OTHER NAMESConstruction AgreementConstruction Management AgreementService Agreement for ConstructionConstruction Services Contract
What is a Construction Contract?
A Construction Contract is an agreement that outlines the terms of a construction project. Construction Contracts outline the project details, expectations, costs and payments, and can also define how to handle unexpected issues (such as weather delays or material shortages).
Typically, a contractor will draft the agreement and send it to the property owner to review. Once both parties agree on the terms, they both sign to make the contract legally binding.
When can you use a Construction Contract?
You are a contractor in charge of building or renovating a property.
You are hiring a contractor to build or renovate your property.
What we’ll cover
Sample Construction Contract
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This (the "Contract" or "Agreement") is made as of (the "Effective Date") by and between of , , , and of , , .
desires to provide Construction services to and desires to obtain such services from .
THEREFORE, in consideration of the mutual promises set forth below, the parties agree as follows:
Salesperson Responsible for Soliciting or Negotiating this Contract:
Sales Person Name:
. Beginning on , will provide to
. SCOPE OF WORK. will provide all services, materials and labor for the construction of described at the property of located at: , , , hereinafter referred to as ("Worksite").
This includes building and construction materials, necessary labor and site security, and all required tools and machinery needed for completion of construction.
is only responsible for furnishing any building improvements related to construction of the structure, but not related to landscaping, grading, walkways, painting, sewer or water systems, steps, driveways, patios and aprons, etc., unless they are specifically agreed to in writing.
. PLANS, SPECIFICATIONS AND CONSTRUCTION DOCUMENTS. will make available to all plans, specifications, drawings, blueprints, and similar construction documents necessary for to provide the Services described herein. Any such materials shall remain the property of . will promptly return all such materials to upon completion of the Services.
A list of job specifications is attached to this Contract.
. COMPLIANCE WITH LAWS. shall provide the Services in a workmanlike manner, and in compliance with all applicable federal, state and local laws and regulations, including, but not limited to all provisions of the Fair Labor Standards Act, the Americans with Disabilities Act, and , and the New Jersey Contractors Registration Act
. WORK SITE. warrants that owns the property herein described and is authorized to enter into this contract. Prior to the start of construction, shall provide an easily accessible building site, which meets all zoning requirements for the structure, and in which the boundaries of 's property will be clearly identified by stakes at all corners of the property. shall maintain these stakes in proper position throughout construction.
. MATERIALS AND/OR LABOR PROVIDED. shall provide to a List of each and every party furnishing materials and/or labor to as part of the Services, and the dollar amounts due or expected to be due with regards to provision of the Services herein described. This List of materials and/or labor shall be attached to this Agreement as Exhibit declares, under the laws of the , that this List is a true and correct statement of each and every party providing materials and/or labor as part of the Services herein described.
may substitute materials only with the express written approval of , provided that the substituted materials are no lesser quality than those previously agreed upon by and .
. NOTICE OF ALTERNATIVE BILLING CYCLE. This construction contract will allow to require the submission of billings or estimates in billing cycles other than monthly cycles. Billings or estimates for this construction contract shall be submitted in accordance with the "PAYMENT" section of this contract.
. PROGRESS PAYMENTS. Progress payments shall be made on the basis of a certified billing or estimate for work performed, and for materials or products supplied, during the preceding monthly billing cycle or during an alternative billing cycle identified in this construction contract to , , . shall:
(A) Make progress payments no later than 14 days after the date the billing is received; and
(B) Make final payment of all remaining amounts no later than seven days after the date that approves the work.
may make progress payments or final payment later than 14 days after the date the billing or estimate is submitted if:
(A) provides drawings and specifications that expressly state in a clear and conspicuous manner that an extended payment specified period is allowed and identify the extended payment period as a specific number of days after the date that the billing or estimate is received or the date that the owner approves all work; and
(B) provides on each page of drawings and specifications the Notice of Extended Payment Provision statement included with this construction contract.
, , , , , ., in the amount of upon completion of the services described in this Agreement. upon executing this Agreement. on or before . agrees to pay in installment payments of the total sum of as follows:
agrees to pay as follows:
Payment discount terms include a percent discount if the total bill is paid within days.
Payment Discount Terms
If any invoice is not paid when due, interest will be added to and payable on all overdue amounts at percent per year, or the maximum percentage allowed under applicable laws, whichever is less. shall pay all costs of collection, including without limitation, reasonable attorney fees.
