Construction Contracts
If It's Important, Put It in Writing
You've chosen your contractor. Everyone is excited. You're ready to get started.
This is also the point where homeowners can make one of the most expensive mistakes of the entire project: assuming everyone understands the agreement the same way.
A construction contract isn't about expecting something to go wrong. It's about making sure everyone understands what they're agreeing to before the work begins.
A handshake and a good relationship are valuable.
Neither one replaces a clear written contract.
1. Know Exactly What Is Included
A contract should clearly describe the work being performed.
Look beyond phrases such as "build house according to plans" or "complete construction."
You should be able to identify:
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What work is included
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What materials or finishes are specified
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What the contractor is responsible for
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What you are responsible for
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What is specifically excluded
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Which plans, specifications, or other documents are part of the agreement
The more room there is for interpretation, the more room there is for disagreement later.
If something matters to you, don't assume it's included. Verify it.
2. Understand How and When Money Changes Hands
Before signing, understand the entire payment structure.
The contract should explain the contract amount and how payments will be made throughout construction.
Pay attention to:
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Initial payments
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Draw schedules
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Payment milestones
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Allowances
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Retainage, if applicable
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Final payment requirements
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Documentation required before payment
Payments should make sense in relation to the progress of the project.
And don't be afraid to ask questions about what you're paying for.
This is your money. You should understand where it's going.
3. Pay Close Attention to Allowances
Allowances can make a construction price look more complete than it actually is.
An allowance is generally an amount included in the contract for something that hasn't been fully selected or priced yet, such as flooring, lighting, appliances, countertops, or plumbing fixtures.
The problem comes when the allowance isn't realistic.
If the contract includes $5,000 for something that will realistically cost $10,000 based on your expectations, the original contract price may look attractive, but that additional money still has to come from somewhere.
Before signing:
Ask what each allowance includes and whether the amount reflects the quality and selections you actually expect.
4. Understand How Changes Will Be Handled
Changes happen during construction.
The important question is how those changes will be documented and paid for.
Your contract should establish a process for change orders, including:
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Who can authorize a change
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How the cost will be calculated
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Whether contractor markup applies
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How schedule changes will be handled
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When payment for the change is due
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Whether work can proceed before written approval
A conversation on the jobsite should not accidentally become a several-thousand-dollar surprise.
Changes should be documented before the changed work is performed whenever reasonably possible.
5. Read the Parts Nobody Wants to Read
Don't stop after checking the price and signing the last page.
Read the entire agreement.
Pay attention to provisions covering delays, insurance, warranties, disputes, termination, responsibilities, cleanup, permits, unforeseen conditions, and what happens if either party doesn't fulfill the agreement.
If you don't understand something, ask before you sign.
And if the contract involves significant money or provisions you aren't comfortable evaluating yourself, consider having an attorney familiar with construction contracts review it.
The time to discover what your contract says is before there's a disagreement.
Before You Sign
Slow down.
Compare the contract to the plans, specifications, proposal, and conversations you've had with your contractor.
Make sure the important promises actually made it into the written agreement.
Get questions answered.
Get changes documented.
Keep a complete signed copy of everything.
A good construction contract isn't there because you don't trust your contractor.
It's there so both of you know exactly what you've agreed to.
Contract Signed? Now Protect the Work You're Paying For.
A contract tells everyone what should be built.
The next step is making sure the work being completed actually matches the plans, specifications, and required standards.