Protecting Yourself: 5 Key Elements You MUST Have in Your Construction Contract (2024)

There's an old saying, "The devil is in the details." But when it comes to construction contracts, the opposite is true: "The devil is in the LACK of details."

When you sign a contract for a construction project, the two things most likely to come back to bite you are 1) what is not written in the contract; and 2) what is not clearly stated in the contract.

To that end, before you sign anything and start working, make sure your contract has these 5 key elements.

A Detailed Scope of Work

The scope of work section spells out, in specific terms, exactly what the contractor will be responsible for doing. What work needs to be done? How will the work be done? Who will do the work?

The scope of work should leave no room for interpretation. Also, make sure to itemize any exclusions--what is NOT included in the scope--so the client can't come back later with a dispute over work they wrongly expected you to do.

Project Cost and Payment Schedule

Your contract should spell out the project cost in a way that clearly reflects the scope of work. Be sure to note what sorts of factors (if any) could change the cost.

In addition, make sure to establish a clear payment schedule based on your needs. Spell out clearly when and how you expect to be paid, and what happens if the client doesn't pay on time.

Construction Timeline

Your contract should include a start date and end date for your project, as well as the sequence of what gets done when and a set of milestones to measure the progress.This is especially true if you are a home-improvement contractor where this is required by law. At the same time, make sure there's a disclaimer that holds you harmless for delays caused by things you can't control (such as bad weather, supply chain issues, delays on the client's end, etc.).

Change Order Process

Change orders can impact all parts of the project (i.e., scope of work, cost, and timeline). If a client requests a change during the project, you need to have a process in place for how those changes will be handled. Usually, a change order is an addendum to the contract that stipulates what the changes are, how they affect the timeline, and what the additional work will cost.Make sure these changes are documented in writing (even an email or a text message).You should also get this change signed by both parties.

Project Issues and Dispute Resolution

No project is without its problems. Your contract should have a section that outlines how you and the client will communicate about issues as they come up, and how those issues will be resolved.

Your contract should also include a dispute resolution clause that spells out the process for handling disagreements. This could involve mediation or arbitration, and it will save you a lot of time and money in the long run if problems do come up.

If you need help drafting a construction contract, or if you’re unsure whether a particular contract leaves you vulnerable, we’re here to help. Contact Spitalnik & Spitalnik today to schedule an appointment.