, including the New Jersey Lien Law, or may stop work until payment is received
. shall commence the work to be performed within 30 days of and shall complete the work on or before , time being of the essence of this contract.
Upon completion of the project, agrees to sign a Notice of Completion within days after the completion of the contract. If the project passes its final inspection and does not provide the Notice, may sign the Notice of Completion on behalf of .
. PERMITS. shall obtain all necessary building permits. shall apply for and obtain any other necessary permits and licenses required by the local municipal/county government to do the work, the cost thereof shall be included as part of the Payment to under this Contract.
, or any allowed person, e.g. lender, public body, or inspector, may make changes to the scope of the work from time to time during the term of this Agreement. However, any such change or modification shall only be made in a written "Change Order" which is signed and dated by both parties. Such Change Orders shall become part of this Agreement. agrees to pay any increase in the cost of the Construction work as a result of any written, dated and signed Change Order. In the event the cost of a Change Order is not known at the time a Change Order is executed, shall estimate the cost thereof and shall pay the actual cost whether or not this cost is in excess of the estimated cost. Extra Work and Change Orders become part of the contract once the order is prepared in writing and signed by the parties prior to the commencement of any work covered by the new change order. The order must describe the scope of the extra work or change, the cost to be added or subtracted from the contract, and the effect the order will have on the schedule of progress payments.This Contractor does not carry commercial general liability insurance. This Contractor carries commercial general liability insurance written by . You may call the insurance company at to check the contractor's insurance coverage. This Contractor is self-insured. A notice concerning commercial liability insurance is attached to this contract. This Contractor is a limited liability company that carries liability insurance or maintains other security as required by law. You may call (the insurance company or trust company or bank) at to check on the contractor's insurance coverage or security. This Contractor has no employees and is exempt from workers' compensation requirements. This Contractor carries workers' compensation insurance for all employees. A notice concerning workers' compensation insurance is attached to this contract.
. INSURANCE. Before work begins under this Contract, shall furnish certificates of insurance to substantiating that has placed in force valid insurance covering its full liability under the Workers' Compensation laws of the and shall furnish and maintain general liability insurance, and builder's risk insurance for injury to or death of a person or persons, and for personal injury or death suffered in any construction related accident and property damage incurred in rendering the Services.
. Upon request, will execute all documents necessary to confirm or perfect the exclusive ownership of to the Work Product.. Upon request, will execute all documents necessary to confirm or perfect the exclusive ownership of to the Work Product.
. CONFIDENTIALITY. , and its employees, agents, or representatives will not at any time or in any manner, either directly or indirectly, use for the personal benefit of , or divulge, disclose, or communicate in any manner, any information that is proprietary to . and its employees, agents, and representatives will protect such information and treat it as strictly confidential. This provision will continue to be effective after the termination of this Contract.
Upon termination of this Contract, will return to all records, notes, documentation and other items that were used, created, or controlled by during the term of this Contract.
State of Commonwealth of However, this indemnity does not extend to liability for loss or damage resulting from the sole negligence of or 's agents or employees because it would violate 's public policy. However, this indemnity does not extend to liability for loss or damage resulting to the extent the claims arise out of, pertain to, or relate to the active negligence or willful misconduct of or 's agents or employees. However, this indemnity does not extend to liability for loss or damage resulting from the negligence, intentional act, or omission of or 's agents or employees. This indemnity shall be provided in proportionate extent to 's partial responsibility for the claim, damage, injury or loss, but shall not provide indemnity against claims or losses deemed to be caused by the sole negligence or willful misconduct of or 's agents or employees. This indemnity shall be provided even if is partly responsible for the claim, damage, injury or loss, but shall not provide indemnity against claims or losses deemed to be caused by the negligence, willful misconduct, or breach of contract of or 's agents or employees. This indemnity shall be provided only to the proportionate extent of 's partial responsibility for the claim, damage, injury or loss. shall not provide indemnity against claims or losses deemed to be caused by the sole negligence or willful misconduct of or 's agents or employees.
