I hereby cancel this transaction.



________________________________________

Owner Signature


________________________________________

Date



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This document is provided
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Jonathan Macy

Jonathan Macy
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Attorney at Law
Jonathan Macy previously served as General Counsel and Chief Compliance Officer for an international insurance services company. In this capacity, he provided legal advice to various departments and members of management on all levels covering broad spectrum of legal issues. Mr. Macy participated from the planning phase through implementation and operation of various company services and projects. Mr. Macy assisted in implementation of and oversaw and managed compliance with legal and regulatory policies. Mr. Macy negotiated and drafted complex commercial agreements, vendor agreements, technology agreements, licensing agreements, confidentiality agreements, and lease agreements.
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