Essential Elements of a Construction Contract
Contracts are a part of your daily life. Buying a cup of coffee for your morning commute to work or hiring a college student to mow your lawn are only two examples of the many contracts people encounter on a daily basis. Yes, this does dispel the notion that contracts including construction contracts must be multiple-page documents created only after hours upon hours of intensive negotiations by teams of lawyers representing each of the parties.
The truth is that contracts, which are promises made by one party to another that are capable of being enforced under the law, can be simple or complex depending on the needs of the parties. For example, accepting the offer of the shop owner to sell you a cup of coffee for the price posted behind the cash register was fairly simple. Asking the college student to mow the lawn took longer in order to reach an agreement on the price, the day of the week for the service, and whether you or the student furnished the mower.
When parties seek to reach an agreement on more complex matters, such as the construction of residential or commercial structures, contracts become more formal and more extensive in order to document the rights and obligations of each party. Retaining a construction law attorney to negotiate ensures that your interests are protected. To help you have a better understanding of contracts and, specifically, construction contracts, here is an overview of the essential elements of a construction contract.
Elements of a valid contract
Contracts are agreements that parties make and that courts will enforce. To be enforceable, the agreement must have the following elements:
- Offer: One of the parties must make a promise to do or refrain from doing something.
- Acceptance: The other party must accept the offer as made by the other party to the agreement.
- Consideration: There must be money or something of value exchanged in return for the promise.
- Meeting of the minds: There must be a mutual understanding of the terms of the agreement and consent to being bound by them.
Oral or written contracts carry equal weight as far as being enforceable, but it is obviously easier to prove the terms of a written contract than an oral one. Oral contracts lend themselves to disagreements because they rely too much on each party recalling the terms of the agreement in exactly the same way.
Written contracts may actually help to prevent the parties from ending up in court by avoiding disagreements. Instead of relying on recollection, a well-written contract containing all of the essential terms of the agreement can be referred to whenever there is a disagreement about the obligations and rights of each party. This is particularly important in construction projects where terms of pricing, materials, specifications, deadlines, and other important matters may be forgotten or be subject to interpretation without having a comprehensive, written construction contract.
Negotiating a construction contract
The negotiation process of a contract for a construction project may vary depending on the parties or the type of project. Hiring a contractor to build a home, remodel an existing one or build a commercial building may start with the contractor or developer presenting you with its standard construction contract containing terms generally found in a construction contract to which has been added the prices and specifications, such as materials or the type of foundation, for your particular project.
Negotiations would focus on changes you may wish to make to the standard contract to make it a better reflection of your understanding of the agreement. At other times, the parties and their lawyers may start from scratch without a standard contract and negotiate the terms of their agreement along with essential clauses generally found in construction contracts.
Essential elements of a construction contract
Whether using a standardized form that you found on the internet or one specifically written by a construction attorney for your project, the following are some of the essential elements that it should include:
- Identify the parties: The names, addresses, and other information to identify each of the parties and their roles in the project.
- Location of the project: Depending on the type of construction project, an address may be sufficient to identify its location. Other times, however, a property description from a survey or filed map may be needed.
- Description of the work and the cost: This should be as detailed as your lawyer believes will be necessary to avoid conflicts over prices and work. For example, the contract should include terms about how the cost of the project will be affected by the availability of materials or changes in the market price of materials.
- Commencement and completion date: Dates for the start and expected completion of each stage of construction should be included to reflect the understanding of the parties. Include language making clear the rights of the parties in case dates stated in the contract are not met. For example, a construction contract may include monetary penalties against a party for failing to meet deadlines.
- Payment schedule: When payments must be made, the amount and what happens if a payment is not made must be included in the contract. For instance, does a contractor have the right to stop work on a project in response to a payment not being made?
- Remedies for breach of contract: The parties may agree to submit disputes under the contract to binding arbitration rather than engaging in litigation in court.
- Acts of God: Specify the effect on the contract of floods, tornados, hurricanes, and other natural or unforeseen circumstances beyond the control of the parties.
- Use of subcontractors and responsibility for liens filed by them: Whether the use of subcontractors is permitted and responsibility liens for payment filed by them should be included.
As much as you may want to get your project underway, it is better to listen to your attorney. Also, make certain the construction contract you sign accurately and completely represents your understanding of the agreement that you had with the other party.
Steve Howards has been writing legal-centric articles for several years now. He started working with the personal injury attorney law firm Herrig & Vogt in 2019 as the Content Marketing Manager, which has allowed him to expand on his writing in personal injury, family law, and much more. Steve strives to offer the public advice on various laws covering a variety of practices.
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