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Understanding the essential parts of a construction contract

On Behalf of | Nov 12, 2021 | Business Contracts, Business Law

Before a company starts any project, they often draft a contract describing the work that needs to be done. This critical document not only outlines the job in its entirety but ensures both the client and the general contractor know what to expect.

Clients and general contractors alike should understand how construction contracts work to minimize potential errors and maximize job efficiency, according to The Balance Small Business.

What details does the contract include?

A construction contract involves many important parts, including the following:

  • Outline of project
  • Pricing
  • Time and materials
  • Extenuating circumstances

The outline of the project should involve as much detail as possible to avoid any misunderstanding or confusion from either party. This may involve an organized list of who is responsible for what, when payment is expected and project timelines. It may also list subcontractors and anyone else who is working on the project. Payment may be set up for a lump sum fee, including materials and labor or unit pricing, which breaks up the cost per area. Materials may specify certain items to use for the project

Certain clauses are written into the contract to prevent unforeseen expenses, such as a price increase on materials. For example, if the cost of steel increases during the project timeline, the contractor is not held responsible for that increase in funds.

What happens next?

Once a contract is drafted, each party must approve the document in order to make it official. During the negotiation process, the client and contractor will review the draft and make change requests if necessary. Once both parties agree to the document, the final contract is signed and work can begin.

Entering into a business contract is an important venture. People can protect themselves by ensuring they know how a contract works and what to do if there is a breach of that contract.