Real Estate
Construction Contract
Governs a construction project between an owner and contractor, covering scope, timeline, payment, and quality standards.
Overview
Governs a construction project between an owner and contractor, covering scope, timeline, payment, and quality standards.
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Who Needs This Document?
Property owners commissioning construction, general contractors, subcontractors, architects, and project managers.
When Do You Need This?
Required before any construction, renovation, or remodeling project begins. Should be executed after design is finalized and before work commences.
Key Provisions
A well-drafted document should include the following essential provisions:
- Scope of work, plans, and specifications
- Contract price, payment schedule, and change order procedures
- Project timeline, milestones, and delay penalties
- Warranty, insurance, and liability provisions
Frequently Asked Questions
- What is the difference between a fixed-price and a cost-plus construction contract?
- A fixed-price contract sets a single agreed amount for the entire project, putting the risk of cost overruns on the contractor. A cost-plus contract reimburses the contractor's actual costs plus a fee or percentage markup, shifting more of that risk to the owner in exchange for more flexibility if the scope changes. Owners generally prefer fixed pricing for budget certainty; contractors sometimes prefer cost-plus on projects with uncertain scope.
- How are changes to the project scope handled once construction has started?
- Through a change order process requiring written agreement on the scope change, its cost impact, and any effect on the timeline before the contractor proceeds with the additional work. Verbal changes agreed on-site without paperwork are a common source of later payment disputes, since neither party has a record of what was actually authorized.
- What happens if a contractor finishes the project late?
- Construction contracts commonly include liquidated damages, a pre-agreed amount deducted from payment for each day the project runs past the agreed completion date. The contract should also address excusable delays, such as weather or supply shortages beyond the contractor's control, which typically extend the deadline without triggering the delay penalty.
Related Documents
- Independent Contractor AgreementEstablishes the working relationship between a company and an independent contractor, defining scope of work, payment terms, and intellectual property rights.
- Service AgreementA comprehensive contract governing the provision of services between a service provider and a client, including SLAs, payment terms, and liability.
- Indemnity AgreementA contractual obligation where one party agrees to compensate another for losses, damages, or liabilities arising from specified events.