If provides work, services, or other preparatory work in connection with a public building or improvement, may require to indemnify and hold harmless and its officers and employees, from liabilities, damages, losses and costs, including reasonable attorney fees and court costs, but only to the extent caused by the negligence, recklessness, or intentional wrongful conduct of the contractor, subcontractor, or design professional, including any other persons employed or used by such contractor, subcontractor or design professional in performance of the contract. If the contract for the public building or improvement is for another purpose, cannot provide indemnity as it is prohibited by 's public policy.
warrants its labor for a period of one (1) year. All product warranties will be extended to upon payment in full of work performed. 's liability under a warranty claim shall be limited to and not exceed the total price charged for the work performed. shall make warranty claims timely within the stated warranty period upon discovering a defect or performance problem.
In addition to any additional warranties agreed to by the parties, the contractor warrants that the work will be free from faulty materials; constructed according to the standards of the building code applicable for this location; constructed in a skillful manner and fit for habitation or appropriate use. The warranty rights and remedies set forth in the Maine Uniform Commercial Code apply to this contract.
. FREE ACCESS TO WORKSITE. will allow free access to work areas for workers and vehicles and will allow areas for the storage of materials and debris. Driveways will be kept clear for the movement of vehicles during work hours. will make reasonable efforts to protect driveways, lawns, shrubs, and other vegetation. also agrees to keep the Worksite clean and orderly and to remove all debris as needed during the hours of work in order to maintain work conditions which do not cause health or safety hazards.
. UTILITIES. shall provide and maintain water and electrical service, connect permanent electrical service, gas service or oil service, whichever is applicable, and tanks and lines to the building constructed under this Agreement after an acceptable cover inspection has been completed, and prior to the installation of any inside wall cover. shall, at 's expense, connect sewage disposal and water lines to said building prior to the start of construction, and at all times maintain sewage disposal and water lines during construction as applicable. shall permit to use, at no cost, any electrical power and water use necessary to carry out and complete the work.
. INSPECTION. shall have the right to inspect all work performed under this Contract. All defects and uncompleted items shall be reported immediately. All work that needs to be inspected or tested and certified by an engineer as a condition of any government departments or other state agency, or inspected and certified by the local health officer, shall be done at each necessary stage of construction and before further construction can continue. All inspection and certification will be done at 's expense.
. DEFAULT. The occurrence of any of the following shall constitute a material default under this Contract:
The failure of to make a required payment when due.
The insolvency of either party or if either party shall, either voluntarily or involuntarily, become a debtor of or seek protection under Title 11 of the United States Bankruptcy Code.
A lawsuit is brought on any claim, seizure, lien or levy for labor performed or materials used on or furnished to the project by either party, or there is a general assignment for the benefit of creditors, application or sale for or by any creditor or government agency brought against either party.
The failure of to make the building site available or the failure of to deliver the Services in the time and manner provided for in this Agreement.
. REMEDIES. In addition to any and all other rights a party may have available according to law of the , if a party defaults by failing to substantially perform any provision, term or condition of this Contract (including without limitation the failure to make a monetary payment when due), the other party may terminate the Contract by providing written notice to the defaulting party. This notice shall describe with sufficient detail the nature of the default. The party receiving said notice shall have days from the effective date of said notice to cure the default(s) or begin substantial completion if completion cannot be made in days. Unless waived by a party providing notice, the failure to cure or begin curing, the default(s) within such time period shall result in the automatic termination of this Contract.
, or other labor disputes, or supplier failuresAny controversies or disputes arising out of or relating to this Agreement will be submitted to mediation in accordance with any statutory rules of mediation. If mediation does not successfully resolve the dispute or is unavailable, then the parties may proceed to seek an alternative form of resolution in accordance with any other rights and remedies afforded to them by law, including filing suit. Any controversies or disputes arising out of or relating to this Agreement will be resolved by binding arbitration under the rules of the American Arbitration Association. The arbitrator's award will be final, and judgment may be entered upon it by any court having proper jurisdiction. Any controversies or disputes arising out of or relating to this Agreement will be submitted to mediation in accordance with any statutory rules of mediation. If mediation is not successful in resolving the entire dispute or is unavailable, any outstanding issues will be submitted to final and binding arbitration under the rules of the American Arbitration Association. The arbitrator's award will be final, and judgment may be entered upon it by any court having proper jurisdiction.
