Understanding Construction Contracts

Contracts Protect All Parties

Putting down in black and white the services that each member of the remodeling team will perform is an essential step in launching the project, even if the people you're hiring are relatives or close friends. Besides heading off misunderstandings, contracts offer protection against the cost of delays and other kinds of setbacks that sometimes occur during remodeling projects. Although the term "contract" may seem intimidating or overly formal, most construction contracts are relatively short, simple documents written in plain English. It's important to remember, however, that the blueprints (plans) and the specifications (lists of materials) are considered part of the official agreement between the homeowner and contractor and are therefore officially part of the contract. All three documents are legally binding, so any changes made after construction begins must be initialed by you and all other parties to the agreement.

Standard-Form Agreements
For the written portion of the document, most contractors supply a boilerplate text contract that includes provisions for the following: a work schedule and a payment schedule; statements designating liabilities and insurance coverages in the event of injuries, theft, or damage at the work site; statements that specify where materials will be shipped and who will be responsible for receiving, checking, and warehousing them; and clauses that say the builder cannot be held responsible for delays caused by weather and other forces beyond his or her control.

Even in a boilerplate contract, there should be places to write in various provisions that apply specifically to your project. If not, you should request that such information be attached and initialized by all parties so that you can state whether you'll be obtaining any products or materials yourself (contractors normally make all purchases at wholesale and collect a 15 percent markup) or doing any of the work yourself (for which the contractor will need to allow credit).