All construction contracts are not created equal. Most attorneys will confirm that they could write a construction contract that either:
- Makes it nearly impossible to lose money on the job, or
- Makes losing money on the job almost certain.
Clauses favoring the contractor:
- Anything not in the contractor’s estimate will be at extra charge.
- Design defects are corrected at the owner’s expense.
- No retainage will be deducted from payments due.
- Changes required by law are charged as extra work.
- Changes will be charged at the normal selling price of the contractor.
- The contractor provides no warranty other than required by law.
- Disputes have to be resolved by arbitration, not litigation.
- The contractor gets paid for delay caused by the owner.
- Final payment is due 30 days after termination.
- Any defect not on the punch list is accepted..
Clauses favoring a property owner:
- The contract price covers job conditions as they exist.
- The contractor is responsible for hazmat found on the job.
- The owner can reject any work considered defective.
- Any ambiguity in the plans is resolved in favor of the owner.
- Final payment releases all contractor claims.
- Claims for extra work expire if not made in writing within 5 days.
- Unsatisfactory work must be removed at the contractor’s expense.
- The contractor provides a broad form warranty on all work completed.
- The contractor is liable for any loss suffered by the owner (indemnity).
- The contractor has to pay for any corrections required by law.
- If the owner is in a hurry to take occupancy, pay close attention to bias when dealing with the construction schedule.
- If the plans aren’t as complete as you would like, consider bias very carefully when spelling out how the owner gets charged for extra work.
- If materials have to be ordered and paid for before work starts, require an initial payment that covers your up-front costs.