Contractor's Initials: _______
Property Owner's Initial: ______________
Contractor's Initials: _______
Property Owner's Initial: ______________
Contractor's Initials: _______
Property Owner's Initial: ______________
. ENTIRE AGREEMENT. This Contract contains the entire Agreement of the parties, and there are no other promises or conditions in any other contract or agreement whether oral or written concerning the subject matter of this Agreement. Any amendments must be in writing and signed by each party. This Agreement supersedes any prior written or oral agreements between the parties.
. SEVERABILITY. If any provision of this Agreement will be held to be invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
. AMENDMENT. This Agreement may be modified or amended in writing, if the writing is signed by each party.
. GOVERNING LAW. This Agreement shall be construed in accordance with, and governed by the laws of the , without regard to any choice of law provisions of or any other jurisdiction.
. NOTICE. Any notice or communication required or permitted under this Agreement shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the address set forth in the opening paragraph or to such other address as one party may have furnished to the other in writing.
. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Contract shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Contract.
. SIGNATORIES. This Agreement shall be signed , and , and shall be effective as of the date first written above.
the services described in the attached , ,
The Primary Contractor should file a Notice to Owner prior to starting work under this Agreement in order to preserve the Contractor's rights to file a lien against the property should the Owner fail to make payment.
In order to preserve the right to file a Mechanics Lien on the property, the Contractor or Laborer must serve the Property Owner with a Preliminary Twenty Day Notice within 20 days of first providing services, labor or materials. The documents requirements can be located at: http://www.azleg.gov/FormatDocument.asp?inDoc=/ars/33/00992-01.htm&Title=33&DocType=ARS. Once served a copy of the Notice and Proof of Service must be kept for filing with the Mechanics Lien should one become necessary due to the Owners failure to pay for services or labor.
The Notice to Owner included in this is required by Missouri Law in order for the Contractor to preserve his or her right to file a Mechanic's Lien should the Owner fail to make payment for services or materials provided.
While a Contractor typically has 6 months from the date the last labor or material was provided to file a Mechanics Lien, if the Owner records a Notice of Intended Sale the Contractor must provide a Notice of Rights 5 days prior to the date of closing set forth in the Notice of Intended Sale in order to maintain their right to file a lien.
Maine law requires the Contractor attach the Maine Attorney General Home Construction Warning notice to the . A copy of this notice has been included with your Contract. This version is dated 2007 and is current as of December 2013. To verify the version is still current please visit the Attorney Generals website at: http://www.maine.gov/ag/consumer/housing/home_construction.shtml.
In addition to the Notice contained inside the , the Contractor must provide the Owner with a Disclosure of Lien Rights form which must be signed prior to the Contractor starting work on the project. The form can be printed for the Hawaii Government Website at: http://hawaii.gov/dcca/pvl/boards/contractor/application_publications/pvl_ct-25.pdf/?searchterm=Disclosure%20of%20LIen%20Rights
All Subcontractors are required to provide the Property Owner with a Notice of Right to Lien in order to preserve its right to file a lien. As the Primary Contractor on a project you should consider informing any subcontractors of its responsibility. You can use Rocket Lawyer's Subcontractor Contractor to enter into contract with the Subcontractor and provide the Subcontractor with the Notice of Right to Lien which can be served on the Property Owner.
The included Notice of Right to Lien should be served on the Property Owner prior to starting work on the project.
If the Contractor intends to hire a Subcontractor to assist on this project, the Contractor should notify the Subcontractor of the required Notice the Subcontractor must provide to the Property Owner prior to starting work on the project. This Notice along with a Subcontractor's Agreement are available on RocketLawyer.com.
REQUIRED NOTICE. The Contractor must provide the Property Owner with 3 separate notices prior to or at the time of signing the . Prior to meeting with the Property Owner to sign this , the following forms should be located and printed:
- Consumer Protection Notice: This notice can be located at: http://ccbed.ccb.state.or.us/WebPDF/CCB/Publications/CPN.pdf
-Information Notice To Owner About Construction Liens: This notice can be located at: http://ccbed.ccb.state.or.us/WebPDF/CCB/Publications/information%20notice%20liens.pdf
-Notice of Procedure: This notice can be located at: http://ccbed.ccb.state.or.us/WebPDF/CCB/Publications/notice%20of%20procedure.pdf
This includes the following additional attachments which should be used as follows:
- Notice of Possible Mechanics Lien. The Contractor is required to provide the Owner with the included Notice of Possible Mechanics Lien within 10 days of starting work on the construction project described in this Contract. It is best to send this Notice by certified mail, return receipt requested to ensure proof of receipt. You can use Rocket Lawyer's Affidavit of Service to include with this Notice and further document proof this Notice was mailed. All proof of service should be kept in a safe location.
