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3 key provisions to include in a construction contract

On Behalf of | Jul 25, 2022 | Construction Law |

Construction contracts come in all shapes and sizes. While some are short and precise, others may include tens of sections and provisions.

Whether you are a contractor or an investor, there are certain provisions that you must include in a construction contract. Here are some of these clauses.

Cost of the project

No matter the size, a construction project is always a cash-intensive undertaking. This makes the project cost one of the most important components of the contract. This clause should contain the cost of materials, labor as well as applicable licenses and levies.

Of course, there may be instances when you cannot assign specific figures to the project. For instance, the final project cost may be subject to a number of factors, such as work hours and other contingencies. In this case, you might want to work with a price range rather than a fixed amount.

Payment terms

Every contractor deserves fair pay for work done. A good construction contract should include a clause that outlines how and when payment will be made. Will the client pay in installments? If yes, after what milestones? If subcontractors are involved, it is important that this clause specifies how they will be compensated. The same applies to suppliers. Will the client pay the suppliers separately or through the contractor? The more specific the payment clause is, the less likely there will be pay-related disputes.

Dispute resolution

While every client and contractor hopes for a smooth project, disputes can happen. A dispute resolution clause plays a crucial role in spelling out how you will resolve disputes in the most cost-effective and least disruptive manner possible.

A good construction contract safeguards the rights of the client and the contractor alike. Drafting a solid construction contract can help you complete the project to the satisfaction of the parties involved.