What are the key components of a construction contract?

Construction projects are complex endeavors filled with moving parts. Before embarking on one, having a clear and detailed contract in place remains wise.

Although drafting such a document can be a chore, completing the task will pay dividends. A comprehensive construction contract is bound to save time and reduce confusion.

Project details and scope of work

Every construction contract should clearly outline the entirety of what is to come. This section must describe the venture in detail, specify building materials and mention any desired assembly methods or techniques.

Payment terms and schedule

The contract should also outline the total project cost and payment plan. Additionally, it should mention any penalties for late payments or completion delays.

Insurance and liability

Proper construction agreements specify the insurance requirements for both the contractor and the client. This includes liability insurance, workers’ compensation insurance and property damage coverage.

Change orders and modifications

Construction projects often encounter adjustments as they advance. Their agreements should outline the process for handling such revisions. This helps ensure that requests receive proper communication.

Dispute resolution

If there is a disagreement, having a document outlining the procedures for putting conflicts to bed will be welcome. The answer could be mediation, arbitration or another creative solution. Such clauses often turn handy, as 85% of construction projects run over budget. It is no surprise that fiscal overruns commonly turn into heated battles.

A well-drafted construction contract provides a foundation for every successful building project. The onus rests on those in charge to create paperwork that addresses every possibility before and after completion.

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