Whether you’re a general contractor, subcontractor, or builder, having a well-drafted construction contract is crucial to protecting your business. A vague or incomplete contract can lead to misunderstandings, delayed payments, legal disputes, or even litigation. To avoid these costly issues, it’s essential that your construction contracts are clear, thorough, and legally enforceable. With the help of our peers at Volpe Law LLC, contractors can understand the essential elements for every construction contract.
Scope Of Work
The most important part of any construction contract is the scope of work. This section should clearly define what work is being performed, who is responsible for which tasks, what materials will be used, and any relevant plans or specifications.
Tip: Be as specific as possible. Vague descriptions can lead to disagreements about what was promised and what was delivered. Your construction litigation lawyer can draft a solid contract with clear terms so there’s no confusion about the respective roles of all signatories.
Payment Terms
Make sure the contract includes detailed payment terms, including:
- The total contract price or billing rate
- Payment schedule (e.g., milestones, progress payments, lump sum)
- Due dates and invoicing procedures
- Penalties for late payments
- Retainage terms, if any
Clear payment terms protect your cash flow and reduce the risk of disputes over compensation.
Timeline And Project Schedule
Include a realistic start date, substantial completion date, and final completion date. Delays are common in construction, so it’s also wise to include:
- Conditions that may extend the timeline (weather, permitting, supply chain issues)
- Notice requirements for delays
- Penalties for missed deadlines (liquidated damages) or bonuses for early completion
Change Order Procedures
Changes to the original scope of work are inevitable. Your contract should outline how change orders are handled:
- How changes must be submitted (in writing)
- Who approves them
- How costs and timelines will be adjusted
Without a change order process, you may find yourself performing extra work without being paid for it.
Warranties
Most clients expect some form of warranty on workmanship and materials. Your contract should spell out:
- What is covered under the warranty
- The length of the warranty period
- What voids the warranty (e.g., unauthorized modifications)
This protects both you and your client by setting clear expectations.
Insurance And Liability
Spell out the insurance requirements for both parties. Contractors typically need to carry:
- General liability insurance
- Workers’ compensation
- Builder’s risk insurance
Also include indemnity clauses that outline who is responsible for damages, injuries, or defects.
Dispute Resolution
If something goes wrong, how will disputes be resolved? Many contractors prefer to avoid court and instead include:
- Mediation or arbitration clauses
- A specific venue or jurisdiction for legal proceedings
- A clause requiring written notice of disputes
- Having this in writing can save time and money if a disagreement arises.
Termination Clauses
Finally, include terms that define how and when the contract can be terminated—whether for cause (e.g., breach of contract) or convenience. This helps protect your business if the client becomes uncooperative or the project is halted unexpectedly.
Bottom Line
A solid construction contract isn’t just paperwork—it’s your best protection against costly legal issues. Taking the time to include these key provisions can prevent misunderstandings, safeguard your payments, and reduce liability. It’s crucial to have an experienced construction litigation lawyer review your contracts before signing, and draft them on your behalf, to ensure all your bases are covered.
