Numerous construction agreements are awful. Lawyers have studied hundreds of them, written dozens of them, and participated in the litigation of dozens of pointless lawsuits resulting from shoddy contracts. This article defines construction contracts and lists the owners and contractors the factors they should take into account before signing one. Getting help from a construction attorney in Olympia, WA, is crucial.
- What kind of agreement is it?
Making sure the written record appropriately depicts the type of transaction agreed upon is essential. Lawyers have seen “Fixed Price” contracts with language allowing the contractor to bill on a time and materials or cost-plus basis.
- Is the task scope specified in the contract?
Disputes frequently occur when the contract is vague concerning the nature of the task. Understanding what work is covered under a fixed-price contract is critical. The owner expects a precise description of the work that will be done and an accurate estimate of the cost, even with cost plus or time and materials contracts.
- What are the terms of the contract regarding cost overruns?
By incorporating a clause permitting them to charge a higher price if there are cost overruns, some contractors try to reduce the risk associated with a fixed-price contract. In these situations, it is crucial that the contract have a line-item budget outlining the expected time and material costs for each item.
- Payment and Invoicing.
Payment and invoicing details should be made explicit in the contract. The owner is frequently required to make progress payments during the project, although the contracts are frequently ambiguous. For instance, a contract can provide that a progress payment is due once the contractor has finished 20% of the work, but it leaves it up to the contractor to decide when 20% of the work is complete.
- Keeping records.
Numerous contractors are infamously lousy at keeping track of their expenses and labor hours. The contractor should be required by the contract to maintain correct records and to send each invoice with all related receipts and time sheets. Contractors that do not do this risk being involved in conflicts that develop during the project.
- Change orders
Owners frequently wish to expand the project’s scope of work or modify it while it is still in progress. The contractor reasonably wants compensation if these changes or additions raise expenses. Conflicts arise when the owner disputes the contractor’s allegations that the owner requested more work or altered the project’s scope. Due to this, it is essential that the contract explicitly indicate that the owner is not responsible for any modifications to the work’s scope unless they have been approved by the owner in a documented change order.