Creating Construction Contracts: How-to.

How to create a Construction Contracts

A client once told me that he liked working with my company because there were "no surprises."

His expectations of what we would build for him, how long it would take to build, and how much we would charge were all met.

Meeting clients' expectations and, as a result, improving the likelihood that yours will be satisfied as well, requires that they be understood and aligned in the first place.

For example, the clients are given to understand that, almost inevitably, during the course of a project, extra costs will crop up.

You, on the other hand, understand that it is your responsibility to keep the client up to date on those costs as they arise and not hit them with the extras after they have piled up for weeks or months.

In addition to meticulous construction planning, a well-crafted construction contract is an excellent means of aligning our expectations with those of the owners.

However, some builders may be hesitant to develop a comprehensive contract due to the added burden it can impose, or they may prefer to rely on a handshake agreement and trust their reputation rather than relying on lawyers and legal provisions to define their relationship with clients.

Even experienced contractors, who work on large projects, may be hesitant to develop a comprehensive contract, often citing reasons such as avoiding paperwork.

However, by not taking the time to create a thorough agreement, they risk losing control of their business and the building process to their creditors.

Contractors Ensure Expectation Control

As the experts in their field, it is essential that contractors stay in control and ensure that their expectations align with those of their clients before construction begins.

A detailed contract is an indispensable tool in achieving that goal, and contractors must make sure to agree on one to maintain control and avoid unnecessary surprises.

As a result of hearing many builders express their desire for a simpler, shorter construction contract, I attempted to draft a concise version that I could recommend with confidence.

However, despite my efforts, I found it impossible to create one. 

Every single clause outlined in my existing contract's table of contents is essential, even for smaller projects such as bathroom renovations or deck construction.

Thus, investing the time to create a comprehensive contract is worthwhile. Moreover, regardless of the project's size, it is crucial for clients to invest an hour in reading and understanding the agreement's ground rules before embarking on the lengthy construction process.

Doing so will help avoid misunderstandings and ensure that the project proceeds smoothly.

If parties had created a comprehensive contract and adhered to it, nine out of ten disputes could have been prevented.

A construction contract's format and its components

Construction contracts usually consist of several distinct sections, and while some off-the-shelf contracts may combine them, a comprehensive contract should have clearly separated sections.

This separation is crucial in creating an effective agreement that matches the expectations of both the contractor and the client.

These sections are so distinct that, in construction legal terms, they are known as "separate documents." A well-crafted construction contract should include the following documents:

• The Agreement.
• The Condition.
• The Plans.
• The Specifications.
• The Addenda.