A building construction contract or a construction contract is a legally binding, written agreement between a business or homeowner and a contractor that summarizes the terms and conditions of the construction or work to be done, usually the building or renovation of a home. 3 min read updated on September 19, 2022
A building construction contract or a construction contract is a legally binding, written agreement between a business or homeowner and a contractor that summarizes the terms and conditions of the construction or work to be done, usually the building or renovation of a home. The contract can be drafted by the homeowner, contractor, supplier, or by a certified legal professional. A solid building construction contract provides outlines each party's responsibilities and provides a framework for dispute resolution. Having a contract in place helps avoid wasting time, money, and resources.
There are many types of building construction contracts that can be customized to meet your specific needs. A contract can be general or describe specific terms of the contract like payment terms, the length and a detailed timeline of the project, the scope and depth of the project, and the legal obligations of each party.
By entering into a contract, buyers, property owners, contractors, subcontractors, and construction firms are fully aware of each party's expectations regarding performance, materials, schedule, and finances. Having a concrete building contract in place before work starts can help avert disputes because it defines a process for addressing them if they arise, reducing stress in an already stressful situation.
A construction contract also protects the rights of both parties. Protections include preparations for delays and mistakes, contract and price disputes, and liabilities from work-related incidents. Both parties should consider the following before entering into a legally binding agreement:
Without a written agreement, both parties risk spending more money, time, and resources, as well as legal ramifications. There are bound to be disputes without the use of a construction contract. Some of the most commonly disputed aspects of a construction contract include issues with payment, the scope of the work completed, and length of time to complete the project.
Homeowners also might not get quality work completed on time, and if the contractor doesn't have scrupulous billing practices, they might end up overpaying. Contractors and suppliers, on the other hand, risk not being paid and fronting the cost of the work until payment is received. Contractors also risk losing his or her license.
Spelling out the specifics of the contract in its entirety, the terms and conditions section is one of the most important parts of the contract. Regardless of the type of contract, there are certain provisions and guidelines that must be included in the construction contract. A building contract covers the following:
To ensure you're starting your project on a good foot, both you and the other party should consult with a qualified legal advisor prior to signing the contract to ensure it covers all applicable legal requirements.
If your project has special requirements that are not covered by a standard builder contract template, or you want to receive some advice before you proceed, you can post your legal need or job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.