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Common terms used in construction contracts

Before you get involved in any type of construction agreement, you should work to understand the contract involved. Construction contracts can become complicated, so it's a good idea to work with a construction law professional to vet anything you plan to sign. It's also a good idea to understand some common terminology in construction contracts, especially if you plan to get involved in other deals.

One common terms is "allowance." This means the amount included in a contract that the contractor might use toward purchasing supplies or other items. Allowance doesn't always refer to exact price, because some estimation is involved, and the contract usually uses a middle-market estimate as a guideline. A contractor might ask for a painting allowance, for example, which means up to that amount is going to be used to paint the building.

When contracts use the word structural, they are talking about a load-bearing element of the building. It's an important distinction between load-bearing and decorative elements; in some cases, you might not want a contractor making any changes to structural elements.

Rough-in refers to the "rough draft" of any installation. Plumbing or electrical elements might be roughed in prior to finishing touches being put on them. Trim-out refers to the completed finishes, such as installing fittings, molding or mounting covers. If you want a finished product, ensure your contract includes trim-out.

Finally, you might want to ensure your contract says the premises will be left broom clean. That means all the debris from construction are removed or swept away and you won't have to deal with leftover supplies, packing materials or sawdust.

Source: Better Homes and Gardens, "Understanding Construction Contracts," accessed July 22, 2016

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