- Notice of Right to Rescind. This Notice must be provided in duplicate to EACH Property Owner. The Acknowledgement of Receipt near the bottom of the form should be signed by each Owner. The Owner(s) should only execute the cancelation portion of the form if the Owner wishes to cancel the within the allowed amount of time.
- Beneficial Information to Consumers Summary of Registration Law (R.I.G.L. Title 5 Chapter 65). This document should be provided to the Property Owner. This document provides helpful information to the Property Owner regarding their rights under Rhode Island General Law.
The included Notice of Lien Rights must be provided to the Property Owner before the General Contractor starts work on the project.
The requirements for a Construction Home Improvement Contract are very strict in California. Be sure to read the interview questions carefully and please answer each question completely. Failure to answer a question could result in California-mandated clauses, or required information, to be missing and render the Contract void.
If the parties decide not to electronically sign this contract, be sure that the Notice of Right to Cancel is signed on the same day as the Contract itself is signed.
For further information and resources, please see California Business and Professions Code Sections 7150-7168 and the California Contractors State License Board website: http://www.cslb.ca.gov/
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This document needs to be signed by:
All Providers (or Representatives of the Providing Company) -- typically the Primary Contractor
All Recipients (or Representatives of the Receiving Company) -- typically the Homeowner(s)
The Contract can be signed online. It becomes effective as of the date specified in the Contract.
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Everyone gets a copy
Anyone named in the document should receive a copy of the signed document. If you sign this agreement online, a signed copy will be securely stored in your account. You can share your document from your account.
The Primary Contractor should file a Notice to the Owner prior to starting work under this Agreement in order to preserve the Contractor's rights to file a lien against the property should the Owner fail to make payment.
Make sure any optional attachments have been included. You can scan and upload attachments to your Rocket Lawyer account using your Rocket Lawyer account to ensure you have a complete record of all documents involved in this transaction.
In some states, in order to preserve the right to file a Mechanics Lien on the property, the Contractor or Laborer must serve the Property Owner with a Preliminary Twenty Day Notice within a certain timeframe (for example, 5 days or 20 days) of first providing services, labor or materials. Once served a copy of the Notice and Proof of Service must be kept for filing with the Mechanics Lien should one become necessary due to the Owners failure to pay for services or labor.
Some states require the Contractor attach the additional notices to the Construction Contract. When required, this Construction Contract includes the additional attachments which should be used. Depending on the state, these may include:
Various consumer protection information brochures and notices, such as A Consumer Protection Notice, an Information Notice To Owner About Construction Liens, a Notice of Procedure, Beneficial Information to Consumers Summary of Registration Law, etc.
A Disclosure of Lien Rights form (which may also be called a Notice of Right to Lien, Notice of Possible Mechanics Lien, Notice of Lien Rights, etc.). This must be provided to the Property Owner before the General Contractor starts work on the project. Some states also require this notice to be signed by the property owner.
A Notice of Right to Rescind.
If you are subcontracting as on a project, you should consider informing any subcontractors of their responsibility to provide any required notices prior to starting work. You can use the Subcontractor Contract to enter into a contract with the Subcontractor and provide the Subcontractor with the Notice of Right to Lien which can be served to the Property Owner.
Prior to starting work under this Contract, a contractor should make certain all steps have been taken to protect their right to file a Mechanic's Lien should one become necessary.
The requirements for a Construction Home Improvement Contract are very strict in some states. Be sure to read the interview questions carefully and please answer each question completely. Failure to answer a question could result in the omission of state-mandated clauses or required information, which could render the Contract void.
If the parties decide not to electronically sign this contract, be sure that the Notice of Right to Cancel is signed on the same day as the Contract itself is signed.
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Construction Contract FAQs
Why should a construction contractor write a Construction Contract?
Whether you are being contracted by an acquaintance or a stranger, the Construction Contract is a document that should never be skipped. These benefits may help you make the decision to use one:
Neither party is surprised by how long the work takes
There is no confusion about fees charged
The construction contractor and property owner both understand their responsibilities
A few unfavorable outcomes from not signing one could include incomplete payments, impractical expectations, unclear due dates, and more issues.
