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Important items to include in a construction contract

On Behalf of | Sep 15, 2021 | Construction Law

Carefully and thoughtfully negotiating a construction contract can help avoid problems in the future and protect the interests of the parties. Construction contracts outline the terms of the agreement and are an important foundation of any construction project.

What to include in a construction contract

A well rounded construction contract will include the following items or clauses:

  • Time frame: the contract should include a time frame or time frames for any aspect of its performance that occurs in the future.
  • Prices: the contract should outline prices for the goods and services included in the contract.
  • Payment methods and payment penalties: the contract should define terms of payment and if they are appropriate for the party’s financial institution. It may be possible to include lump sum or installment payments depending on what is negotiated. If there are late payment penalties, they should also be included and should be reasonable.
  • Material terms: material terms of the agreement should be included in the contract and the contract should be as specific as possible.
  • Industry-specific transaction rules: it is important to understand industry procedures for how transactions are governed in the construction industry if they are included in the contract.
  • Resolution of anticipated disputes and anticipated problems: checking for an arbitration clause before signing the contract is important to understand how anticipated disputes will be handled. If there are specific provisions in the contract aimed at addressing anticipated problems, it is also important to be aware of those and ensure they are fair.
  • Inability to agree: if the agreement is an interim agreement so that the project can begin but further negotiation is needed, the document needs to clearly state that.
  • Attorneys fees: it is important to know how the contract will handle the payment of attorney’s fees if there is a contract dispute or contract breach because it may require the payment of the other party’s fees.

In general, a construction contract should use specific terms, define the obligations of the parties to one another, list the delivery terms of products and services and list payment terms. A well-defined construction contract can help avoid problems down the road and construction law can help the parties ensure they have negotiated a contract that will protect them and their project.