Four Contract Considerations- Construction Agreement | Project38LB

Updated: Feb 20, 2019

You may have found your contractor from Angie’s List, HomeAdvisor, a referral from a good friend or maybe your best friend. Plus, you have asked all the right interview questions, examined price and ready to make the final decision.


Before saying "I Do" with a contractor you have never worked with before, consider getting a written contract or agreement. Drawing up a contact maybe an indicator on how well the project will go. Let the other bidders know your plan to have only one contractor provide an agreement and if the terms do not work you plan to be in touch.


1) Contract delivery and language – Was your contract delivered within the time promised? If not why? If your contract did not arrive on time and you were not notified, get to know the reason for delay. Agreement delays maybe an indicator on how the contractor will perform.


Read it from back to front first You will be more familiar with the Scope of Work which is normally in the back. Highlight any details that need to be added or changed. Double check for ancillary services; hauling away old material, disposal fees, recycling fees, parking fees, delivery fees or special machinery rental. Many of these fees increase contract price and are more costly multi story building vs first floor construction.


2) Deposit and Start Date – Compare when the deposit and start date occur. A fair start deposit is 10% and due on the first or second day of work. Deposit payment in advance may indicate the contractor is financially insecure and my use your deposit for something besides your project.


If your contractor will not accept 10% on start date or later because of material purchase. Get a copy of the materials quotation directly from supplier. Offer to pay material on delivery or directly to supplier. If this is not an option, negotiate a smaller deposit of 1%-2% before start date and balance on start date.


Make sure the payment schedule aligns with progress of work. The contractor my ask for progress payments by date. Have it changed to milestones in the scope of work. For example another 10% is paid when trenching is completed and new pipe installed.


3) Addenda and Modifications - How easy is it to add or make modifications to the agreement. If your contractor ignores your request for a change then he or she may not be willing to adapt during work.


Addenda can be added in simple ink or Outlook note / task. Getting documented is an important step. If you contractor does not document change orders, you may have to document them yourself. Avoid possible misunderstandings about finished work and final payment. Photos with text memo is a great way to document as well.


4) Work As a Team - Lastly, it never hurts to get a second pair of eyes to review the agreement as well. It could be your business partner, realtor, or a tradesman you have worked with and trust. They could add a thought or catch a mistake.


Four important components of a construction agreement or contract are; 1) who are the parties involved 2) price to be paid 3) the rights of each party 4) start date and end date of construction




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