What details should my Construction Contract include?
In order to make a Construction Contract with Rocket Lawyer, you'll need the following details:
Contact information for the property owner
What type of services will be provided
Any plans, specifications, and construction documents
Work site information
What materials and labor will be provided
Permit and insurance details
Subcontractor information, if applicable
How much it will cost and when payment is due
How long the project will last
As you may expect, Construction Contracts made with Rocket Lawyer also include the typical legal language about the non-employer relationship, dispute resolution, and finally, liability for losses. In the process of making your agreement, you also will have the ability to designate which state's jurisdiction it falls under. Further personalized editing is permitted, if necessary.
What are the different types of Construction Contracts?
The five main types of Construction Contracts are:
Lump Sum - A lump sum is agreed upon for a project, e.g. $20,000 to remodel the kitchen.
Time & materials - The customer pays for the actual costs of time and materials.
Costs plus - This is similar to time and materials, except that it also includes a "plus" for profit.
Unit price - The project is broken up into smaller chunks, or units, rather than one overall price.
Guaranteed Maximum Price - As it sounds, there is a guaranteed maximum, and the contractor becomes responsible for any cost above that guaranteed maximum.
How do you recognize revenue in a construction contract?
As this is an accounting question, you may want to consult with an accountant for information specific to your unique situation. As a general matter, however, revenue recognition can be done either on a prorated basis dependent upon the percentage of completion, or once the project is substantially completed, following the completed-contract method.
If you have questions about making Construction Contracts or structuring your payment terms, ask a lawyer.
Would Rocket Lawyer be able to review my Construction Work Agreement before it is signed?
Seeking out a legal professional to look over your Construction Contract may take a long time if you try to do it by yourself. Another approach could be via the Rocket Lawyer attorney network. Rocket Lawyer Premium members are able to ask for a contract review from an attorney with experience in business or send additional questions. As a small business owner or operator, you can be confident that Rocket Lawyer is by your side.
Are there any additional actions that I will need to take once I make a Construction Contract?
Attached alongside each Construction Contract, there will be a series of tips on what is next to finalize the document. You are encouraged to engage with your contract in any of the following ways: editing, printing, getting signatures via RocketSign® when ready, and/or saving it as a Word or PDF document. Finally, you will need to send a copy of the signed contract to the property owner.
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About Construction Contracts
Learn how to make a contract for construction work
How To Write a Construction Contract
A Construction Contract (also known as a Construction Contract Agreement) between the Contractor and the Owner is very important for successful completion of a construction project. A Construction Contract will help you engage a Contractor to do all the work and provide all the materials, tools, machinery and supervision necessary for the construction of a structure on real property. A Construction Contract should identify each party and their responsibilities, fully define the work to be done, and fix the amount and timing of payment.
The very basic elements of a Construction Contract are:
Identification of the parties.
A description of the services to be performed with drawings and specifications if relevant and possible.
The dates or scheduled dates for performance of the services.
Any conditions or limitations placed on either of the parties or warranties related to the performance of services.
Let’s take a closer look at some of the provisions you may encounter in a Construction Contract.
The length of the Construction Contract is usually very clearly stated. Options for the term include:
Upon the completion of the services.
Upon a specific event or occurrence.
On a specific date.
Upon written notice by either party.
On some other basis.
Certain provisions of the contract may, however, survive the termination of the Contract. For example, if the contract includes a confidentiality provision, the Contractor may have to continue to keep the Owner's protected information confidential beyond the stated term of the contract.
The amount of the total cost of the contract – which includes profit, labor, and materials but excludes finance charges – may be listed, and in some cases, may be required. Details regarding the contract price and what is included may be subject to state and local rules, laws, and regulations. When in doubt, consult with a Rocket Lawyer network attorney to review your contract and to ensure it is in compliance with the law.
Payment to Contractor
Payment terms vary depending on the services provided and the parties involved. The Owner often agrees to pay for the services in a lump sum upon completion of the services. A Construction Contract can also provide the option of making payment installments on specific dates, such as monthly or quarterly, or after a specific event has occurred, such as completion of various stages of the project.
Another option is to pay for the services based on an hourly fee and the number of hours required to complete the services. If the contract is for services to be provided on an ongoing basis, installment payments may be preferred.
