We’re often asked to review construction contracts and change orders and revise them so they are more useful to both contractors and property owners. Many construction contractors use construction contract forms from the internet, or no construction contract at all. A construction contract is not supposed to be an annoyance or hurdle. Its purpose is quite simple – to correctly and accurately recite the agreement between the contractor and property owner.
Good construction contracts and change orders are important because when used properly and consistently they make business more simple. Disputes over the scope of the work, payment, materials, colors and final appearance, and even who is actually authorized to make decisions on the work site are easily handled in a good contract.
Scope of Work
A good construction contract should anticipate and address the areas contractors and owners often have disagreements about. One of those areas is the the work scope. “Work Scope” or “Scope of Work” is the part of the contract that sets out what specifically the contractor is to do. A clear, detailed work scope alleviates confusion about what the contractor is supposed to do. It can also set out the steps of the project and the timeline for completion.
Next, the payment schedule. When payments are to be made and the amounts of payments (whether it’s all up front, a percentage down and rest at completion, or a deposit for materials with a payment schedule at specific benchmarks in the project) is critical to ensuring the contractor doesn’t wind up behind schedule because materials haven’t been funded and bought, laborers haven’t been paid, or the contractor is having to work on other projects because payment is behind on this project.
Other issues include dealing with materials issues. For example, what happens if the stone the owner has chosen is out of stock or no longer available when the time comes to buy materials? Does the contractor have the ability to purchase materials of similar color, texture, quality, or grade? Or is the owner required or allowed to make a new choice? A clear contract can address this.
Identify Decision Makers
The contract can also address who the persons are that are able to make decisions concerning the project. Disputes often arise when one spouse consents to one aspect of the project, then the other spouse doesn’t like it and refuses to pay for it. The same can be true with contractors that have multiple persons on the work site talking to the owner and making decisions. A good contract can set out, specifically, who has authority to sign the contract, execute any change orders, and make agreements and decisions concerning the project.
Use Written Change Orders
Change orders are simply changes or additions to the project while the project is in progress and payments for the changes. For example, if the contractor is installing cabinetry, and in the course of construction a new grade of cabinet becomes available, a change order can be done to confirm that the new grade of cabinet will be installed and confirm the change in the cost for the new materials. Making sure all changes (their specs and their costs) are in writing and agreed to by all decision makers will reduce (or eliminate!) disputes at the end of the project.
Contact our attorneys today to discuss your contractor contract questions, and see how we can make the construction business simpler for you.