Once you’ve done all your homework and decided which contractor you want to hire the next step is signing the contract. Ideally, you want to have an attorney review the contract before you sign it. However, I know that isn’t always realistic so the following highlights the most important terms of a residential construction contract.
- Scope of work – The contract should say exactly what work the contractor is to going to perform. You should carefully review this section before signing to make sure the contractor is doing all the work you want them to do.
- Contract price – There should be an agreed upon contract price for the defined scope of work. There should also be a payment schedule listing when payments are due. You should never agree to make final payment until the contractor has finished all the work and obtained final inspection.
- Change orders – Inevitably the contractor runs into an issue which they will claim is “change order” work. This construction term means the work is outside the scope of work and the contractor won’t do the work without additional money. This is why the scope of work clause is so important. The contract should say that all change orders must be in writing and signed by the homeowner.
- Schedule – You should make sure the contract includes a written schedule that lists when the contractor is going to start the work and includes an estimated completion date. Unless the contract includes a completion date, the contractor is legally obligated to complete the work within a “reasonable time” which is extremely vague.
- Releases – The contract should require the contractor to provide a written release in exchange for all payments. The release is a written document from the contractor which confirms receipt of payment and waives the contractor’s right to make claims against you for the acknowledged payment. You should also require the contractor to provide releases from any suppliers and subcontractors working on the project. In most cases, you won’t know if your contractor has hired any suppliers/subcontractors so you should request a written list of all other companies that will be working on the project.
You will never be able to anticipate everything that can come during the course of any project but by following these tips you are putting yourself in the best position to negotiate any unanticipated problems.