If the parties contract for progress payments, the details of these payments can be set forth under the heading Schedule of Progress Payments. Each progress payment may be specified in dollars and with reference to what will trigger the payment, including the amount of work or services to be performed as well as any materials to be supplied. Thus, except for the down payment, Contractors may neither request nor accept payment that exceeds the value of the work performed or the materials delivered. The best way for homeowners to manage a project is to keep tight control of disbursements to the Contractor and never pay for work not actually completed.
Commercial General Liability Insurance
Homeowners may want to make sure the Contractor has adequate liability coverage on all projects and request to be added as an additional insured under the Contractor's policy.
Workers' Compensation Insurance
The Construction Contract may require that contractors disclose whether they have workers' compensation insurance or whether they are exempt. Contractors are only exempt from workers' compensation requirements if they have no employees. Homeowners should be wary of Contractors who claim they are exempt but appear on site with employees. These workers may be considered to be the homeowners' employees, and the homeowners' insurers may be forced to cover the workers for any injuries sustained on the project. Further, the homeowner might be sued for any injuries sustained by uncovered workers.
Work Product Ownership
If a product is created as a result of the service, it may be important to specify which party will own the rights to the work product. The Owner generally has an expectation to be the owner of any work product resulting from the services. A provision in the contract can confirm this expectation and obligate the Contractor to cooperate in documenting the Owner's ownership rights.
Service Contract Confidentiality
The Construction Contract can include an option that obligates the Contractor to protect and not disclose the Owner's proprietary or confidential information. "Confidential information" is information that is unique to a specific business or individual and is withheld from anyone without access. Additionally, information is confidential if unauthorized disclosure could result in harm to the owner. Some examples of "Confidential information" might include customer lists, trade secrets, products, business plans, financial statements, and manufacturing processes.
You can choose to include an option in the Contract that requires the Contractor to return the Owner's records and other property upon the completion of the service.
An "assignment" of a contract occurs when one party to a contract transfers its contract rights and obligations under the contract to a new third party. For various reasons, the non-assigning party may not feel comfortable dealing with a stranger to the original contract. Therefore, it is common for the parties to prohibit assignments without the prior written consent of the non-assigning party. This option allows the non-assigning party the opportunity to evaluate the proposed new party and the risks involved in allowing the assignment.
A Construction Contract may provide that in addition to any other rights provided by law, a party may terminate (end) the contract if the other party has failed to fully perform the obligations under the contract. The non-breaching party may provide the party in default with written notice of the breach and state the number of days that the breaching party will have to cure or fix the default. A typical period to cure is thirty (30) days. If the party in default fails to remedy the situation in the specified number of days, the non-breaching party may elect to terminate the contract.
Breach of Contract
If a party to a contract fails to meet its contractual obligations, perhaps by being unable to perform an act, or not delivering prescribed goods, or making a payment by a certain deadline, that party is in "breach" or "default" of the contract.
When one party defaults under a contract for the first time, that does not necessarily entitle the non-defaulting party to immediately terminate or end the contract. Rather, it is recommended, and often required by the contract, that a notice of default and an opportunity to cure (or fix the failure) be given. If a reasonable period of time has passed and the problem is not corrected, then a notice of termination, due to the default, may be given. What constitutes a "reasonable" period of time within which to cure the default varies according to the circumstances and often the contract itself. If the cure period is not specified in the contract, then the time period given must be long enough to reasonably allow the defaulting party a chance to correct the problem.
Alternative Dispute Resolution
Both mediation and arbitration are forms of Alternative Dispute Resolution (ADR) and offer an alternative to going to court, which can be expensive. Both involve an unbiased third party (mediator or arbitrator) who helps with negotiations in an effort to come to a resolution. The main difference between the two is that an arbitrator makes a final and binding decision (just as if a judge had decided on the case), while a mediator structures negotiations so that the parties can come to a compromise and settle the matter with each other. Note that if the parties agree to arbitration as a dispute resolution method, it is typically the case that the parties are waiving their right to bring the issue or dispute to court and agree to accept the arbitrator's decision as final and legally binding.
A Construction Contract, or any other Contract for Services, may include provisions that:
Make it clear that the document contains the entire contract of the parties;
Require any changes to the contract to be in writing and signed by the party affected by the change;
Preserve the remainder of the contract if one of its provisions is unenforceable; and
Specify which state's laws will govern any disputes between the parties.
