“Contract law is essentially a defensive scorched-earth battleground where the constant question is, ‘if my business partner was possessed by a brain-eating monster from beyond spacetime tomorrow, what is the worst thing they could do to me?'”
– Charles Stross
Despite popular understanding, verbal contracts are legally enforceable. But here is the problem: actually proving what the two contracting parties agreed upon in a court of law is extremely difficult – if not outright impossible.
Their simplicity makes written contracts the vastly preferable option. A single document lays out precisely what the two parties offer each other, whether those offers have been accepted, whether the agreement is legally binding, and various other details which will prove extremely important should either party decide to back out of the deal.
If you’re planning on building a new home, remodeling a home, creating an addition to your home, or simply building a nice deck, then you ought to have already predicted this advice: get a written construction contract. We dearly hope you will choose an earnest, reputable contractor to do the work, but a contract provides too much peace of mind to go without one.
It is quite possible that you did not study contract law at Harvard. Neither did we, but as a general contractor serving Central Minnesota and the greater St. Cloud area, we are qualified to recommend the inclusion of a few key details in the next construction contract you sign. Here are the requisites!
Naturally, you don’t want to enter any agreement without knowing the magnitude of the bill you’re expected to foot. Your construction contract should therefore include the project’s total cost. Two methods are commonly used to determine cost:
Cost plus – The owner pays the cost of the work plus a fee to the contractor. The fee may be flat or relative to (i.e. a percentage of) the cost of the project. When their fee is a percentage, the onus is on the contractor to demonstrate the actual cost of the project.
Guaranteed maximum price – The contractor guarantees completion of the project for a price that will not exceed a certain amount. This method is usually preferred by homeowners, as it tells them what they are getting into upfront.
Definition of Work
When you buy a tomato at the grocery store, you don’t need the store to provide a contract that defines “tomato.” You are already familiar with tomatoes and what purchasing one entitles you to.
Home construction and remodeling aren’t as simple as tomatoes. “Work” is a vague concept, which is why a construction contract must explicitly detail every facet of the work that is to be completed at your property, including architectural plans, specifications, materials, labor, supervision, and change orders (should they arise).
Your expectations of your contractor should be committed to paper and signed. It is the best way to ensure they are legally accountable for providing every service requisite for the completion of the project, which typically include:
- Quality workmanship
- Payment to subcontractors
- Payment to material suppliers
- Insurance, such as workers’ compensation
- Acquisition of relevant permits
- Proof of legal compliance
- Subsequent cleanup of the job site
A competent contractor won’t merely wish to detail their obligations to the owner. Good faith works both ways, which is why a construction contract should spell out the client’s obligations as well. These typically include:
- Method of payment
- Guarantee of access to job site
- Description of conditions at job site
- Plans, including any specific materials the client requires
- Deadlines for selecting specified materials
Here’s something all general contractors like: getting paid. That is why a construction contract includes the dates at which the client is expected to make payments. Progress payments, which are owed when predetermined milestones are reached, are standard, but freedom of contract allows the contractor and their client to define any payment terms they agree upon. The contract may also obligate the contractor to demonstrate that they are paying their subcontractors.
A change order is any request by either party that materially alters the previously agreed upon scope of work. A construction contract should allow change orders, as well as detail any deadline extensions and increased costs that would accompany them.
Mediation. Arbitration. Litigation. All of these are commonly utilized to resolve disputes between parties that have entered a contract. Neither the contractor nor their client enter into a contract in the hope that a disagreement will arise between them, but deciding how potential disputes will be settled ahead of time is quite important.
A construction contract should contain the provisions under which it becomes null and void. Default by the contractor is a common reason for terminating a contract, but any other failures to fulfill an obligation may be included as well.
Would you like to see an example of an expertly drafted construction contract? Contact Wensmann Contractors today so we can create one together! And once we have, we’ll set right to work exercising every one of its provisions to the letter. You’ll enjoy absolute peace of mind that Central Minnesota’s most reliable general contractor is delivering precisely the results you’ve envisioned.