Because the Owner will generally be the owner of what will be produced on the property, it is possible that the Owner could be liable to a third party who is injured by the Contractor. For example, if the Owner has retained the Contractor to build a garage on the Owner's property, a person injured on the work site by the Contractor may sue both the Contractor (as the negligent party) and the Owner (as the owner of the property where the injury occurred). In order for the Owner to avoid paying for the negligent acts of the Contractor, it is common for the Contractor to agree to indemnify the Owner for any damages or injuries caused by the Contractor. Thus, in the above example, such a provision would provide that if the injured party recovered a judgment against the Owner in a lawsuit, the Contractor would have to repay the Owner for any amount of the judgment paid by the Owner, plus the Owner's other related costs such as attorney fees.
A Construction Contract might include a warranty that the services provided under the contract will meet the local standard of similar Contractors in the community. This provides a minimum level of performance that the Contractor must meet to fulfill the terms of the contract. This provision might not be included in the contract if the Contractor is not providing a specific warranty.
The particular requirements for Construction Contracts can vary depending on the rules, regulations, and laws particular to the state and local authorities that apply to the contract (or any home builder contract) and construction project itself. Consult with a Rocket Lawyer network attorney for affordable legal advice regarding your particular Construction Contract.
Definitions of Construction Contract Terms
Americans with Disabilities Act
A federal civil rights statute that prohibits discrimination against individuals with disabilities in employment, education, and businesses that are open to the general public. It requires employers to provide reasonable accommodations to allow employees with disabilities to perform their job duties unless doing so would pose an undue burden on an employer. It applies to private businesses with at least 15 employees, as well as state and local governments.
A contractual agreement that one or both parties will not disclose private, confidential, or proprietary information that they encounter during the course of the contract. For example, a construction contractor may come into contact with a client’s proprietary information at the client’s worksite. A confidentiality agreement, also known as a non-disclosure agreement (NDA) protects the secrecy of the information.
Fair Labor Standards Act
A federal statute that governs minimum wage, overtime compensation, employer recordkeeping requirements, child labor, and other matters. While state law may supersede certain matters covered by the FLSA, it generally applies to private-sector employers, the federal government, and state and local governments. Certain employees, such as those working in an administrative, executive, or professional capacity, may be exempt from the statute’s minimum wage and overtime provisions.
Federal Family and Medical Leave Act
A federal employment statute that allows certain employees to take up to 12 weeks of unpaid leave per year for certain family or medical reasons, without the risk of losing their job or benefits. The statute applies to private businesses with 50 or more employees, government agencies, and schools. In order to qualify for leave, employees must have worked for a covered employer for at least 12 months, and they must have worked at least 1,250 hours during the 12 months immediately before the requested leave.
A clause that protects either or both parties from liability for breach of contract if an unforeseeable, unavoidable event makes it impossible for them to fulfill their contractual duties. This is sometimes called an “Act of God” clause because it applies to natural disasters like earthquakes or hurricanes. It may also apply to human-caused events like criminal acts or war. For example, a construction contractor may be excused from completing work on a house if, while the job is underway, (1) a third party commits arson and burns down the house or (2) a tornado destroys the house.
An agreement by one party to a contract to take on the other party’s financial or legal liabilities. A construction contractor, for example, may agree to cover any claims made against the client that arise from errors, omissions, or negligent acts by the contractor during the performance of their work. This is known as indemnifying the client. If someone brings a legal claim against the client under these circumstances, the contractor would be obligated to cover the client’s costs.
A significant failure to abide by or honor the terms of a contract, which may allow the non-breaching party to suspend or terminate the contract and/or recover damages from the breaching party. Determining whether a breach of contract was “material” or “non-material” depends on subjective factors like the nature of the work to be performed under the contract and the extent to which the contractor’s work complies with the client’s wishes.
1. A representation by a construction contractor that their work will meet certain standards, they will use materials that are of good quality, and the work will conform to the contract and designs approved by the client. Remedies for breach of warranty include the financial cost incurred by the client because of the breach.
2. A guarantee by a construction contractor that their work, once completed, will remain in good working order for a specified period of time, such as one year. The contractor may be obligated to repair or replace defective parts or materials during this time period.
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